Download - Angel Broking Strategy - April 2010
StrategyApril 2010
gy
Firing up!
Research Team
Table of Contents
Strategy ………..………2-8
Federal Bank ……………. 36
GSFC …………….……… 39
IVRCL Infra 42
Large Caps
Bharti Airtel ……..….……. 10
ICICI B k 13
Heritage Foods …….…….64
JK Tyre and Ind. ……….…67
IVRCL Infra ………….….. 42
Jagran Prakashan …....… 45
Jyoti Structures ….……….48
ICICI Bank ………..………13
Maruti Suzuki ….……....... 16
Reliance Infra …..……......19
Spice Jet ……..…….….... 51
TAJGVK …..…….………. 54
SBI ………………............. 22
Tech Mahindra …...………25
Small Caps
Fag Bearings …………… 58
G l I d t i 61
Mid Caps
Anant Raj Ind. ………..…..29
Greenply Industries …….. 61Electrosteel Castings ……32
New growth cycle from FY2011E
Signs of economic improvement are getting stronger in India with the IIP growth having recovered from lows of-0.2% in December 2008 to hit a high of 16.7% in January 2010. We expect the economy to further strengthenas low interest rates help kick-start another cycle of corporate and consumer credit expansion.Correspondingly, Earnings expectations from Corporate India for FY2011E are increasing, coming off a lowbase in FY2010E. For instance, with global economies improving, we have revised upwards our Earningsestimates for Metal stocks by 10-20%; similar upgrades have also been made for several other sectors.Overall, we expect the Benchmark Sensex companies to register 27% CAGR in Earnings over the next two
W t t lik C it l G d & E i i I f t t B ki d R l E t t t l d
(Rs)
years. We expect sectors like Capital Goods & Engineering, Infrastructure, Banking and Real Estate to leadfrom the front, even as the Telecom Sector is expected to stabilise in FY2012E.
Sensex EPS Growth
830 805 820
1,065
1,312
1,000
1,250
1,500 (Rs)
527
723 830 805 820
250
500
750
-
50
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Source: Angel Research
2
Manufacturing and Capital Goods to lead from front
Historical analysis of All-Industry Sales data indicates strong yoy growth, with an average growth rate of around22% during FY2003-09.
The growth in Sales was achieved on the back of steady increase in capital expenditure in turn increasing theGross Block and Plant & Machinery (P&M). The average P&M turnover was around 2.5x during the mentionedperiod with a peak rate of around 2.9x in FY2009.
T hi th ti t d S l th f 22 24% FY2010 12E t i d t t dd P&M thTo achieve the estimated Sales growth of 22-24% over FY2010-12E, we expect industry to add P&M worthRs2,64,000cr in FY2012E compared to the P&M addition of around Rs1,60,000cr in FY2009, implying a growthof 65% over the period. This indicates the significant scope of growth for the Capital Goods Sector in India.
C E ti ti (R )Capex Estimation (Rs cr)Particulars 2013E 2012E 2011E 2010E 2009 2008 2007 2006 2005 2004 2003Gross Block 3,301,234 2,721,234 2,281,234 1,911,234 1,565,922 1,269,462 992,474 834,503 706,515 595,294 555,235
Plant and Machinery 1,980,740 1,632,740 1,368,740 1,146,740 937,265 777,194 633,965 546,789 464,244 423,509 393,196
Capital Work in Progress 580,000 440,000 370,000 345,312 235,380 148,600 95,058 71,200 74,772 63,911Capital Work in Progress 580,000 440,000 370,000 345,312 235,380 148,600 95,058 71,200 74,772 63,911
Net Sales 5,715,628 4,609,377 3,717,240 3,046,918 2,720,462 2,208,030 1,713,108 1,329,333 1,103,187 898,690 807,378
Sales Growth (%) 24 24 22 12 23 29 29 20 23 11 16
Gross block turnover 1.7 1.7 1.6 1.6 1.7 1.7 1.7 1.6 1.6 1.5 1.5
P&M Turnover 2.9 2.8 2.7 2.7 2.9 2.8 2.7 2.4 2.4 2.1 2.1
Incremental Plant and Machinery 264,000 160,071 Growth 2009-12 (%) 65
Source: ACE Equity,, Angel Research
3
Inflation expected to decline
15%
WPI inflation to come down to 4-5% by March 2011Visibly, the headline WPI inflation, which hasclimbed to 9.9% yoy in February 2010, is themain catalyst for the RBI’s tightening measures.
10%
9%
12%
15%
Food inflation continues to be the main causefor this runaway increase in overall inflation. Itremains at elevated levels of 16.3% yoy, whileNon-Food manufacturing products inflation
5%
3%
6%
Non Food manufacturing products inflation(having 52.2% weightage in the WPI Index) isjust 4.3% in February 2010.
Going forward, Food inflation which wasb d b h B d l i
-3%
0%
Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11
exacerbated by the Bad monsoons last year, islikely to moderate. At the same time, due to thebase effect, over the next 6-9 months, overallinflation is likely to once again come down tothe manageable 4 5% rangethe manageable 4-5% range.
Source: RBI, Angel Research
4
Monetary Tightening not a concern
60.0 9.00
(%) (%)
Monetary Tightening began in Sep 2005, but Credit growth remained above 20% right up to Dec 2008
30.0
40.0
50.0
6.00
7.00
8.00
-
10.0
20.0
3.00
4.00
5.00
-04 -05 -05 -05 -06 -06 -07 -07 -08 -08 -08 -09 -09 -10
Sep-
Feb- Jul
-
Dec-
May- Oct-
Mar-
Aug- Jan-
Jun-
Nov- Apr-
Sep-
Feb-
Credit Growth yoy (RHS) Repo Rate (LHS) Reverse Repo Rate (LHS) CRR (LHS) Series5
The RBI’s main objective is to control inflation expectations Nonetheless at the current juncture with growth
Source: RBI, Angel Research
The RBI s main objective is to control inflation expectations. Nonetheless, at the current juncture with growthjust picking up, stifling liquidity is not required. Hence, we expect the rate hikes to happen in small, step-by-step increments, and it will take a dozen or more hikes spread over many quarters, before one needs to startworrying about high interest rates affecting growth.
In fact, in the previous cycle, even with a 3-4% increase in interest rates, credit demand remained strong dueto robust economic activity and opportunity, buoyed by cheap foreign capital and strong domestic savings. Thepresent situation appears headed in a similar direction.
5
FII inflows to surge…
Even as fundamental factors continue to show significant upward momentum, the economy is also receiving FIIinflows. In fact, even during the crisis-ridden year of CY2009, the country received as much as Rs85,000cr ofFII inflows.
In the first couple of months of this calendar year, India has already received Rs15,000cr by way of FII inflow,and considering the improving global and domestic scenario, this figure is likely to only improve going forward.CY2010 is likely to end with at least Rs1-1.25lakh crore (US $20-25bn) of FII inflows.
90,000 Phenomenal FII inflows even in a low global growth year
(Rs)
FII Inflows
-
30,000
60,000
(60,000)
(30,000)
CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 (YTD)
Source: Bloomberg, Angel Research
6
…and FDI is gaining prominence
FDI Inflows (% of World)
Country 1980 2000 2006 2008y
World 100 100 100 100
Developed Economies 86.2 81.4 70.3 63.4
USA 31 3 22 7 16 2 18 6USA 31.3 22.7 16.2 18.6
UK 18.7 8.6 10.7 5.7
Developing Economies 13.8 18.6 29.7 36.6
Brazil 3.5 2.4 1.3 2.7
Russian Federation 0.0 0.2 2.0 4.1
China 1.8 8.4 9.0 11.0
India 0.1 0.3 1.4 2.4Source: UNCTAD, Angel Research
7
Markets in Fair value zone, stock-picking key to investment success
At current levels, the Sensex is trading at 13.4x FY2012E EPS v/s the 5-year average of 16.1x. Whilevaluations are not cheap, at the same time they are not factoring more than 8% GDP growth. With 8% growthlooking increasingly achievable, we expect the Sensex to touch 20,992 levels (an upside of 19%) by March2011 b d T t P/E f 16 FY2012E EPS2011, based on Target P/E of 16x FY2012E EPS.
In the ensuing slides we have discussed 15 of our Top Picks that are expected to significantly outperform theSensex. We have chosen the stocks from across sectors including large, mid and small caps such as SBI, TechMahindra, Electrosteel Casting, Greenply, etc., g, p y,
11.023,000Sensex (LHS) Sensex Earnings Yield (%) (RHS) Avg. Bond Yields (%) (RHS)
Sensex Earnings Yield(Sensex) (%)
8.0
9.0
10.0
11.0
15,500
18,000
20,500
23,000
4.0
5.0
6.0
7.0
5,500
8,000
10,500
13,000
3.0 3,000Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
Source: Angel Research
8
Large Caps
Bharti Airtel(CMP/TP: Rs310/406)
Minute of usage to grow by 20% over FY10-14: Total MoU has been growing at robust pace marking aCAGR of 48% in last 4 years. The total minute of usage is likely to grow at a very high rate considering thelower tele-density of 47% as against that of 88% for US and lower MoU/subscriber (just 458 vs 772 for US)which provides enough headroom for future growth. We believe total MoU to grow by 20% over FY10-14.
Competition Intensity to reduce: We do not expect the ongoing price war to further intensify as the cost ofoperation for the new players are high and not sustainable unless they gain scale. Hence, we believe thatBharti with high EBIDTA per minute of Rs0.16 is relatively better placed than its peers.
LBO structuring to benefit: Though the Kuwait-based Zain Telecom (African Assets) has been valued higherthan that its closest peer MTN at US $9bn we believe it would still be value accretive for Bharti owing tothan that its closest peer, MTN, at US $9bn, we believe it would still be value accretive for Bharti owing tofinancial leverage from the Leveraged Buy-Out structuring of the deal. Moreover, Bharti has also successfullyacquired 70% stake in Warid Telecom to capitalise on the untapped opportunity in the densely populatedBangladesh market (160mn), which has low tele-density of 32%.
Trading at attractive valuations to Peers: Bharti Airtel is currently trading at 12.0 FY12E Earnings of Rs25.8,Trading at attractive valuations to Peers: Bharti Airtel is currently trading at 12.0 FY12E Earnings of Rs25.8,which is at significant discount to its historical average of 26x as well as Sensex P/E of 14.5x FY12E Earnings,despite higher average RoCE of 20% (FY10-12E) as against average RoCE of 18% for the Sensex. Hence, wemaintain a Buy on the stock based on 14x FY12E EPS for its Core business and Rs45 per share for its 42%stake in Indus Towers.
Valuation SnapshotEPS( Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12 FY10 FY11 FY12
24.1 23.8 25.8 26.6 21.3 19.4 12.7 13.0 12.0 2.9 2.6 2.2 3.1 2.7 2.2
10
Bharti Airtel
20.0%
25.0%
30.0%
110
130
300
350
400
450
Leadership maintained with high customer market shareMoU to grow by 20% over FY10-14E
0.0%
5.0%
10.0%
15.0%
50
70
90
0
50
100
150
200
250
FY'07 FY'08E FY'09E FY'10E FY'11E FY'12E FY'13E FY'14E
1 630 0000 6
Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10
Subscribers Market share
FY'07 FY'08E FY'09E FY'10E FY'11E FY'12E FY'13E FY'14E
Total MOU (bn)
Source: Company, Angel Securities
Peer Group: Revenue per minute/ EBIDTA per minute
Source: Company, Angel Securities
Tenancy ratio going up
1 2
1.3
1.4
1.5
1.6
26,000
28,000
30,0000.52
0.45
0.51
0 160 2
0.3
0.4
0.5
0.6
1
1.1
1.2
22,000
24,000
Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10No of towers Tenancy ratio
0.16 0.14 0.12
0
0.1
0.2
Bharti Rcom IdeaRPM EPM
Source: Company, Angel Securities Source: Company, Angel Securities
11
Bharti Airtel
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDS
Equity Share Capital 1,898 1,898 1,898 1,898
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 36,962 39,212 42,651 46,770
% chg 36.8 6.1 8.8 9.7
Reserves& Surplus 28,496 36,585 44,454 52,872
Shareholders Funds 30,395 38,483 46,352 54,771
Total Loans 11,880 10,152 7,873 5,762
Deferred Tax Liability 756 756 756 756
Oth Li biliti 34 34 34 34
Total Expenditure 21,794 23,195 26,000 28,484
EBIDTA 15,168 16,017 16,652 18,287
(% of Net Sales) 41.0 40.8 39.0 39.1
Other Income 152 627 618 678 Other Liabilities 34 34 34 34
Minority Interest 1,070 1,255 1,438 1,636
Total Liabilities 44,134 50,679 56,452 62,958
APPLICATION OF FUNDS
Gross Block 55,809 67,609 75,073 82,088
Depreciation& Amortisation 4,758 5,916 6,569 7,224
Interest 1,161 - - -
PBT 9,401 10,728 10,701 11,741
(% of Net Sales) 16 16.4 17.1 18.1 Gross Block 55,809 67,609 75,073 82,088
Less: Acc. Depreciation 14,895 20,811 27,380 34,604
Net Block 40,914 46,798 47,693 47,485
Goodwill 4,036 4,036 4,036 4,036
Investments 14 14 14 14
Share in profit of JVs (71.3) 35.0 35.0 35.0 Exceptional & Prior Period Expenses 22 22 22 22
Tax 662 1396 1,500 1,763
(% of PBT) 7 1 13 0 14 0 15 0Current Assets 14,408 15,817 21,958 30,026
Current liabilities 15,238 15,986 17,249 18,603
Net Current Assets 14,408 15,817 21,958 30,026
Total Assets 44,134 50,679 56,452 62,958
(% of PBT) 7.1 13.0 14.0 15.0
Less: Minority interest (MI) 175.9 185.0 182.4 197.8 PAT( After Minority Interest) 8,470 9,160 9,032 9,793
% chg 26.4 8.1 (1.4) 8.4
12
ICICI Bank(CMP/TP: Rs948/1,155)
Well-positioned to garner strong Market share gains in CASA deposits: In our view, the Bank’s substantial branchexpansion (210 branches added during last 12 months, about 875 more in next 12-18 months ie. 2.5 times the size 8quarters back) as well as strong Capital Adequacy at 19.4% (Tier-I at 14.2%) have positioned it to gain market share thatwill contribute to substantial Core business growth as the macro environment continues to improve. In fact, the Bank hasonce again started gaining market share in Savings accounts; during 9MFY2010, the Bank has improved its marketshare of Savings deposits by 20bp over FY2009 levels, capturing a substantial 6% incremental market share.
Improved Deposit Mix to reflect in better NIMs: The Bank is decisively executing a credible strategy of consolidationthat will drive materially improved Balance Sheet and Earnings quality over the next two years. The distinguishing featureof the Bank’s performance in 9MFY2010 was the improvement in CASA ratio to 40% (transformative considering that theratio was as low as 22% at the end of FY2007 and 29% even as recently as FY2009). In light of this change in theLiability-mix, we expect the Bank’s NIMs to improve to a healthy 2.8-3.0% over FY11-12E (2.6% in FY2009) .
Worst of Asset Quality issues over: The Bank’s asset quality is showing signs of stabilising, with 3QFY2010 slippagescoming down to Rs750cr (against run-rate of about Rs1,000cr per quarter). In absolute terms, Gross NPAs of the Bankdeclined on a sequential basis for the third consecutive quarter to Rs8,926cr. The Bank has also done lower restructuringof loans than PSU Banks (3.0% of total loans, 10.2% of net worth). Going forward, there could be potential upsides to our( , ) g , p pEarnings estimates on account of the better-than-expected performance on the Asset quality front.
Valuations attractive: At the CMP, the Bank’s Core Banking business (after adjusting Rs307 per share towards thevalue of the subsidiaries) is trading at 1.9x FY12E ABV of Rs377. Including subsidiaries, the stock is trading at 1.4xFY12E ABV of Rs512. We have valued the Bank’s subsidiaries at Rs307 per share of ICICI Bank and the core Bank atRs848 (2.25x FY12E ABV). We maintain a Buy on the stock, with a 12-month Target Price of Rs1,155.Rs848 (2.25x FY12E ABV). We maintain a Buy on the stock, with a 12 month Target Price of Rs1,155.
Valuation SnapshotCompany Reco CMP (Rs) Tgt Price (Rs) Upside (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
FY12E FY12E FY12E FY09-12E FY12E FY12E
ICICIBK Buy 948 1,155 21.7 1.9 2.3 15.6 21.8 1.3 15.1
13
ICICI Bank
4.0
5.0
6.0
Well-positioned in terms of CAR and Branch expansionSavings Deposits Market share Trend
-
1.0
2.0
3.0
Y200
3
Y200
4
Y200
5
Y200
6
Y200
7
Y200
8
Y200
9
Y201
0
FY FY FY FY FY FY FY
9MFY
% Savings Deposit Share
1 640 0
Source: Company, Angel Securities
Strong Traction expected in Profitability driven by lower Provisions
Source: Company, Angel Securities
SOTP Valuation Summary
Y/E March (Rs) Value Per Share
0 6
0.8
1.0
1.2
1.4
1.6
10.0
20.0
30.0
40.0 Y/E March (Rs) Value Per ShareICICIBK 848ICICI Pru Life 154
ICICI Lombard General Insurance 13
ICICI Prudential AMC 15ICICI Securities & PD 27
-
0.2
0.4
0.6
(20.0)
(10.0)
-FY2009 FY2010E FY2011E FY2012E
% Advances Growth (LHS) % Earnings growth (LHS)% ROA (RHS) % Provisions/Assets (RHS)
Source: Company Angel Securities Source: Company, Angel Securities
C C Secu t es &
ICICI Venture Funds management 14
ICICI UK, Canada 66ICICI Home Finance 19SOTP Value 1,155
Source: Company, Angel Securities Source: Company, Angel Securities
14
ICICI Bank
Income Statement Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ENet Interest Income 9,092 8,918 10,169 12,877
- YoY Growth (%) 10.9 (1.9) 14.0 26.6
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Share Capital 1,463 1,463 1,463 1,463
- Equity 1,113 1,113 1,113 1,113Other Income 8,118 7,612 8,327 10,174
- YoY Growth (%) (8.6) (6.2) 9.4 22.2
Operating Income 17,210 16,530 18,496 23,051
- YoY Growth (%) 0.8 (3.9) 11.9 24.6
O ti E 7 045 5 983 7 131 9 445
- Preference 350 350 350 350
Reserve & Surplus 48,420 50,533 53,152 56,705
Deposits 218,348 212,889 263,983 327,338
- Growth (%) (10.7) (2.5) 24.0 24.0
Borrowings 67 324 64 557 77 678 93 473Operating Expenses 7,045 5,983 7,131 9,445
- YoY Growth (%) (13.6) (15.1) 19.2 32.5
Pre - Provision Profit 10,165 10,548 11,364 13,606
- YoY Growth (%) 13.9 3.8 7.7 19.7
Provision and
Borrowings 67,324 64,557 77,678 93,473
Tier 2 Capital 25,482 29,304 36,337 45,421
Other Liabilities & Provisions 18,265 5,176 9,835 13,825
Total Liabilities 379,301 363,922 442,447 538,226
Cash in Hand and with RBI 17,536 10,644 13,199 16,367Provision and Contingencies 5,048 5,229 4,698 4,482
- YoY Growth (%) 30.4 3.6 (10.2) (4.6)
Profit Before Tax 5,117 5,319 6,667 9,124
- YoY Growth (%) 1.2 3.9 25.3 36.9
Bal. with banks & money at call 12,430 12,303 15,008 18,313
Investments 103,058 101,787 118,294 134,705
Advances 218,311 212,853 263,938 329,922
- Growth (%) (3.2) (2.5) 24.0 25.0Provision for Taxation 1,359 1,337 1,686 2,332
- as a % of PBT 26.6 25.1 25.3 25.6
PAT 3,758 3,982 4,981 6,792
- YoY Growth (%) (9.6) 6.0 25.1 36.4
Fixed Assets 3,802 3,164 3,743 4,431
Other Assets 24,164 23,171 28,265 34,488
Total Assets 379,301 363,922 442,447 538,226
- Growth (%) (6.3) (4.1) 22.0 22.0
15
Maruti Suzuki(CMP/TP: Rs1,396/1,861)
Per Capita near inflexion point for car demand: Car penetration in India is estimated at around 12vehicles/1,000 people in FY2009 compared to around 21 vehicles/1,000 people in China. Moreover, India’sPPP-based Per Capita is estimated to approach US $5,000 over the next 4-5 years, which is the inflexion pointfor Car demand. Increasing penetration is estimated to drive around 14% CAGR in domestic volumes overFY09 12E Further Maruti has a sizeable competitive advantage over the new foreign entrants due to itsFY09-12E. Further, Maruti has a sizeable competitive advantage over the new foreign entrants, due to itswidespread distribution network (service and sales outlets of around 2,767 and 681, respectively), which is noteasy to replicate.Suzuki focusing to make Maruti a small car manufacturing hub: Suzuki Japan is making Maruti amanufacturing hub to cater to increasing global demand for small cars due to rising fuel prices and stricteremission standards. We estimate the company's export volume to grow at around 55% CAGR overFY09-12E. Moreover, R&D capabilities, so far largely housed at Suzuki Japan, are progressively moving toMaruti. The company is aiming to achieve full model change capabilities over the next couple of years, whichwill enable it to launch new models and variants at a much faster pace.Valuation: The company recorded a CAGR of 15% in volume over FY08-10E (in line with industry) and weValuation: The company recorded a CAGR of 15% in volume over FY08-10E (in line with industry) and weestimate it to continue to register double-digit growth of about 14% CAGR over FY2010-12E. We believe thathigh growth potential of the Indian car market would mitigate the impact of rising competition for market leaderMaruti Suzuki. We recommend a Buy on the stock with a price target of Rs1,861, at which the stock wouldtrade at 17x FY2012E EPS, which is in line with our Sensex Target P/E.
Valuation SnapshotEP (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11 FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
88.0 96.6 109.4 20.5 18.7 17.8 15.9 14.5 12.8 3.3 2.7 2.3 1.1 0.9 0.7
16
Maruti Suzuki
Particulars* PPP-based/Capita Calorie Telecom Power Car
(US $) (Kilo/Capita) (MOU / Capita) (Kwh/year) (Car/1,000 people)
High growth potential of Indian car market would mitigate the impact of rising competition for market leader Maruti Suzuki
India 3,100 2,047 125 618 12
USA 46,400 3,900 624 14,240 449
India - Growth Opportunity (x) 15 2 5 23 37India Growth Opportunity (x) 15 2 5 23 37
100%
Car Sales growth - Tier II and III cities/towns remain to be tapped Rising income level to support volume growth
Source: NSSO, CIA, FCC, ERS, Human Development Report 2007-08, Crisil Research, Angel Securities; *-Estimates
62.0 61.8 61.6
16.8 18.8 20.4
40%
60%
80%
100%
High Income (annual income>Rs2.85lakh)
Medium Income (annual income Rs71000-Rs2.85lakh)
(in %) 3QFY10 2QFY10 1QFY10 4QFY09 3QFY092QFY09 1QFY09
Top 10 Cities 50 8 (10) (9) (23) (7) 7
Next 10 Cities 57 23 12 8 (12) 0 8
Next 20 Cities 56 35 9 10 (11) (4) 14
21.1 19.3 18.00%
20%
2005-08 2008-09 2009-10E
Rs71000 Rs2.85lakh)
Low Income (annual income<Rs71000)
Source: Industry Angel Securities Source: NCAER Angel Securities
Next 60 Cities 55 29 20 23 2 12 17
Other Cities (36) 55 38 34 11 22 31
All India 41 22 5 4 (13) (1) 12
Source: Industry, Angel Securities Source: NCAER, Angel Securities
17
Maruti Suzuki
Balance SheetY/E March FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 144 5 144 5 144 5 144 5
Profit & Loss Statement Y/E March FY2009 FY2010E FY2011E FY2012E
Net Sales 20,530 28,299 32,936 38,463
% chg 14.7 37.8 16.4 16.8 Equity Share Capital 144.5 144.5 144.5 144.5
Reserves& Surplus 9,200 12,258 14,768 17,609
Shareholders Funds 9,345 12,402 14,912 17,754
Total Loans 698.9 698.9 698.9 698.9
Deferred Tax Liability (net) 155 1 151 3 140 9 119 8
Total Expenditure 19,095 24,588 28,847 33,694
EBIDTA 1,435 3,711 4,089 4,769
(% of Net Sales) 7.0 13.1 12.4 12.4
Other Income 1,016 985 1,038 1,080 Deferred Tax Liability (net) 155.1 151.3 140.9 119.8
Total Liabilities 10,199 13,252 15,752 18,572
APPLICATION OF FUNDS
Gross Block 8,721 10,679 12,668 14,794
Less: Acc Depreciation 4 650 5 504 6 429 7 538
Depreciation & Amortisation 707 854 925 1,110
Interest 51.0 50.3 52.4 50.7
PBT 1,693 3,792 4,150 4,689
(% of Net Sales) 8.2 13.4 12.6 12.2 Less: Acc. Depreciation 4,650 5,504 6,429 7,538
Net Block 4,071 5,175 6,239 7,255
Capital Work-in-Progress 861 1,068 1,013 740
Investments 3,173 5,301 6,301 7,429
Current Assets 5 491 6 243 7 476 9 104
( )
Extraordinary Expense/(Inc.) 146.1 - - -
Tax 457 1,247 1,359 1,526
(% of PBT) 27.0 32.9 32.8 32.6
PAT Current Assets 5,491 6,243 7,476 9,104
Current liabilities 3,398 4,534 5,277 5,956
Net Current Assets 2,094 1,709 2,199 3,149
Total Assets 10,199 13,252 15,752 18,572
PAT 1,236 2,544 2,791 3,163
% chg (30.4) 105.9 9.7 13.3
Ad. PAT 1,090 2,544 2,791 3,163
% chg (36.5) 133.5 9.7 13.3
18
Reliance Infra(CMP/TP: Rs1,008/1,253)
Transformation into Infrastructure behemoth…: R-Infra offers strong near-term growth potential withsustained long-term cash flows with nearly Rs1.6trillion (US $35bn) in assets under development across theInfrastructure and Power verticals and ownership/control over around 3.8bn tonne coal reserves. Visibility inexecution is likely to improve substantially with two road projects already operational and Rs14,000cr worthroads metro rail and power projects going on stream in the next 12 monthsroads, metro rail and power projects going on-stream in the next 12 months.
…on the back of strong Balance Sheet…: R-Infra has one of the strongest Balance Sheets in the Infra spacein India, with a huge war chest. Given its high risk appetite, the company is uniquely positioned to gain fromIndia’s infra growth opportunity. Its cash and cash equivalent stood at around Rs10,000cr at end FY2009.Compared with peers, it has an under leveraged Balance Sheet, with Gross Debt-to-Equity of around 62%.p p , g , q yHence, we believe that there is ample scope for R-Infra to aggressively, albeit prudently, build its infrastructureportfolio with strong net worth along with its execution experience, which makes it a serious contender for theproposed mega infrastructure projects, which potentially offer higher returns by restricting competition.
…coupled with strong growth opportunities: Visible traction in road project awards by the NHAI andl d di i li (37 050k FY10 14E) i i f i f d l lik R liplanned awarding pipeline (37,050km over FY10-14E) are positives for infrastructure developers like Reliance
Infra. Besides this, the Mega Road Projects and Ultra Mega Transmission Projects serve as potentialopportunities in the near term. Also, the large Metro Projects in Hyderabad and Bangalore are at advancedstages of bidding with Reliance Infra also figuring amongst the bidders.
Valuation SnapshotValuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
54.1 54.4 68.3 6.5 6.2 7.2 18.6 18.5 14.8 1.2 1.2 1.1 2.5 2.4 2.0
19
Reliance Infra
�Mumbai Metro Line 1 (69%)
�Delhi Airport Metro Express Link (95%)
�Mumbai Metro Line 2 (48%)
Reliance InfrastructureEPC + Investments
(Listed Company)
FuelAssets
ReliancePower
RelianceCementation
45%
51%
� CBM (45%)� Out Blocks (70%)� Coal Field (100%)
100%
�Mumbai Metro Line 1 (69%)
�Delhi Airport Metro Express Link (95%)
�Mumbai Metro Line 2 (48%)
Reliance InfrastructureEPC + Investments
(Listed Company)
FuelAssets
ReliancePower
RelianceCementation
45%
51%
� CBM (45%)� Out Blocks (70%)� Coal Field (100%)
100%
Re-organisation to increase Value-unlocking potential
RelianceEnergy
GenerationLtd
(Dahanu)
BSESKeralaPower
Ltd
ReliancePower
TransmissionLtd
RelianceEnergy
Ltd
RelianceEnergyTrading
Ltd
RelianceInfraVentures
Ltd
RelianceProperty
DevelopersLtd
RelianceGoa &
TransmissionProjects
�Mumbai distribution (100%)
�Delhi Discoms
Energy Trading Road projects�5 projects in
Tamil Nadu�GF t ll d
�Real Estate�SEZ
100%
RelianceEnergy
GenerationLtd
(Dahanu)
BSESKeralaPower
Ltd
ReliancePower
TransmissionLtd
RelianceEnergy
Ltd
RelianceEnergyTrading
Ltd
RelianceInfraVentures
Ltd
RelianceProperty
DevelopersLtd
RelianceGoa &
TransmissionProjects
�Mumbai distribution (100%)
�Delhi Discoms
Energy Trading Road projects�5 projects in
Tamil Nadu�GF t ll d
�Real Estate�SEZ
100%
Goa &Samalkot
PowerLtd
�Delhi Discoms(49%)
�GF toll road�Jaipur Reengus
toll road�Airport projects
Goa &Samalkot
PowerLtd
�Delhi Discoms(49%)
�GF toll road�Jaipur Reengus
toll road�Airport projects
Order Book lends visibility
Source: Company, Angel SecuritiesHuge infra portfolio: Metros to improve credibility
Project Detail Type of Project R-Infra'st k (%)
Capex(R b )
Concession period+Const CoD
4,500 -
5,400 9,900 12,000
16,000
20,000
(Rs cr)Project Detail Type of Project stake(%) (Rs bn) period+Const.
periodCoD
Current projects Delhi Airport Express Link Metro 95 28.9 28+2 FY11 Mumbai Metro phase I Metro 69 23.5 32.5+2.5 FY12 Namakkal - Karur (NK Toll) Road 100 3.5 18.5+1.5 Operational Dindigul Samyanallore (DS Toll) Road 100 4.2 18.5+1.5 Operational Trichy Karur (TK Toll) Road 100 7.5 28+2 FY12 Trichy Dindigul (TD Toll) Road 100 5.6 28+2 FY12 Salem Ulenderpet (SU Toll) Road 100 10.8 23+2 FY12
7,200 9,000
-
4,000
8,000
Existing Order Book Projects in Pipeline/ Preferred Bidder
Roads Power Transmission Metro's
Source: Company Angel Securities S C A l S iti
Gurgaon - Faridabad Road 100 7.8 15+2 FY12 Total 91.8Projects in-pipeline Mumbai Metro Line 2 Metro 48 110 30+5 5yrs from FCMumbai Western Expressway Sea Link Urban Transport 51 35+5 NA Jaipur-Reengus Road 100 5.9 15.5+2.5 NA Regional Airports Airport 100 1-1.5 95-year lease NA Total 169 Grand Total 260.7
Source: Company, Angel Securities Source: Company, Angel Securities
20
Reliance Infra
Balance Sheet (Consolidated)Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 226 1 226 1 269 0 269 0
Profit & Loss Statement (Consolidated)Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 12,578 14,076 15,825 19,064 % chg 50.8 11.9 12.4 20.5 Equity Share Capital 226.1 226.1 269.0 269.0
Reserves& Surplus 16,082 18,678 23,171 25,183
Shareholders Funds 16,308 18,904 23,440 25,452
Total Loans 10,217 13,812 16,446 16,624
Deffered Tax Liability 211 3 194 0 194 0 194 0
Total Expenditure 11,948 12,585 13,927 16,067
EBITDA 629.9 1,490.8 1,897.7 2,996.2 (% of Net Sales) 5.0 10.6 12.0 15.7
Other Income 1,423.8 993.2 1,121.0 1,267.9 Deffered Tax Liability 211.3 194.0 194.0 194.0
Total Liabilities 26,736 32,910 40,080 42,270
APPLICATION OF FUNDS
Gross Block 10,107 11,886 15,863 24,873
Less: Acc Depreciation 4 638 5 104 5 669 6 584
Depreciation & Amortisation 330.4 465.8 565.6 914.7
Interest & other Charges 439.4 561.1 706.4 1,128.3
PBT 1,283.9 1,457.1 1,746.7 2,221.1
(% of Net Sales) 10.2 10.4 11.0 11.7
Extraordinary Inc 53 6 - - - Less: Acc. Depreciation 4,638 5,104 5,669 6,584
Net Block 4,880 6,193 9,604 17,699
Capital Work-in-Progress 3,558 7,755 8,982 1,811
Investments 15,936 16,196 18,310 19,491
C t A t 9 570 9 393 9 861 9 957
Extraordinary Inc. 53.6 - - -
Tax 78.3 233.1 283.7 383.9
(% of PBT) 6.1 16.0 16.2 17.3
PAT 1,259.2 1,224.0 1,463.0 1,837.2 % chg 10.4 (2.8) 19.5 25.6
Current Assets 9,570 9,393 9,861 9,957
Current liabilities 7,208 6,627 6,677 6,688
Net Current Assets 2,362 2,767 3,184 3,269
Total Assets 26,736 32,910 40,080 42,270
( )
(% of Net Sales) 10.0 8.7 9.2 9.6
Adj. PAT 1,205.6 1,224.0 1,463.0 1,837.2 % chg 92.7 1.5 19.5 25.6
(% of Net Sales) 9.6 8.7 9.2 9.6
21
State Bank of India(CMP/TP: Rs2,073/2,586)
Improving Savings Market Share: During the past few years, the Bank witnessed a significant decline in CASA marketshare with private sector banks pursuing aggressive branch expansion. However, the Bank’s market share of savings depositshas expanded by a substantial 300bp to 23.5% during FY07-9MFY10 (only PSB to do so), driven by relatively faster branchexpansion (9.5% CAGR v/s 2-5% for most PSBs) leveraging its tremendous trust factor in the country.
Strongest Fee Income among PSU Banks: SBI has a relatively strong share of Fee Income flowing from commission,g g y g gexchange and brokerage, which is one of the highest amongst PSU banks, owing to its vast branch network and strongcorporate and government business relationships. During 9MFY10, the Bank continued its dominance with Non-InterestIncome/Assets at 1.2% (highest among PSU Banks).
Asset quality pressure – A short-term headwind: SBI has a Gross NPA ratio of 3.1% and Net NPA ratio of 1.9%, indicatingvery low provision coverage ratio of 40.2%, (56% including technical write-offs) and restructured loans of Rs26,000cr,y p g %, ( % g ) , ,constituting 39.1% of its Net Worth. We expect pressure on Corporate and SME loans restructured to continue for anothercouple of quarters. However, the Bank is expected to comfortably absorb asset quality pressures and we see this as a short-term headwind over-discounted by the market, providing an attractive buying opportunity.
Banking and Non-Banking subsidiaries form significant portion of SOTP: Due to strong CASA and Fee Income, SBI’score RoEs have improved over the past few years and unlike virtually all other PSBs actual 9MFY2010 RoEs are below corecore RoEs have improved over the past few years and unlike virtually all other PSBs, actual 9MFY2010 RoEs are below corelevels due to low asset yields, providing scope for upside as the CD ratio improves and yields normalise to sectoral averages.Moreover, after a steep correction, SBI (excluding value of insurance and capital market subsidiaries), is trading at just 1.2xFY2012E ABV v/s its 5-year range of 1.3-2.0x and median of 1.6x. We believe this provides sufficient margin of safety andattractive upside, especially in light of its dominant position and reach, strong growth and superior Earnings quality. Werecommend a Buy on the stock, with a Target Price of Rs2,586.
Valuation SnapshotCompany Reco CMP (Rs) Tgt Price (Rs) Upside (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
FY12E FY12E FY12E FY09-12E FY12E FY12ESBI Buy 2,073 2,586 24.8 1.2 1.6 8.6 18.0 1.1 19.2
22
State Bank of India
21.0
23.0
25.0
2.1
1.7 1.7
1 5
2.0
2.5
Fee Income/Assets – The best amongst PSU BanksImproving Market Share – Savings Deposits
15.0
17.0
19.0
FY20
03
FY20
04
FY20
05
FY20
06
FY20
07
FY20
08
FY20
09
FY20
10
1.2 1.1 1.0 1.0 0.9 0.9 0.8 0.8 0.8 0.7 0.6 0.6
-
0.5
1.0
1.5
XSB
CBK
IBK
SBI
OBC
DBK
DBK
PNB
PBK
NBK
BOB
BOI
NBK
IOB
SIB
9M
% Savings Deposit Share
AX
HDFC
ICIC O
IND
FED P
CRP UN B
DEN
Source: Company, Angel Securities
Upside in Core RoE (%, 9MFY10)
Source: Company, Angel Securities
SOTP Valuation Summary
Y/E March (Rs) Target Multiple Value Per Share
SBI & Associates 1.6x ABV 2,342
Life 15.0x NBP 202
20.6
25.4
15.816.317.5
19.3
15
20
25
30
AMC 5% AUM 14
Others (Cap Mkt, Cards, Factors) 28
SOTP Value 2,5860
5
10
BOB PNB SBIActual RoE Core RoE
Source: Company Angel Securities Source: Company Angel SecuritiesSource: Company, Angel Securities Source: Company, Angel Securities
23
State Bank of India
Income Statement Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ENet Interest Income 20,873 24,566 29,363 36,931
- YoY Growth (%) 22.6 17.7 19.5 25.8
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Share Capital 635 635 635 635
Reserve & Surplus 57,313 64,707 73,390 85,184Other Income 12,902 13,806 15,115 18,297
- YoY Growth (%) 37.3 7.0 9.5 21.1
Operating Income 33,775 38,373 44,477 55,228
- YoY Growth (%) 27.8 13.6 15.9 24.2
O ti E 15 649 19 012 21 674 24 708
Reserve & Surplus 57,313 64,707 73,390 85,184
Deposits 742,073 801,439 961,727 1,144,455
- Growth (%) 38.1 8.0 20.0 19.0
Borrowings 53,714 58,011 69,613 82,839
Tier 2 Capital 30,344 37,931 45,517 54,620Operating Expenses 15,649 19,012 21,674 24,708
- YoY Growth (%) 24.1 21.5 14.0 14.0
Pre - Provision Profit 18,127 19,361 22,804 30,520
- YoY Growth (%) 31.2 6.8 17.8 33.8
Provision and
C p , , , ,
Other Liabilities & Provisions 80,353 79,450 99,432 119,870
Total Liabilities 964,432 1,042,171 1,250,313 1,487,604
Cash in Hand and with RBI 55,546 40,072 48,086 57,223
Bal.with banks & money at 48 858 52 766 63 319 75 350Provision and Contingencies 3,736 4,903 5,809 7,457
- YoY Growth (%) 10.8 31.2 18.5 28.4
Profit Before Tax 14,391 14,457 16,995 23,063
- YoY Growth (%) 37.9 0.5 17.6 35.7
call 48,858 52,766 63,319 75,350
Investments 275,954 275,257 330,161 385,238
Advances 542,503 629,304 755,164 906,197
- Growth (%) 30.2 16.0 20.0 20.0
Fi d A 3 838 4 021 4 680 5 402Provision for Taxation 5,058 4,829 5,679 7,727
- as a % of PBT 35.2 33.4 33.4 33.5
PAT 9,332 9,628 11,316 15,335
- YoY Growth (%) 38.7 3.2 17.5 35.5
Fixed Assets 3,838 4,021 4,680 5,402
Other Assets 37,733 40,752 48,902 58,194
Total Assets 964,432 1,042,171 1,250,313 1,487,604
- Growth (%) 33.8 8.0 20.0 19.0
24
Tech Mahindra(CMP/TP: Rs907/1,168)
Sustained traction from Non-BT clients: The company’s Revenues from Non-BT clients have continued to flourish andmarked a strong CQGR of 16.1% over 1QFY06-3QFY10. The sustained volume traction from Non-BT clients (4% CQGRover 4QFY10-4QFY12E) continues to provide Revenue growth momentum, Margin improvement, geographicaldiversification, increased Off-shoring mix and reduced client concentration. Moreover, net addition of 3,897 employees in3QFY10 (highest in the last ten quarters) taking the total headcount to 30,404, indicates a strong pipeline .( g ) g g
Restructuring ends the uncertainty: The recent deal restructuring with BT ends the uncertainty, as the new termsensure compensatory volumes. We believe that the Advance Revenues will help it maintain its existing level of OperatingMargins of 24%. Also, the repayment of loans from the compensatory fee receipt (upfront payment of Rs968cr) willreduce Interest costs and support Earnings growth.
Positive news flow from Satyam: Positive news flow from Satyam by way of client retention, new deal wins andfavorable settlement with Upaid are also providing comfort on future business prospects.
Significant discount to Peers: Currently, the consolidated EBITDA margin outlook is relatively weak due to the BT dealas well as the uncertainty regarding Satyam. However, considering the company's pedigree of a Tier-1 IT player, marginsshould eventually revive close to peer levels. Based on this premise, including Satyam, the stock is looking attractive ons ou d e e tua y e e c ose to pee e e s ased o t s p e se, c ud g Satya , t e stoc s oo g att act e oEV/Sales basis relative to peers, trading at 1.9x FY2010E sales, a substantial discount to its peers average of 3.5x. Wehave valued TechM on SOTP basis, valuing Tech Mahindra (excl. Satyam) at 13x FY2012E EPS (40% discount to ourtarget P/E for Infosys v/s 55% at present and 20% to the 5-year average), and value its 42.7% stake in Mahindra Satyamat Rs287 per share based on current market cap, applying a 25% holding company discount.
Valuation Snapshot (Financials are excluding Satyam Market Cap not adjusted for Satyam)Valuation Snapshot (Financials are excluding Satyam, Market Cap not adjusted for Satyam)EPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
53.2 60.7 67.8 28.5 25.1 22.1 17.0 14.9 13.4 4.3 3.3 2.6 1.9 1.7 1.4
25
Tech Mahindra
12%
14%
16%
18%
550
600
650
700
Strong Employee addition Robust Growth in Non-BT (qoq)
3000
40005000
28,000
32,000
2%
4%
6%
8%
10%
12%
300
350
400
450
500
550
Q1'09 Q2'09 Q3'09 Q409 Q1'10 Q2'10 Q3'10
(Rs
cr)
-1000
01000
2000
20,000
24,000
Q3'
08
Q4'
08
Q1'
09
Q2'
09
Q3'
09
Q40
9
Q1'
10
Q2'
10
Q3'
10
6 5 740%
Q Q Q Q Q Q Q
Non BT Revenue QoQ growth
Source: Company, Angel Securities
Revenue contribution from BT decreasing
Source: Company, Angel Securities
Economical FY10E EV/Sales despite Comparative Margins770
Q Q Q Q Q Q Q Q Q
Employee Net addition
6.5
5.3
3.8
2.82.2
1.9 1 7 2
3
4
5
6
7
15%
20%
25%
30%
35%
40%
420 490 560
630 700
1.7
0
1
2
0%
5%
10%
Infosys TCS Wipro Mphasis HCL TechM # Patni
EV/Sales EBIDTA Margin
Source: Company, Angel Securities Source: Company, Angel Securities, # Tech M EV/Sales includes Satyam
280 350
Q1FY08 Q3FY08 Q1FY09 Q3FY09 Q1FY10 Q3FY10
BT Revenue Non BT Revenue
26
Tech Mahindra
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDS
Equity Share Capital 121.7 122.2 125.7 129.2
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 4,465 4,607 4,989 5,704
% chg 18 5 3 2 8 3 14 3Preference Share Capital - - - -
Reserves& Surplus 1,833 2,479 3,344 4,320
Shareholders Funds 1,954 2,601 3,470 4,449
Total Loans 0 1,400 800 0
D f d T Li bilit (19 6) 0 0 0
% chg 18.5 3.2 8.3 14.3
Total Expenditure 3,172 3,487 3,791 4,390
EBIDTA 1293.0 1120.2 1198.4 1313.9
(% of Net Sales) 29.0 24.3 24.0 23.0Deferred Tax Liability (19.6) 0 0 0
Minority Interest - - - -
Total Liabilities 1,935 4,001 4,270 4,449
APPLICATION OF FUNDS
Gross Block 900 1,100 1,275 1,450
Other Income (72) 15 10 10
Depreciation& Amortisation 110 138 159 181
Interest 3 224 119 34
PBT 1132.5 773.7 930.0 1108.6 , , ,
Less: Acc. Depreciation 410.00 547.54 706.95 888.24
Net Block 490 553 568 562
Capital Work-in-Progress 161.7 211.7 236.7 186.7
Investments 434.6 2946.6 2871.6 2821.6
PBT 1132.5 773.7 930.0 1108.6
(% of Net Sales) 25.4 16.8 18.6 19.4
Exceptional & Prior Period Expenses - - - -
Tax 118 124 167 233Current Assets 1,737 2,078 2,295 2,516
Current liabilities 889 1,787 1,702 1,637
Net Current Assets 848 290 593 879
Total Assets 1,935 4,001 4,270 4,449
(% of PBT) 10.4 16.0 18.0 21.0
PAT( After Minority Interest) 1014.5 649.9 762.6 875.8
% chg 207.5 (35.9) 17.3 14.8
27
Mid Caps
Anant Raj Industries(CMP/TP: Rs134/196)
Land acquisition at discounted price: Almost all of ARIL’s land bank (872 acres) is exclusively located inNCR (within 50km of Delhi), with around 525 acres in Delhi. This historical land bank has been acquired at anaverage cost of Rs300/sq ft. This is because ARIL follows the allocation route for land acquisition rather thanauctions, which are significantly lower than prevailing market rates. The successful strategy of land acquisitioncan be attributed to ARIL being a real estate contractor for the Delhi Development Authority (DDA) and acan be attributed to ARIL being a real estate contractor for the Delhi Development Authority (DDA) and afocused NCR player, which helps it in identifying areas with high economic potential in Delhi.Super premium Residential launches will drive near-term visibility: We expect ARIL’s two super premiumresidential projects, Hauz Khas and Bhagwandas (Delhi) to drive its near-term Revenue visibility, contributingaround Rs600cr Profit over the next three years. Further, ARIL has 70% pre-lease commitments at its ManesarIT Park (1 1mn sq ft) where 30% of lessees have already acquired fit outs and another 40% will be moving inIT Park (1.1mn sq ft), where 30% of lessees have already acquired fit-outs and another 40% will be moving inby March FY10. It will also have five hotels operational near the Delhi airport by FY11E, with transfer ofoccupancy risk to third-party in return of fixed rentals.Trading at significant discount: ARIL is trading at 43% discount to its NAV (much higher than its peers),which gives margin of safety, given its low-cost land bank at prime locations and well-capitalised BalanceSheet. The discount is primarily owing to higher exposure to commercial assets (67%). However, we expectdemand to pick up in the Commercial and Retail Segments in 2HFY11E, with our channel checks indicatingthat leasing enquiries have picked up following renewed interest from corporates. The stock is trading at 7.6xFY12E EPS and 0.9x FY12E P/BV. We have arrived at a Target Price of Rs196, which is at 15% discountto our 1-year forward NAV, and provides potential upside of 46% from current levels.
Valuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
8.8 11.8 17.6 8.0 9.7 12.9 15.3 11.3 7.6 1.2 1.0 0.9 9.3 5.6 3.6
29
Anant Raj Industries
1 Yr forward NAV (Rs per share)Commercial 131 Hospitality 53 Residential 45
Valuation summary 60mn sq. ft. of Saleable area in NCR
33 %12 %
Other 17 Total 246 Add: Net Cash 22 Less: Present value of taxes (37)
NAV/share (Rs) 231 55 %
R id ti l C i l H it litTarget Price (Rs) 15% discount to NAV 196
Delhi, 16.9Other 80
9078
Location-wise Breakup of NAV Location-wise Breakup of Saleable Area (mn sq ft)
Residential Commercial Hospitality
Source: Angel SecuritiesSource: Angel Securities
Nazafgarh, 4.0
Faizalwas, 4.9
locations, 9.9
2
50
27 2010 6 8 10
32
2
2
4
8
44 1
1
40
10
20
30
40
50
60
70
80
Rs/s
hare
53
27 23
108 6
1610
Manesar, 17.52- Retail malls
Delhi, 0.7
Rai, Sonepat, 3.5
Greater Nodia, 2.8
Del
hi
Man
esar
2 Re
tail
Mal
ls-D
elhi
Sone
pat
Gre
ater
Noi
da
Naz
abga
rh
Faiz
alw
as
Oth
er lo
catio
ns
Oth
er in
com
e
Commercial Residential Hotels
Source: Angel Securities Source: Company, Angel Securities
30
Anant Raj IndustriesProfit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 251 338 467 785
% chg (58) 35 38 68
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDSEquity Share Capital 59 59 63 63
Reserves& Surplus 3 261 3 547 3 991 4 492Total Expenditure (30) (27) (39) (60)
EBITDA 221 310 429 725
(% of Net Sales) 88.0 91.9 91.7 92.3
Other Income 70 54 59 44
Reserves& Surplus 3,261 3,547 3,991 4,492
Shareholders Funds 3,320 3,605 4,054 4,555
Total Loans 210 110 110 410
Deffered Tax Liability 3 3 3 3
Minority Interest 69 69 69 69
Depreciation & Amortisation (9) (17) (21) (27)
Interest (0) (0) (1) (3)
PBT 282 347 466 739
Total Liabilities 3,601 3,787 4,236 5,036 APPLICATION OF FUNDSGross Block 1,260 1,534 1,894 2,640
Less: Acc. Depreciation (45) (61) (82) (109)
Net Block 1 215 1 472 1 812 2 530(% of Net Sales) 112.3 102.7 99.8 94.1
Min. Int./EO/Prior Period Items (1.1) (1.5) (1.0) -
Tax (73) (69) (93) (185)
Net Block 1,215 1,472 1,812 2,530Intangibles 146 146 146 146
Capital Work-in-Progress 721 721 721 721
Investments 309 309 309 309Current Assets 1,331 1,338 1,577 1,827
(% of PBT) 26.0 20.0 20.0 25.0
Reported PAT 207 276 372 555
% chg (52.5) 33.0 34.9 49.1
Current liabilities 126 205 334 503
Net Current Assets 1,205 1,133 1,242 1,324
Mis. Exp. not written off 5 5 5 5
Total Assets 3,601 3,787 4,236 5,036
31
Electrosteel Castings(CMP/TP: Rs48/72)
Moving towards an Integrated business model: ECL is on track to have in place an integrated businessmodel going ahead through: a) Backward integration initiatives led by the allocation of mines, and b) Focus onbeefing up its logistic infrastructure to further reduce costs. The company has already started coal productionfrom its coal mines at Parbatpur, Jharkhand. This is likely to result in EBITDA Margin improving by 1,304bp to28 0% over FY09-12E despite the fall in DI realisations Moreover grant of iron ore mining lease with28.0% over FY09 12E, despite the fall in DI realisations. Moreover, grant of iron ore mining lease, withestimated reserves of 91mn tonnes could further improve Margins, which is not factored in our estimates.
Value unlocking through listing of EIL: ECL is setting up a 2.2mn tonne steel plant through EIL, in which itholds a 40% stake. The total project cost of Rs7,262cr has been funded through a Debt-Equity ratio of 3:1 andthe project has already achieved financial closure. Of the total equity contribution of Rs1,815cr, ECL has madep j y q y , ,an investment of Rs726cr. ECL plans to list EIL to raise Rs300cr, which will unlock value for ECL.
Leading DI player, to benefit from Investment in Water Infrastructure: ECL, with 65% market share, isexpected to benefit from the strong domestic demand for DI pipes, which is set to grow at 15% per annum.Increasing demand for water and poor sanitation levels (estimated at 33%) are expected to drive investments inwater infrastructure. Also, the company’s strong relationship with the state governments will help mitigate therisk of losing market share as competitors’ capacities come on-stream. ECL already has a presence in Europe,the Middle-East and is currently exploring the US markets.
Valuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
4.5 5.6 6.6 11.3 12.8 13.6 10.8 8.6 7.3 1.0 0.9 0.8 1.7 1.5 1.4
32
Electrosteel Castings
13
14
15
20
25
30
400
500
600
Return Ratios (RoCE and RoE) on an uptrendEBITDA Margins to almost double over FY09-12E
9
10
11
12 (%)
0
5
10
15
20
0
100
200
300
400
(%)
(Rs
cr)
500
FY09 FY10E FY11E FY12E
RoE RoCE
FY09 FY10E FY11E FY12EEBITDA (LHS) EBITDA margin (RHS)
Source: Company, Angel Securities
Strong operating cash flows to fund Capex
Source: Company, Angel Securities
Despite high Capex, Net Debt to Equity in comfortable zone
200
300
400
500
(Rs
cr)
0.54
0.56
0.58
0.60
100
150
200
250
300
350
(x)
(Rs
cr)
0
100
FY2009 FY2010E FY2011E FY2012E
Operating cash f lows
0.50
0.52
0
50
100
FY09 FY10E FY11E FY12ECapex (LHS) Net Debt/Equity (RHS)
Source: Company, Angel Securities Source: Company, Angel Securitiesp y, g p y, g
33
Listing of Subsidiary EIL can unlock value
1,200
1,400
1,600
Significant upside based on EV/tonne analysis
Sales Volume (mn tonne) 2.0EBITDA/tonne (US $) 175EBITDA 1 628
Valuation of Steel business (Rs cr)
0
200
400
600
800
1,000
(US
$/to
nne) EBITDA 1,628
Depreciation 360EBIT 1,268Interest 486PBT 782Tax @33% 258
SAIL Tata Steel* JSW Steel EIL
EV/tonne
Net Income 524Target Multiple (x) 8Market cap 4,189ECL's share (40%) 1,676Assuming a 20% discount 1,340Steel Business (Rs) 35
Source: Angel Securities; * Standalone figures
FY2012E EPS 6.6
Multiple (x) 8.0
V l P h 53
SOTP Valuation (Rs) Steel Business (Rs) 35
Valuation (Rs) including earnings from steel business
Source: Angel Securities
Value Per share 53
Steel business at cost 19
Target Price 72
Standalone business 53
Steel business 35
Price 88
Source: Angel Securities Source: Angel Securitiesg g
34
Electrosteel Castings
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDS
Equity Share Capital 28.7 32.6 32.6 32.6
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Total Sales 1,975 1,526 1,781 1,893
% chg 35 1 (22 7) 16 7 6 3Preference Share Capital - - - -
Reserves& Surplus 1,372 1,538 1,702 1,903
Shareholders Funds 1,401 1,571 1,734 1,936
Total Loans 1,101 1,295 1,295 1,295
D f d T Li bilit 36 9 36 9 36 9 36 9
% chg 35.1 (22.7) 16.7 6.3
Total Expenditure 1,684 1,137 1,334 1,385
EBIDTA 290.9 389.2 447.7 508.7
(% of Net Sales) 14.9 26.8 26.2 28.0 Deferred Tax Liability 36.9 36.9 36.9 36.9
Minority Interest 4.3 5.5 6.5 7.5
Total Liabilities 2,544 2,908 3,072 3,275
APPLICATION OF FUNDS
Gross Block 797.8 1,047.8 1,297.8 1,497.8
Other Income 64.0 20.0 50.0 60.0
Depreciation& Amortisation 53.4 70.5 91.0 106.3
Interest 103.2 95.8 103.6 103.6
PBT 198.3 242.9 303.2 358.9 , , ,
Less: Acc. Depreciation 279.3 349.8 440.7 547.0
Net Block 518.5 698.0 857.1 950.8
Capital Work-in-Progress 301.7 351.7 401.7 451.7
Investments 466.4 666.4 666.4 666.4
PBT 198.3 242.9 303.2 358.9
(% of Net Sales) 10.0 15.9 17.0 19.0
Exceptional & Prior Period Expenses - - - -
Tax 70.4 81.8 99.7 118.1 Current Assets 1,594 1,468 1,446 1,506
Current liabilities 337.0 276.2 298.6 300.2
Net Current Assets 1,257 1,192 1,147 1,206
Total Assets 2,544 2,908 3,072 3,275
(% of PBT) 35.5 33.7 32.9 32.9
PAT( After Minority Interest) 135.3 168.5 211.5 248.8
% chg 17.1 24.5 25.5 17.7
35
Federal Bank(CMP/TP: Rs258/342)
Healthy Deposit Mix: Federal Bank’s CASA deposits recorded a CAGR of 20.6% during FY05-09, leading toa stable 25% CASA ratio. Further, a key differentiator for the Bank - low-cost NRI deposits base - constitutes16.5% of total deposits. Thus, effectively low-cost deposits as a proportion of total deposits stand at around41%, which is expected to underpin NIMs of around 3.1% in FY12E, even as the Bank grows its Advancesfaster than industry (24% CAGR over FY09-12E) to leverage its large Net Worthfaster than industry (24% CAGR over FY09 12E) to leverage its large Net Worth.Impact of Dubai crisis within manageable limits: The stock has been an underperformer due to concernsover impact of the Dubai crisis on the Bank’s business model, which benefits meaningfully from theMiddle-East NRI clients. However, as indicated by management, the Bank has a very low direct loan exposureof around Rs350cr (1.3% of the loan book) to NRIs dependent on Dubai. Hence, impact of the crisis on itsasset quality is expected to be within manageable limits.Compelling Valuations: Since April 2009 till date, the Federal Bank stock has underperformed its peers,which posted average returns of 135%, whereas Federal Bank clocked 80% returns, implying anunderperformance of 55%. The proposed CSB acquisition, which was partly responsible for the stock'sunderperformance in the last 11 months, is now unlikely to fructify, as the asking price substantially exceedsunderperformance in the last 11 months, is now unlikely to fructify, as the asking price substantially exceedsFederal Bank's assessment of the Bank's value. At the CMP, the stock is trading at attractive valuations of0.8x FY2012E ABV - similar to South Indian Bank, its closest peer, compared to the 5-year average premiumof 15%. While lower leverage is leading to low RoEs at present, at the core RoA level, the Bank’s Earningsquality is one of the best amongst peers. We recommend a Buy on the stock, assigning a multiple of 1.0xFY12E ABV to arrive at a 12-month Target Price of Rs342FY12E ABV to arrive at a 12 month Target Price of Rs342.
Valuation SnapshotCompany Reco CMP (Rs) Tgt Price (Rs) Upside (%) P/ABV (x) Tgt P/ABV (x) P/E (x) EPS CAGR (%) RoA (%) RoE (%)
FY12E FY12E FY12E FY09-12E FY12E FY12EFedBk Buy 258 342 31.6 0.8 1.0 5.5 17.0 1.3 14.4
36
Federal Bank
4.5 4.1
3.5 3.3 3.3 3.2 3.0
2 73 03.5 4.0 4.5 5.0
0.5
0.6
0.7
% NII/Assets amongst the highest in the sectorCASA Market Share Maintained
2.7 2.5 2.4 2.4 2.3 2.2 2.2 2.2 2.1
-0.5 1.0 1.5 2.0 2.5 3.0
OBC
CBK
DBK
DBK
PNB
XSB
SIB
SBK
IOB
BOB
BOI
SBI
PBK
CIBK NB
K
NBK0.1
0.2
0.3
0.4
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
100 03 5
O
HDFC IND
FED P AX YES B
CRP
ICIC UN DEN
25 030 0
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
% CASA Share
Source: Company, Angel Securities
Strong CAR and Advances Growth
Source: Company, Angel Securities
Stable Asset Quality, with strong Coverage Ratio
30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
1.0
1.5
2.0
2.5
3.0
3.5
10.0
15.0
20.0
25.0
10.0
15.0
20.0
25.0
30.0
-10.0 20.0
-
0.5
1.0
FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
% Provision Coverage (RHS) % Gross NPA (LHS) % Net NPA (LHS)
0.0
5.0
0.0
5.0
FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
% Advances Growth (LHS) %CAR (RHS)
Source: Company, Angel Securities Source: Company, Angel Securitiesp y, g
37
Federal Bank
Income Statement Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Interest Income 1,315 1,412 1,617 1,921
- YoY Growth (%) 51.5 7.3 14.6 18.7
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Share Capital 171 171 171 171
Reserve & Surplus 4,155 4,593 5,079 5,721Other Income 383 510 544 661
- YoY Growth (%) (3.0) 33.2 6.6 21.6
Operating Income 1,698 1,922 2,161 2,582
- YoY Growth (%) 34.5 13.1 12.5 19.5
Deposits 32,198 37,672 46,336 57,457
- Growth (%) 24.3 17.0 23.0 24.0
Borrowings 749 876 1,065 1,305
Tier 2 Capital 470 470 564 677Operating Expenses 571 665 787 938
- YoY Growth (%) 21.9 16.3 18.4 19.2
Pre - Provision Profit 1,127 1,257 1,374 1,644
- YoY Growth (%) 41.9 11.5 9.3 19.6
p
Other Liabilities & Prov. 1,057 1,614 1,957 2,278
Total Liabilities 38,800 45,396 55,173 67,609
Cash in Hand and with RBI 2,214 2,497 2,317 2,873
Prov. and Conting. 334 426 456 429
- YoY Growth (%) 13.6 27.6 7.0 (6.0)
Profit Before Tax 793 831 918 1,215
- YoY Growth (%) 58.6 4.8 10.5 32.3
Bal. with banks & call money 1,223 1,431 1,739 2,131
Investments 12,119 13,163 16,328 19,498
Advances 22,392 27,318 33,601 41,666
- Growth (%) 18.4 22.0 23.0 24.0Provision for Taxation 293 282 312 413
- as a % of PBT 36.9 34.0 34.0 34.0
PAT 500 548 606 802
- YoY Growth (%) 36.0 9.5 10.5 32.3
Fixed Assets 281 319 376 447
Other Assets 572 669 813 996
Total Assets 38,800 45,396 55,173 67,609
- Growth (%) 19.7 17.0 21.5 22.5
38
Gujarat State Fertiliser Corp(CMP/TP: Rs209/280)
Key beneficiary of new Subsidy regime: GSFC is amongst the top DAP players in the country with totalvolume market share of 7%. DAP is the second highest consumed fertiliser in the country, and with the comingup of Nutrient-based Subsidy regime wherein companies would be allowed to freely price DAP, we expectGSFC to emerge beneficiary of the same.
JV to guarantee key raw material supply: Phosphoric acid is the key raw material required to manufactureDAP, which is in turn manufactured from rock phosphate. Globally, few countries have rock phosphate mines.GSFC’s has set up a joint venture (JV) in Tunisia for the manufacture of phosphoric acid. The JV wouldguarantee uninterrupted supply of the acid.
Assets below Replacement cost: GSFC’s DAP manufacturing assets are available at attractive valuation ofRs16,077/tonne against the current replacement cost of Rs20,000/ton. Hence, we expect GSFC to continue topost good Profitability going forward. This further provides deep value in the stock.
Improving Profitability, good Dividend yield and cheap Valuations: GSFC’s FY10 performance is likely tobe muted due to the correction in commodity prices and high base effect of FY09 We expect RoCE and RoEbe muted due to the correction in commodity prices and high base effect of FY09. We expect RoCE and RoEto improve from 12.9% and 13.1% in FY2010E to 16.3% and 15.3% in FY2012E. If we were to assume thecompany shares Profits in line with most other PSUs, the dividend yield works out to 7% on FY12E DPS. Atcurrent valuation of 0.6x FY12E Book Value, the stock is trading at cheap valuations. Hence, we recommend aBuy on the stock, with a Target Price of Rs280 (incl dividend), providing an upside of 34%.
Valuation SnapshotEPS (Rs) RoE(%) P/E(x) P/BV(x) EV/Sales(x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
33.6 39.4 48.4 13.1 13.8 15.3 6.2 5.3 4.3 0.8 0.7 0.6 0.3 0.3 0.2
39
Gujarat State Fertiliser Corp
400
500
600
16
18
Profits have bottomed outImproving EBITDA Margin
100
200
300
400
Rs
cr
10
12
14(%)
40
0FY2009 FY2010E FY2011E FY2012E
10FY2009 FY2010E FY2011E FY2012E
Source: Company, Angel Securities
Profitability to bottom out in FY2010
Source: Company, Angel Securities
Debt free by FY20120 2
15
20
25
30
35
40
(%)
0.1
0.1
0.1
0.1
0.2
0.2
0.2
ebt:E
quity
(x)
0
5
10
FY2009 FY2010E FY2011E FY2012E
RoE RoCE
Source: Company, Angel Securities Source: Company, Angel Securities
0.0
0.0
0.0
0.1
FY2009 FY2010E FY2011E FY2012E
De
p y, g p y, g
40
Gujarat State Fertiliser Corp
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDS
Equity Share Capital 80 80 80 80
Profit & Loss StatementY/E March FY2009 FY2010E FY2011E FY2012E
Net Sales 5,881 4,133 4,354 4,587
% chg 64 8 (29 7) 5 3 5 3Preference capital - - - -
Reserves & Surplus 1,852 2,082 2,312 2,558
Shareholders fund 1,931 2,162 2,392 2,638
Total Loans 324 389 117 23
Deferred Tax Liability 172 172 172 172
% chg 64.8 (29.7) 5.3 5.3
Total Expenditure 4,909 3,658 3,818 3,986
EBIDTA 972 475 536 601
(% of Net Sales) 16.5 11.5 12.3 13.1 Deferred Tax Liability 172 172 172 172
Minority Interest - - - -
Total Liabilities 2,427 2,722 2,680 2,833
APPLICATION
Gross Block 3,215 3,280 3,378 3,479
Other Income 71.3 96.5 97.0 127.5
Depreciation & Amortisation 143.0 142.9 146.5 150.9
Interest 95.8 32.1 20.2 5.6
PBT 804.4 396.8 465.8 571.9 Less: Acc.Depreciation 2,013 2,156 2,302 2,453
Net Block 1,202 1,124 1,076 1,026 Capital Work-in-Progress 51 51 51 51
Investments 606 606 606 606
C A 1 463 1 82 1 913 2 2 9
(% of Net Sales) 13.7 9.6 10.7 12.5
Tax 240.6 129.1 151.7 186.1
(% of PBT) 29.9 32.5 32.6 32.5 Current Assets 1,463 1,782 1,913 2,259
Current liabilities 895 841 965 1,109
Net Current Assets 568 942 948 1,150
Total Assets 2,427 2,722 2,680 2,833
Exception item 65.2 0.0 0.0 0.0
PAT 498.6 267.7 314.1 385.8
% chg 110.8 (46.3) 17.3 22.8
41
IVRCL Infra(CMP/TP: Rs167/240)
Restructuring to Re-form: IVRCL in a restructuring program will transfer its BOT assets (road and waterassets) to its listed subsidiary, IVR Prime. We believe that this move will benefit both the companies, viz. 1) IVRPrime to have consistent Revenue stream, leverage excess Net Worth for winning more BOT projects and raisemoney via Equity route to fund its growth, and 2) IVRCL to focus on EPC work and experience traction in inflowon the back of enhanced Asset portfolio of IVR Primeon the back of enhanced Asset portfolio of IVR Prime.
Expect huge Order inflows, strong L1 status: IVRCL has a robust Order Book of Rs17,500cr or 2.8x itsFY10E Revenues with a strong L1 status of around Rs4,500cr, the highest in the company’s history till date.We believe that this robust Order Book provides visibility on the Top-line front for the next 24-30 months.Further, the company has also been diversifying to reduce dependence on Andhra Pradesh., p y y g p
Short-term concerns provide Buying opportunity: IVRCL has around 22% of its Order Book coming fromthe state of AP (facing a crisis) owing to which the stock has underperformed in the last three months.However, we would like to take a long-term call on IVRCL, which offers an exposure to the road and irrigationtheme of India’s infra story. Thus, we recommend a Buy on the stock. Further, the excellent track record, strongmanagement team at the helm of affairs and compelling valuations also gives us comfort.
Valuation SnapshotEPS (Rs) RoE (%) Adj. P/E (x)* Adj. P/BV (x)* Adj. EV/Sales (x)*
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12EFY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
8.6 11.6 12.9 12.0 14.0 13.5 12.7 9.4 8.4 1.4 1.3 1.1 0.8 0.7 0.7
Note: * Adjusted for stake in subsidiaries
42
IVRCL Infra
9.9
9 39.4 9.5 9.4
9.6 9.8 10.0
7,000 8,000 9,000
10,000
…Margins to recover given lower commodity pricesOrder Book spread across 21 states lends revenue visibility…
22%
4%4%3%
3% 15%
8.6
9.3
8.0 8.2 8.4 8.6 8.8 9.0 9.2
-1,000 2,000 3,000 4,000 5,000 6,000
26%
9%5%
5%
4%
4%
40 0 300
FY08 FY09 FY10E FY11E FY12E
Sales (Rs cr, LHS) EBITDA (Rs cr, LHS) EBITDA Margins (%, RHS)
Source: Company, Angel Securities
Trading at discount to historical P/E band…
Source: Company, Angel Securities
…in spite of significant Embedded Value
AP Maharashtra Tamilnadu Karnataka MP OrissaGujarat UP Punjab West Bengal Other states
10.0
15.0
20.0
25.0
30.0
35.0
40.0
100
150
200
250
300
0.0
5.0
1-Apr-021-Jul-021-O
ct-021-Jan-031-Apr-031-Jul-031-O
ct-031-Jan-041-Apr-041-Jul-041-O
ct-041-Jan-051-Apr-051-Jul-051-O
ct-051-Jan-061-Apr-061-Jul-061-O
ct-061-Jan-071-Apr-071-Jul-071-O
ct-071-Jan-081-Apr-081-Jul-081-O
ct-081-Jan-091-Apr-091-Jul-091-O
ct-091-Jan-10
P/E 7YEAR AVG 5YEAR AVG 3YEAR AVG
0
50
100
IVRCL Standalone Construction
IVR Prime Hindustan Dorr-Oliver
SOTP Target Price
Source: Company, Angel Securities Source: Company, Angel Securitiesp y, g p y, g
43
IVRCL Infra
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 26.70 55.5 55.5 55.5
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 4,882 5,941 7,570 8,741
% chg 33.4 21.7 27.4 15.5 Equity Share Capital 26.70 55.5 55.5 55.5
Reserves& Surplus 1,784 2,095 2,395 2,792
Shareholders Funds 1,810 2,151 2,451 2,847
Total Loans 1,398 1,946 2,567 3,119
Deffered Tax Liability 11.7 10.0 10.0 7.0
g
Total Expenditure 4,460 5,390 6,855 7,914
EBIDTA 421.5 550.8 714.6 827.0
(% of Net Sales) 8.6 9.3 9.4 9.5
Other Income 29 9 20 0 18 4 38 0 e e ed a ab ty 0 0 0 0 0
Total Liabilities 3,220 4,106 5,027 5,973
APPLICATION OF FUNDS
Gross Block 662.35 732.35 842.35 1,067.35
Less: Acc. Depreciation 141.65 200.97 266.68 345.66
Other Income 29.9 20.0 18.4 38.0
Depreciation& Amortisation 47.3 59.3 65.7 79.0
Interest 130.6 156.5 185.7 245.1
PBT 273.4 355.0 481.6 541.0p
Net Block 520.70 531.38 575.67 721.69
Capital Work-in-Progress 19.55 143.47 132.40 144.34
Investments 388.68 388.68 388.68 388.68
Current Assets 3,814 4,669 5,736 7,273
(% of Net Sales) 5.6 6.0 6.4 6.2
Extraordinary Expense/(Inc.) - - - -
Tax 47.8 117.2 158.9 183.9
(% of PBT) 17.5 33.0 33.0 34.0 , , , ,
Current liabilities 1,523 1,626 1,806 2,554
Net Current Assets 2,291 3,043 3,931 4,719
Total Assets 3,220 4,106 5,027 5,973
PAT 225.6 237.9 322.7 357.0
% chg 7.1 5.4 35.7 10.7
(% of Net Sales) 4.6 4.0 4.3 4.1
44
Jagran Prakashan(CMP/TP: Rs120 /160)
Prefer Regional Print Media to English: We continue to prefer the Regional Print Media over English owingto its lower penetration levels. According to IRS 2009, print media penetration among the rural literates is verylow at 21% v/s 42% of urban literates. Thus, there is significant scope for growth in the Circulation andReadership of Hindi newspapers as is evident from the fact that out of the 359mn people who can read in India,do not currently read any publication while 68% can read Hindido not currently read any publication, while 68% can read Hindi.
Recovery in Advertising to drive 17% CAGR in Top-line: With economic recovery is on-track and sectorslike BFSI, Real Estate and Auto are registering higher growth rates, we expect Jagran to post up-tick in itsAdvertising Revenues. Moreover, we expect Jagran to announce 8-10% rate hike in the coming months, whichshould help drive 17% CAGR in Revenues during FY2010-12E (aided by low base).
Higher Margins likely to sustain: Significant slide in Newsprint prices coupled with cost rationalisationmeasures have helped Jagran improve is Operating Margins by almost 1,000bp to 29% (19%) in FY10.Moreover, with the Newsprint prices expected to remain benign (modeled in 8-10% hike), Rupee to appreciateand lower losses in new initiatives, we expect Jagran to sustain current Margin levels.
Re-iterate as Top Pick in Print Media: We maintain Jagran as our Top Pick in the Print Media space owing toits dominant position in the Hindi Belt, increasing colour ad inventory and ability to attract high amount of localadvertising. We maintain a Buy on the stock, with a Target Price of Rs160 (Rs125) based on P/E multiple of20x FY12E.
Valuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
5.7 6.7 8.0 28.5 30.5 33.2 20.9 17.9 15.0 6.0 5.5 5.0 4.0 3.4 2.9
45
Jagran Prakashan
Strong Revenue and Earnings growth for FY2010-12ELow Penetration among Rural literates - potential for Hindi Print
16.8 17.9
21.0
15 0 14 5
20.0
25.0 Earnings CAGR (%)Top-line CAGR (%)Language Urban Rural Total
12.8 13.1 15.0 14.4 14.5
-
5.0
10.0
15.0 Population (Mn) 272 590 862
Literacy (%) 83% 62% 68%
Source: Company Angel Securities
Sharp spike in Margins likely to sustain due to benign Newsprint
Source: IRS 2009, Angel Securities
Highest Return Ratios (RoCE %) in Print Media3740
JPL HTML DB Corp DCHLReadership (% of Literates) 42% 21% 29%
16
28
33
37
14 16 17
12
24 25 25
15
25 25 26
15
20
25
30
35
21.9
19.0
29.3 29.7 30.2 39.4
41.5
32.7 31.6 31.4 33.0
35.0
37.0
39.0
41.0
43.0
45.0
20.0
25.0
30.0
35.0
Source: Company Angel Securities Source: Companies, Angel Securities
2
-
5
10
FY2009 FY2010E FY2011E FY2012E
JPL HTML DB Corp DCHL
25.0
27.0
29.0
31.0
10.0
15.0
FY2008 FY2009 FY2010E FY2011E FY2012E
OPM % (LHS) RM Costs % of Sales (RHS)
p y g p g
46
Jagran Prakashan
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDS
Equity Share Capital 60.2 60.2 60.2 60.2
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 823.4 928.2 1,092.3 1,267.2
% chg 9 8 12 7 17 7 16 0Preference Share Capital - - - -
Reserves& Surplus 499.7 545.8 599.1 663.2
Shareholders Funds 559.9 606.0 659.4 723.4 Total Loans 141.5 126.5 106.5 86.5
D f d T Li bilit 52 1 52 1 52 1 52 1
% chg 9.8 12.7 17.7 16.0
Total Expenditure 666.7 656.4 768.3 884.5
EBIDTA 156.7 271.8 324.1 382.6
(% of Net Sales) 19.0 29.3 29.7 30.2Deferred Tax Liability 52.1 52.1 52.1 52.1
Minority Interest - - - -
Total Liabilities 753.5 784.5 817.9 862.0 APPLICATION OF FUNDS
Gross Block 479.5 580.1 642.6 704.0
Other Income 22.7 40.1 34.7 38.3
Depreciation& Amortisation 38.3 49.3 54.6 59.8
Interest 5.9 6.3 5.9 5.2
PBT 135 2 256 2 298 3 355 9 479.5 580.1 642.6 704.0
Less: Acc. Depreciation 151.3 200.6 255.2 315.0
Net Block 328.2 379.5 387.4 388.9 Capital Work-in-Progress 70.7 87.0 96.4 105.6
Investments 156.8 156.8 156.8 156.8
PBT 135.2 256.2 298.3 355.9
(% of Net Sales) 16.4 27.6 27.3 28.1
Extraordinary Exp / (Inc) 0.0 0.0 0.0 0.0
Tax 43.6 83.3 96.9 115.7Current Assets 360.1 336.1 382.2 440.5
Current liabilities 162.4 174.9 204.8 229.9
Net Current Assets 197.7 161.2 177.4 210.6
Total Assets 753.5 784.5 817.9 862.0
(% of PBT) 32.2 32.5 32.5 32.5PAT( After Minority Interest) 91.6 173.0 201.3 240.2
% chg -6.6 88.8 16.4 19.3
47
Jyoti Structures(CMP/TP: Rs168/220)
Huge Opportunity for Transmission EPC Players: The government has envisaged an investment in theTransmission sector of Rs1.4lakh crore for the 11th Plan (an increase of over two times from the investmentsmade in the 10th Plan) and Rs2.4lakh crore for the 12th Plan. Around 40-45% of the total Transmission capexand 15-20% of total APDRP and RGGVY spend, works out to a potential opportunity for transmission EPCplayers Factoring around 80 85% achievement we estimate the total opportunity to be aroundplayers. Factoring around 80-85% achievement, we estimate the total opportunity to be aroundRs60,000-65,000cr during the 11th Plan period alone.
Healthy Order Book provides Revenue visibility: JSL has a healthy Order book of Rs4,030cr (1.9xFY2010E Revenues), which provides good Revenue visibility and cushions it from short-term orderfluctuations Besides unlike peers the large domestic presence (with exports constituting around 5% of Orderfluctuations. Besides, unlike peers, the large domestic presence (with exports constituting around 5% of OrderBacklog), which has price variation clause, helps to insulate Margins from input price fluctuations and volatilecurrency movements.
Attractive Valuations: Currently, the stock is trading at 11.6x and 9.7x FY11E and FY12E EPS respectively,which we believe is attractive, given that the stock has commanded an average one-year forward P/E ofwhich we believe is attractive, given that the stock has commanded an average one year forward P/E of13-13.5x in the past five years. We believe that the stock is likely to command better valuations, underpinnedby the strong financial performance (EPS CAGR of 20.2% in FY09-12E and high average RoEs of 20-21%).We assign a multiple of 13x (based on 5-year average) and recommend a Buy on the stock.
Valuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)pEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
12.0 14.2 16.9 21.4 20.9 20.7 14.0 11.9 10.0 2.7 2.3 1.9 0.8 0.7 0.6
48
Jyoti Structures
240,000
200,000
250,000
300,000
Transmission Capex ComponentsHuge Opportunity for Transmission EPC players (Rs cr)
Components % SpendTransmission Lines (50%)Design & Testing 10Towers 30
44,740
140,000
0
50,000
100,000
150,000
200,000
(Rs
cr) Conductors & Insulators 30Construction 30Total 100Substation (50%)Engineering & Design 10Transformers 30S it h i it b k t 3510th Plan 11th Plan 12th Plan
Transmission Capex
Source: Industry, Angel Securities
Order Book Coverage Healthy Return Ratios
Source: MoP, CEA, Angel Securities
Switchgears, circuit breakers etc. 35Civil work 25Total 100
25.7 27.9
23.621.1 21.4 20.9 20.7
18.021.2
19.7 19.6 19.0 19.0 19.2
10 0
15.0
20.0
25.0
30.0
(
%)1.8
2.0
2.22.1
1.9 1.8 1.8
1.0
1.5
2.0
2.5
2 000
3,000
4,000
5,000
6,000
( Rs
cr)
0.0
5.0
10.0
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
RoE RoCE
0.0
0.5
0
1,000
2,000
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Order Backlog (LHS) Revenues (LHS) Coverage Ratio (RHS)
Source: Company, Angel Securities Source: Company, Angel SecuritiesSource: Company, Angel Securities Source: Company, Angel Securities
49
Jyoti Structures
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 16.3 16.4 16.4 16.4
Profit & Loss StatementY/E Mar FY2009 FY2010E FY2011E FY2012E
Net Sales 1,717 2,105 2,508 2,908
% chg 25.3 22.6 19.2 15.9Adj Reserves & Surplus 400.4 489.5 593.3 716.5
Shareholders Funds 416.7 505.9 609.7 732.9
Total Loans 303.6 363.6 393.6 393.6
Deferred Tax Liability (Net) 8.2 8.2 8.2 8.2
% chg 25.3 22.6 19.2 15.9
Total Expenditure 1,521 1,873 2,235 2,596
EBITDA 195.9 231.5 273.4 312.6
% of Net Sales 11.4 11.0 10.9 10.8
Oth 7 3 10 5 12 5 14 5Total Liabilities 728.6 877.7 1,011.5 1,134.7
APPLICATION OF FUNDS
Adj Gross Block 168.8 230.8 247.6 262.6
Less: Acc. Depreciation 52.1 66.1 82.8 100.7
Others 7.3 10.5 12.5 14.5
Depreciation & Amortisation 8.6 14.0 16.7 17.9
Interest 68.3 75.1 89.0 94.5
PBT 126.4 153.0 180.2 214.9
Net Block 116.7 164.7 164.7 161.9
Capital Work-in-progress 4.4 2.4 0.6 0.6
Investments 23.1 23.1 23.1 23.1
Current Assets 1,100.7 1,192.1 1,496.2 1,647.1
% of Net Sales 7.4 7.3 7.2 7.4
Tax 46.6 54.3 64.0 76.3
Effective Tax Rate (%) 36.9 35.5 35.5 35.5
Reported PAT 79 7 98 7 116 3 138 6 Current Liabilities 517.4 505.7 674.3 699.0
Net Current Assets 583.3 686.4 821.9 948.0
Others 1.2 1.2 1.2 1.2
Total Assets 728.6 877.7 1,011.5 1,134.7
Reported PAT 79.7 98.7 116.3 138.6
Exceptionals 0.0 0.0 0.0 0.0
Adjusted PAT 79.7 98.7 116.3 138.6
% chg 10.1 23.7 17.8 19.2
50
Spicejet(CMP/TP: Rs58/80)
Load factors expected to remain healthy in coming quarters: Owing to the huge capacity expansion in the last fewyears and plummeting demand in FY2009, Airlines suffered substantial losses in the last nine months and virtually did nothave any fleet additions. In fact, some players like Kingfisher even rationalised their fleet (down from 88 to 66). However,with demand bouncing back significantly in the last nine months, all low-cost carriers (LCC) have been reporting strongload factors of around 80%+. Moreover, given the high under-penetration in India, demand is expected to record 12-15%CAGR th t th th h it i lik l t t t d M l d b l likCAGR over the next three years, though capacity is unlikely to get augmented. Moreover, large orders by players likeKingfisher are likely to get deferred owing to weak Balance Sheets.
Higher Load Factor to increase Profitability: Given that almost all costs are largely fixed in the Aviation Industry,improvement in load factor is expected to drive substantial spurt in Profits, which was clearly visible for Spice Jet where itreported excellent load factor of 80-90% over the last six months (one of the highest compared to competition) andreported Net Profit of Rs109cr (Rs-43cr) in 3QFY10. Due to its Operating lease based, low-cost model, SpiceJet’sEBITDAR Margins are also the highest compared to listed peers (Jet Airways-20.2%, JetLite-17.7% and SpiceJet-31%).
Increasing fleet and strengthening Balance Sheet: SpiceJet is set to take delivery of around 9 planes by FY12E (19%CAGR) taking its total fleet to 27 planes. The increase in capacity and strong load factor provides strong Revenuevisibility for SpiceJet, while Net Profit is estimated to come in at Rs371cr in FY12E. The company’s US $80mn FCCBsy yare likely to get converted by December 2010; the company is also planning to raise around Rs350cr through a QIP.Together with strong Profitability, the company’s Balance Sheet strength will also go up significantly, with an estimatedNet Worth of around Rs920cr by FY12E and zero debt. Factoring FCCB conversion and excluding cash per share, thestock is trading at attractive FY2012E P/E of 4.8x. We value the stock at 7x FY2012E EPS and have arrived at a TargetPrice of Rs80.
Valuation SnapshotEPS( Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
5.0 7.2 9.2 - 51.0 40.4 10.8 7.7 4.8 - 4.4 2.6 0.7 0.5 0.3
51
Spicejet
CY2009 CY2010E CY2011E CY2012EAIR India 0 0 0 0Indian Airlines 80 80 81 81
Jet Airways 63 63 68 78
10
8
6 6 5 5 5 4
6
8
10
12
Expected domestic fleet additionsAviation Sector to experience highest domestic annual growth (%)
Jet Airways 63 63 68 78Jet Lite 16 16 18 20Indigo 25 34 42 52Kingfisher 46 46 58 73Spice jet 19 20 24 27Paramount 5 5 5 5Go air 8 8 8 8
4 3
2
-
2
4
Indi
a
Chin
a
Braz
il
Sout
h Af
rica
North
Afri
ca
Russ
ia
Aust
ralia
/New
Ze
alan
d
entra
l Eur
ope
este
rn E
urop
e
U.S
80%90000 Gross Margin/ASKM(LHS) Cost/ASKM(LHS) Load Factor(RHS)
Total 262 272 304 344Growth (%) 4 12 13
A Ce We
20 years annual domestic growth forecast
Source: Company, Angel Securities
Domestic Airlines Load Factor set to increase
Source: Airbus, Company, Angel Securities
Spice Jet Profits to surge with increasing load factor
20%
30%
40%
50%
60%
70%
80%
2000030000400005000060000700008000090000
Km(m
n)
Stagnant
1.1 1.0 1.0 1.0
1.5 1.7 1.7
1.5 1.5 1.3
1.4 1.3 1.4 1.3
84%79%
73% 67%74% 79% 79%
30%40%
50%
60%70%
80%90%
0 60.8 1.0 1.2 1.4 1.6 1.8 2.0
Gross Margin/ASKM(LHS) Cost/ASKM(LHS) Load Factor(RHS)
(Rs)
0%
10%
20%
01000020000
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
E
FY11
E
FY12
E
Domestic ASKM mn(LHS) Domestic RPKM mn(LHS) Load Factor%(RHS)
0%10%
20%
-0.2 0.4 0.6
FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
(33) (77) (133.5) (352.6) 121.7 279.2 371.4P/(L)(Rs cr)
Source: DGCA, Company, Angel Securities Source: Company, Angel Securities; Note: Gross Margin = Operating Revenue – ATF cost, p y, g p y g g p g
52
Spicejet
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDSEquity Share Capital 241.0 241.0 403.6 403.6
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 1,689.4 2,158.2 2,886.9 3,389.0
% chg 30 5 27 7 33 8 17 4 Preference Share Capital - - - -
Reserves& Surplus (670.5) (548.7) 144.0 515.0
Shareholders Funds (429.5) (307.7) 547.6 918.6Total Loans 488.8 488.8 - -
Deferred Tax Liability - - - -
% chg 30.5 27.7 33.8 17.4
Total Expenditure 2108.6 2074.2 2,586.0 3,004.7
EBIDTA (419.2) 84.0 300.9 384.3
(% of Net Sales) (24.8) 3.9 10.4 11.3y
Minority Interest - - - -
Total Liabilities 59.4 181.1 547.6 918.6APPLICATION OF FUNDSGross Block 95.8 100.6 105.6 110.9
L A D i ti 28 2 36 3 44 7 53 6
Other Income 124.1 54.0 52.1 77.5
Depreciation& Amortisation 7.3 8.0 8.4 8.9
Interest 16.0 8.2 4.1 -
PBT (318.3) 121.7 340.4 452.9 Less: Acc. Depreciation 28.2 36.3 44.7 53.6
Net Block 67.6 64.3 60.9 57.3Capital Work-in-Progress 185.3 164.7 82.3 6.8
Investments - - - -
Current Assets 497.9 733.3 1.159.9 1,653.1
PBT (318.3) 121.7 340.4 452.9
(% of Net Sales) (19) 5.7 11.8 13.4
Exceptional & Prior Period Expenses 30.9 - - -
Tax 3.3 - 61.3 81.5
Current liabilities 691.4 781.3 755.5 798.2
Net Current Assets (193.5) (47.9) 404.3 854.9Deferred Rev. Exp - - - -Total Assets 59.4 181.1 547.6 918.6
(% of PBT) (0.1) - 18 18
PAT( After Minority Interest) (352.6) 121.7 279.2 371.4
% chg 164.1 - 129.4 33.0
53
TAJGVK(CMP/TP: Rs149 /240)
Hotel Industry witnessing signs of revival: We expect the Hotel Industry to witness an uptrend from 4QFY10Econsidering the visible signs of economic revival coupled with delays on the supply side (around 26% undersupply over earlier industry estimates till CY13E). We expect business destinations like Hyderabad and Chennaiwhere TAJGVK has a presence, to significantly benefit as business sentiment gathers steam. Signs of improvingdemand are visible with occupancy rates (OR’s) and average room rates (ARR’s) climbing up and expected tof th lfurther scale up.Diversification to de-risk business model: To diversify its presence and spread out geographical risks, TAJGVKopened a property in Chennai in December 2008 thereby lowering Hyderabad’s room concentration to 59% inFY2009 from 78% in FY2008. The company also plans to target the mid-market segment through its upcomingproperty in Begumpet in Hyderabad along with exploring possibilities of a tie-up with IHCL’s ‘Ginger’. There areplans to enter the Bangalore market too, for which land has already been acquired.Asset-light expansion strategy to keep Balance Sheet healthy : TAJGVK is adding 189 rooms in Begumpetadopting an Asset-light strategy to maintain its Debt-Equity ratio at comfortable levels of 0.3x in FY12E. This, webelieve, will provide adequate room for the company to plan further expansions.Attractive Valuations: Currently, the stock is trading at attractive valuations of 16.9x and 12.5x FY11E andAttractive Valuations: Currently, the stock is trading at attractive valuations of 16.9x and 12.5x FY11E andFY12E EPS respectively, given that the stock has mostly traded in a P/E band of 13-24x over FY04-10E, whichcovers one cycle for the Industry. Moreover, at FY12E EV/room of Rs1.2cr, TAJGVK is the cheapest incomparison to its peers (EV/room between Rs1.5-2cr). Hence, we expect the stock to witness a re-rating on theback of robust Earnings growth and revival signs in the industry. We recommend a Buy on the stock, with a TargetPrice of Rs240.
Valuation SnapshotEPS ( Rs) RoE (%) P/E (x) P/BV (x) EV/room (Rs cr)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
4.7 9.0 12.2 10.1 16.4 18.7 31.5 16.6 12.3 3.2 2.7 2.3 1.2 1.2 1.1
54
TAJGVK
60
70
80
90
0.1
0.15
0.2
0.25
Tourist Arrival trend10 15 20 25 30
3,000
4,000
5,000
6,000
Recovering FTAs and Occupancy Trend Foreign Tourist Arrivals (FTA’s) Growth Trend (CY98-09)
0
10
20
30
40
50
-0.2
-0.15
-0.1
-0.05
0
0.05
Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10
Tourist Arrival trend recovering g Global slowdown &
Terrorism Impact
(10)(5)0 5
0
1,000
2,000
,
CY
1998
CY
1999
CY
2000
CY
2001
CY
2002
CY
2003
CY
2004
CY
2005
CY
2006
CY
2007
CY
2008
CY
2009
P
FTA's growth trend (July 2008 - February 2010) Occupancy rates (in %)
C
Foreign Tourist Arrivals (in '000) Growth %
Source: Company, Angel Securities
Room Supply estimates for CY13E (Old and Revised)
Source: Company, Angel Securities
Financial ForecastOld New % inc/decBusiness locations
1520253035404550
100150200250300350400Business locations
Ahmedabad 350 730 108.6 Bangalore 6461 4554 (29.5)Chennai 4002 3533 (11.7)Hyderabad 5353 3027 (43.5)Kolkata 4253 1649 (61.2)NCR 14096 10697 (24.1)North Mumbai 8709 7081 (18.7)South Mumbai 2790 2704 (3 1)
0510
050
100
FY2008 FY2009 FY2010E FY2011E FY2012E
Sales (Rs cr.) EBIDTA (Rs cr.) Net Prof it (Rs cr.)
EBIDTA margin (%) Net prof it margin (%)
S A l S iti S C A l S iti
South Mumbai 2790 2704 (3.1)Pune 2977 1180 (60.4)Leisure locationsAgra 1971 1756 (10.9)Goa 3544 3972 12.1 Jaipur 2791 1982 (29.0)Kerala 2924 2208 (24.5)Total 60,221 45,073 (25.2)
Source: Angel Securities Source: Company, Angel Securities
55
TAJGVK
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 237.5 223.6 298.3 342.4
% chg (7 8) (5 8) 33 4 14 8
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 12.5 12.5 12.5 12.5 % chg (7.8) (5.8) 33.4 14.8
Total Expenditure 136.7 146.7 177.2 195.9
EBITDA 100.8 76.9 121.1 146.6
% of Net Sales 0.4 0.3 0.4 42.8
q y p
Adj Reserves & Surplus 258.5 281.1 330.3 395.4
Shareholders Funds 271.0 293.7 342.9 407.9
Total Loans 139.0 162.0 184.0 124.0
Deferred Tax Liability (Net) 12.2 12.2 12.2 12.2 Others 1.2 1.2 1.7 2.6
Depreciation & Amortisation 13.7 18.9 19.0 19.4
Interest 6.6 13.9 17.3 12.4
PBT 81.7 45.3 86.5 117.3
Total Liabilities 422.3 467.9 539.1 544.1
APPLICATION OF FUNDS
Adj Gross Block 463.1 534.8 625.9 650.9
Less: Acc. Depreciation 89.1 108.0 127.1 146.5
% of Net Sales 34.4 20.3 29.0 34.3
Tax 28.9 15.6 30.3 41.1
Effective Tax Rate (%) 35.4 34.5 35.0 35.0
Reported PAT 52 8 29 7 56 2 76 3
Net Block 374.0 426.8 498.8 504.4
Capital Work-in-progress 69.4 45.0 25.0 25.0
Investments - - - -
Current Assets 32.7 48.4 85.5 95.6 Reported PAT 52.8 29.7 56.2 76.3
Exceptionals (0.6) 0.0 0.0 0.0
Adjusted PAT 53.3 29.7 56.2 76.3
% chg (24.6) (44.3) 89.4 35.6
Current Liabilities 55.5 53.9 71.9 82.6
Net Current Assets (22.8) (5.5) 13.6 13.0
Others 1.7 1.7 1.7 1.7
Total Assets 422.3 467.9 539.1 544.1
56
Small Caps
Fag Bearings (FAG IN)(CMP/TP: Rs509/626)
Industry outlook encouraging: In a developing economy like India, with a greater focus on mechanisation ofthe manufacturing process, the demand for bearings is expected to outperform industrial growth.Consequently, the Industrial Segment (which accounts for almost 50% of the Indian Bearings market) offersimmense growth opportunity for the Bearings industry. Moreover, the Bearings Segment has a directg pp y g y g gcorrelation with the Auto Sector growth, which is expected to grow at around 10% per annum over the next 2-3years.
Strong support from parent company: FAG India is a FAG Kugelfischer George Schaefer AG Groupcompany. The parent manufactures bearings for automotive and industrial applications. FAG India is apreferred supplier of bearing systems to some of the leading manufacturers of cars and trucks like Marutipreferred supplier of bearing systems to some of the leading manufacturers of cars and trucks, like Maruti,M&M, Tata Motors, GM, Ford and Daimler Chrysler. Notably, with global players looking at enhancing theircapacities in India, FAG can enjoy an edge over its peers to supply to these OEMs in India.
Attractive Valuations: The stock is currently trading below its average historical valuations, at 11.1xCY2010E and 9.8x CY2011E Earnings. It is also attractively placed on P/BV basis and is currently trading atC 0 0 a d 9 8 C 0 a gs s a so a ac e y p aced o / bas s a d s cu e y ad g a1.6x CY2010E and 1.4x CY2011E BV (as against its average historical valuation of 2x one-year forward BookValue). At our Target multiple of 12x CY2011E and 2x CY2011E BV, we have arrived at a Target Price ofRs626. Further, FAG Bearings scores well over its peers and we believe that it is a good long-term investmentpick, in view of its strong financials.
V l ti S h tValuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales( x)
CY09 CY10E CY11E CY09 CY10E CY11E CY09 CY10E CY11E CY09 CY10E CY11E CY09 CY10E CY11E
46.4 45.7 52.2 14.3 14.5 14.5 11.0 11.1 9.8 1.8 1.6 1.4 0.8 0.7 0.6
58
Fag Bearing
30
40
50
15 0
20.0
25.0
Return RatiosBearing Industry Revenue Growth Trend
0
10
20
30
CY2004 CY2005 CY2006 CY2007 CY2008 CY2009E CY2010E CY2011E
0.0
5.0
10.0
15.0
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E
C FAG SKF Ti k NRB
RoCE (%) RoIC (%)(5.0)
IIP Growth (%) Bearing Industry Sales Growth (%)
Source: Company, Angel Securities
Relative Valuation
Source: Bloomberg, BRBMA, Angel Securities
One Year Forward EV/Sales chart
Company FAG SKF Timken NRB
CMP (Rs) 531.2 353.1 110.0 67.0
Mcap (Rs cr) 882.6 1862.0 700.6 324.6
EPS (Rs) 39.4 17.9 5.1 3.6
RoE(%) 16 3 14 6 10 9 10 1 600
800
1,000
1,200
1,400
1,600
1,800
2,000
EV
(Rs
cr)
2.0x
1.0x
1.5x
RoE(%) 16.3 14.6 10.9 10.1
P/E(x) 13.5 19.7 21.6 18.4
P/BV(x) 2.2 2.9 2.4 1.9
EV/EBITDA(x) 7.4 10.3 16.2 9.0
0
200
400
600
Jan-
02
Jun-
02
Nov
-02
Apr
-03
Sep
-03
Feb-
04
Jul-0
4
Dec
-04
May
-05
Oct
-05
Mar
-06
Aug
-06
Jan-
07
Jun-
07
Nov
-07
Apr
-08
Sep
-08
Feb-
09
Jul-0
9
Dec
-09
0.5x
Source: C-Line, Company, Angel Securities; Note: Valuations on TTM basis Source: C-Line, Company, Angel Securities, p y, g ;
59
Fag Bearing
Balance SheetY/E December (Rs cr) CY2008 CY2009 CY2010E CY2011E
SOURCES OF FUNDS
Equity Share Capital 16.6 16.6 16.6 16.6
Profit & Loss Statement Y/E December (Rs cr) CY2008 CY2009 CY2010E CY2011E
Net Sales 762.0 818.7 919.7 1,021.5
% chg 17.0 7.4 12.3 11.1 Equity Share Capital 16.6 16.6 16.6 16.6
Reserves& Surplus 388.4 444.2 509.5 584.5
Shareholders Funds 405.0 460.8 526.1 601.1
Total Loans - - - -
Deffered Tax Liability (net) 5 8 5 8 5 8 5 8
Total Expenditure 599.6 694.5 784.5 868.3
EBIDTA 162.4 124.1 135.2 153.2
(% of Net Sales) 21.3 15.2 14.7 15.0
Other Income 6.0 7.8 5.0 6.0 Deffered Tax Liability (net) 5.8 5.8 5.8 5.8
Total Liabilities 410.8 466.6 531.8 606.8
APPLICATION OF FUNDS
Gross Block 400.2 442.5 484.0 537.6
Less: Acc Depreciation 251 8 271 9 296 1 323 0
Depreciation& Amortisation 20.6 20.1 24.2 26.9
Interest 0.5 0.7 0.9 1.0
PBT 147.4 111.1 115.1 131.3
(% of Net Sales) 19.3 13.6 12.5 12.9 Less: Acc. Depreciation 251.8 271.9 296.1 323.0
Net Block 148.4 170.6 187.9 214.7
Capital Work-in-Progress 15.1 13.3 14.5 16.1
Investments 0.3 4.7 5.3 6.1
Current Assets 385 4 428 6 493 6 557 4
( )
Extraordinary Expense/(Inc.) (2.9) 11.5 - -
Tax 51.6 34.0 39.1 44.7
(% of PBT) 35.0 30.6 34.0 34.0
PAT 98 6 65 5 75 9 86 7 Current Assets 385.4 428.6 493.6 557.4
Current liabilities 138.4 150.6 169.5 187.4
Net Current Assets 247.0 278.0 324.1 370.0
Total Assets 410.8 466.6 531.8 606.8
PAT 98.6 65.5 75.9 86.7
% chg 24.3 (33.6) 15.9 14.1
Ad. PAT 95.7 77.1 75.9 86.7
% chg 20.4 (19.5) (1.4) 14.1
60
Greenply Industries(CMP/TP: Rs198/291)
Banking on MDF and Laminates: Greenply Industries (GIL) is foraying into the lucrative, high-growth MDFmarket, with the largest MDF plant in India (1,80,000 m3/yr capacity), while continuing its strong expansion inlaminates (88% capacity expansion), that is estimated to drive 25% CAGR in Sales over FY10-12E. GIL iswitnessing very strong demand for its laminate products, with both its new production lines running at fullcapacity The MDF opportunity is especially huge: MDF constitutes 20% of wood panel consumption in Indiacapacity. The MDF opportunity is especially huge: MDF constitutes 20% of wood panel consumption in India,while plywood constitutes 80% - the reverse holds true globally. China alone consumes around 10-11mn m3/yrof MDF v/s 0.6mn m3/yr in India. Going forward, with a strict control on issue of new plywood licenses and5-7% CAGR in panel demand, MDF is likely to meet this demand, translating into 25-30% CAGR for MDF.Moreover, even out of present consumption, 80% is being met through imports, which GIL can substitute givenhigh freight costs and 25% anti-dumping duty on importshigh freight costs and 25% anti-dumping duty on imports.Strong brand, high ad-spend and massive distribution: GIL has leading plywood and laminate brands,supported by ad-spend as high as 3.3% of sales (around 10% of laminates revenue). The company also hasthe largest distribution network of over 15,000 dealers in this industry. These advantages underpin the strongRoE profile (20% over FY10-12E) of the company's brand-driven business model.
Attractive Valuations: The stock is currently trading at 9.1x FY11E and 5.4x FY12E Earnings (as against itshistorical range of 0.6-17x one-year forward Earnings) and it is also attractively priced on P/BV basis and iscurrently trading at 1.4x FY11E and 1.2x FY12E (as against its historical trading range of 0.4-3.7x one-yearforward Book Value). At our current target multiple of 8x FY12E, we have arrived at a Target Price of Rs291.
Valuation SnapshotValuation SnapshotEPS (Rs) RoE(%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
20.8 21.7 36.4 20.4 17.3 23.3 9.5 9.1 5.4 1.6 1.4 1.2 1.1 0.8 0.7
61
Greenply Industries
Global MDF Production and Consumption dataSales Breakup- MDF and Laminates to drive growthProducers Production Consumption
China* 24,986,000 22,469,775
Germany* 4,380,000 5,040,448108
2266
6
1000
1200
1400
1600
cr) y
United States of America* 3,334,680 6,087,006
Turkey* 1,952,000 1,621,000
Brazil* 1,879,000 1,763,000
World* 57,313,163 53,701,697284
410555 498 522 548
182
217
267 436542
668
1
3
56
0
200
400
600
800
1000
FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
(Rs
253 5Rs3 000cr Laminate industry (50% organised)Rs7800cr Plywood industriy (20% organised )
Source: FAO.org Company, Angel Research *(2008 Data) ** (2010E)
Total Revenue highest amongst Peers (FY2009)
Source: Company, Angel Securities
Higher Ad-spend/Sales resulting in higher RoE’s
India** 200,000 618,400FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Plywood Laminates MDF Others
3.3
7
22
10
15
20
25
1.5
2.0
2.5
3.0
3.5
(%)
(%)
17.8%
7.1%3.6%
2.4%
0 2%66.8%
Rs3,000cr Laminate industry (50% organised)
35%
5%
7%
5%
1%
1%
15%
Rs7800cr Plywood industriy (20% organised )
0.7
7
-
5
-
0.5
1.0
Midcap Companies Greenply Inds.
Ad Cost / Sales(LHS) RoE(RHS)
0.2%
2%
Greenply Century PlyGolden laminate Bloom DekorKitply ArchidplyRest
32%
5%
Greenply Century PlySarda Ply ArchidplyUniply U.V BoardsW.I plywoods Rest
Source: Company, Angel Securities Source: Company, Angel Securities; Note: Rs 100 to 2,500cr market cap companiesp y, g ; , p p
62
Greenply Industries
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012ESOURCES OF FUNDS
Equity Share Capital 8.5 11.0 12.1 12.1
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 724.9 824.9 1,043.9 1,291.8
% chg 33 8 13 8 26 6 23 7Preference Share Capital - - - -
Reserves& Surplus 172.4 257.7 323.1 406.5
Shareholders Funds 180.9 268.7 335.1 418.6
Total Loans 258.0 457.1 430.4 413.4
D f d T Li bilit 12 6 12 6 12 6 12 6
% chg 33.8 13.8 26.6 23.7
Total Expenditure 646 717.7 897.7 1098
EBIDTA 78.9 107.2 146.2 193.8
(% of Net Sales) 10.9 13 14 15 Deferred Tax Liability 12.6 12.6 12.6 12.6
Minority Interest - - - -
Total Liabilities 451.5 738.4 778.1 844.6
APPLICATION OF FUNDS
Gross Block 273 641.7 679.3 723.5
Other Income 2.2 2.3 2.4 2.5
Depreciation& Amortisation 17 26.2 42.5 45.2
Interest 19.6 26.7 43 41.3
PBT 44.3 56.6 63.0 109.7Less: Acc. Depreciation 73.7 100.0 142.5 187.8
Net Block 199.2 541.7 536.8 535.7
Capital Work-in-Progress 51.7 - - -
Investments 2.2 2.2 2.2 2.2
PBT 44.3 56.6 63.0 109.7
(% of Net Sales) 6.1 6.9 6.0 8.5
Exceptional & Prior Period Expenses - - - -
Tax 7.0 10.8 10.7 21.9 Current Assets 386.4 396.4 483.0 597.4
Current liabilities 188.1 202.1 243.9 290.8
Net Current Assets 198.3 194.5 239.1 306.7
Total Assets 451.5 738.4 778.1 844.6
(% of PBT) 15.9 19.0 17.0 20.0
PAT( After Minority Interest) 37.3 45.9 52.3 87.8
% chg (3.7) 22.9 14.1 67.8
63
Heritage Foods(CMP/TP: Rs206/291)
Reaping the Profits from under-penetrated Milk Business: A market leader in Andhra Pradesh, withnearly 14% market share, Heritage Foods is well placed to reap benefits of the secular growth in theunder-penetrated milk business, which is growing at a CAGR of 17.3%. On account of its large presence in thehighly unorganised industry, Heritage commands a strong brand name. Revenue from the Segment stood atRs465cr in FY2009, a yoy growth of 22.2%.y y g
Diversification into value-added Milk Products: Heritage has consistently increased the proportion of Salesfrom the higher-Margin value-added products like butter, cream, etc., with milk contributing nearly 80% ofSales in FY2009. This would help further boost the Dairy Segment’s pre-tax RoCE, which stood at nearly31.7% in FY2009.
Retail Business to break-even in FY12E: The losses from the Retail business will reduce going forward andthe company projects that the segment will break-even in FY12E. The company also plans to hive off thebusiness into a new company. Post that, the substantial profits from the Milk business will become clearlyvisible to the investors. Hence, the stock is a potential re-rating candidate going ahead.
Outlook and Valuation: We expect the company to clock Net Profit of Rs33.6cr in FY12E from Losses ofRs35.7cr in FY2009 owing to increase in Sales contribution from the Dairy business and improvement inperformance of the Retail business. Consequently, RoEs would improve to 25.1% in FY12E. We have valuedthe company at a P/E of 10x and not assigned any value to the Retail business and have arrived at a TargetPrice of Rs291.
Valuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
7.9 15.2 29.1 9.8 16.4 25.1 26.1 13.6 7.1 2.6 2.2 1.8 0.46 0.42 0.37
64
Heritage Foods
219237
26022
2932
35
800
1000
1200
200
250
300
200
250
300
Curtailing Retail LossesSales Breakup- Dairy Business to Drive Growth
593 665 746 835
206219
0
200
400
600
0
50
100
150
0
50
100
150
FY09 FY10E FY11E FY12EDairy Retail Agri
8 0090 00 26%
FY09 FY10E FY11E FY12E
Retail Sales (LHS) Retail EBIT Losses (RHS)
Source: Company, Angel Securities
OPM to retrace back to Historical levels
Source: Company Angel Securities
Allied products to drive Milk Business Sales
3.00
4.00
5.00
6.00
7.00
8.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
18%
20%
22%
24%
26%
-
1.00
2.00
-
10.00
20.00
30.00
FY09 FY10E FY11E FY12E
EBITDA (LHS) OPM (RHS)
12%
14%
16%
FY06 FY08 FY10E FY12E
Source: Company, Angel Securities Source: Company, Angel Securities
65
Heritage Foods
Balance SheetY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 11.5 11.5 11.5 11.5
Profit & Loss StatementY/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 792.6 916.0 1,018.0 1,135.0
% chg 128 9 15 6 11 1 11 5Preference Share Capital - - - -
Reserves& Surplus 72.3 81.4 95.4 122.3
Shareholders Funds 83.9 93.0 107.0 133.8
Total Loans 172.0 182.3 186.2 180.8
Deferred Tax Liability 20 2 20 2 20 2 20 2
% chg 128.9 15.6 11.1 11.5
Total Expenditure 790.5 875.3 960.3 1,055.3
EBIDTA 2.0 40.7 57.7 79.7
(% of Net Sales) 0.3 4.4 5.7 7.0Deferred Tax Liability 20.2 20.2 20.2 20.2
Minority Interest - - - -
Total Liabilities 276.0 295.4 313.3 334.8
APPLICATION OF FUNDS
Gross Block 264.5 290.9 320.0 352.0
Other Income 6.7 8.0 6.0 5.0
Depreciation& Amortisation 17.2 19.7 20.7 21.7
Interest 20.5 16.0 18.0 15.0
PBT (29.0) 13.0 25.0 48.0Less: Acc. Depreciation 60.8 80.5 101.1 122.8
Net Block 203.7 210.4 218.9 229.2
Capital Work-in-Progress 14.0 14.4 15.0 15.7
Investments 0.2 - - -
C A 126 3 145 9 162 2 180 8
( )
(% of Net Sales) (3.7) 1.4 2.5 4.2
Exceptional & Prior Period Expenses 0.0 0.0 0.0 0.0
Tax 6.8 3.9 7.5 14.4Current Assets 126.3 145.9 162.2 180.8
Current liabilities 68.1 75.4 82.7 90.9
Net Current Assets 58.2 70.5 79.4 89.9
Total Assets 276.0 295.4 313.3 334.8
(% of PBT) - 30.0 30.0 30.0
PAT( After Minority Interest) (35.7) 9.1 17.5 33.6
% chg - - 92.3 92.0
66
JK Tyre and Industries(CMP/TP: Rs196/267)
Favourable Product mix: Commissioning of its new T&B Radial capacity in October 2009 (up from 0.4mn to 0.8mntyres), expansion of PCR capacity by 10% to 5mn tyres for FY11E and planned increases in the OTR Segment forFY10E are working in favour of the company. Given the shortage of radial tyres in the T&B Segment, the companyis in pole position to fully utilise its enhanced capacity and at higher realisations (80% of India's total truck/bus radialtyre production). Further, the buyout of Tornel could act as an upside trigger for the stock, which has already turned
fit bl i 2QFY10 id d b th t t i i i l t d b thprofitable in 2QFY10, aided by the restructuring exercise implemented by the company.
Margins to increase on account of high investment on Radials: Currently, manufacturing Radial tyres is farmore capital intensive than Cross-ply. Investment per TPD is 3.2x of Cross-ply at Rs6.1cr per TPD. On the otherhand, selling prices of Radial tyres are about 20% higher than Cross-ply tyres. Taking into account the difference incapital requirements and consequent impact on Asset turnover, Interest cost and Depreciation, to generate similargRoCE and RoE, Tyre companies would need to earn EBITDA Margins of around 21% compared to around 9%being earned on Cross-ply tyres. Thus, higher capital requirements will help protect Margins from upward boundinput costs, as the business model evolves bearing in mind final RoEs rather than Margins. With the Sector set for astructural shift and apparent pricing flexibility, it will result in an improvement in RoCE and RoE of the Tyremanufacturers going forward.
Attractive Valuations: We estimate the company to clock EPS of Rs45.5 in FY11E and Rs53.5 in FY12E. Thestock is currently available at attractive valuations of 4.3x and 3.7x FY11E and FY12E EPS, respectively. Werecommend a Buy on the stock, with a Target Price of Rs267, at which level the stock would trade at 5x, 3.9x and0.9x FY12E EPS, EV/EBITDA and P/BV, respectively.
Valuation SnapshotValuation SnapshotEPS (Rs) RoE (%) P/E (x) P/BV (x) EV/Sales (x)
FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E FY10E FY11E FY12E
59.1 45.5 53.5 26.7 17.3 17.1 3.3 4.3 3.7 0.9 0.7 0.6 0.4 0.4 0.3
67
JK Tyre and Industries
16
20
100
105%%
100 96 95
71 6580
100
120
%
Radialisation across segmentsRadialisation across countries
0
4
8
12
80
85
90
955748
209.1
65
0
20
40
60
ster
n ro
pe
orth
er
ica
entra
l ur
ope
ca/ Ea
st
outh
er
ica
Asia
ster
n ro
pe
Indi
a
Wor
ld
5,100(x)(x)
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Passenger Cars (LHS) Trucks and Buses (RHS) LCV (RHS)
Wes
Eur
No Am C e Eu
Afric
Mid
dle So Am Eas
Eu
W
Source: Industry, Crisil Research, Angel Securities
We expect P/BV to re-rate on higher forecast RoE levels
Source: Industry, Crisil Research, Angel Securities
Extremely attractive at 3.6x FY2012E EV/EBITDA
2,100
2,700
3,300
3,900
4,500
,
EV (R
s cr
)
5x
7x
0.4
0.6
0.8
1.0
1.2
0.4
0.6
0.8
1.0
1.2
(x)(x)
300
900
1,500
Oct
-01
Apr-
02
Oct
-02
Apr-
03
Oct
-03
Apr-
04
Oct
-04
Apr-
05
Oct
-05
Apr-
06
Oct
-06
Apr-
07
Oct
-07
Apr-
08
Oct
-08
Apr-
09
Oct
-09
Apr-
10
3x
0.0
0.2
0.0
0.2
Oct
-01
Apr-0
2
Oct
-02
Apr-0
3
Oct
-03
Apr-0
4
Oct
-04
Apr-0
5
Oct
-05
Apr-0
6
Oct
-06
Apr-0
7
Oct
-07
Apr-0
8
Oct
-08
Apr-0
9
Oct
-09
Apr-1
0
P/BV (LHS) 5-year Average P/BV (RHS)
Source: C-Line ,Company, Angel Securities Source: C-Line, Company, Angel Securities
68
JK Tyre and Industries
Balance SheetY/E March FY2009* FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 41.1 41.1 41.1 41.1
Profit & Loss Statement Y/E March FY2009* FY2010E FY2011E FY2012E
Net Sales 5,553 4,741 5,447 6,049
% chg 98.7 (14.6) 14.9 11.1
Reserves & Surplus 650.6 870.2 1,040.3 1,240.6
Shareholders Funds 691.6 911.3 1,081.3 1,281.6
Total Loans 1,382 1,382 1,682 1,682
Deffered Tax Liability (net) 112.0 111.7 111.7 111.7
Total Expenditure 5,388 4,136 4,850 5,374
EBIDTA 164.9 604.5 596.4 674.4
(%of Net Sales) 3.0 12.8 11.0 11.2
Other Income 53.9 32.0 33.0 35.0 Total Liabilities 2,186 2,405 2,875 3,076
APPLICATION OF FUNDS
Gross Block 2,840 3,362 4,095 4,480
Less: Acc.Depreciation 1,228 1,346 1,500 1,686
Net Block 1 612 2 016 2 596 2 795
Depreciation& Amortisation 122.5 117.7 153.6 185.9
Interest 171.2 145.2 185.1 180.9
PBT (75.0) 373.6 290.8 342.6
(% of Net Sales) (1.3) 7.9 5.3 5.7 Net Block 1,612 2,016 2,596 2,795
Capital Work-in-Progress 290.5 134.5 122.9 89.6
Investments 75.9 75.9 86.3 92.3
Current Assets 1,334 1,521 1,726 1,877
Current liabilities 1,131 1,348 1,661 1,783
Extraordinary Expense/(Inc.) 0.2 - - -
Tax 32.9 130.8 101.8 119.9
(% of PBT) (43.9) 35.0 35.0 35.0
PAT (107.9) 242.9 189.0 222.7 , , , ,
Net Current Assets 202.4 173.5 65.6 93.8
Misc Expenditure 5.2 5.2 5.2 5.2
Total Assets 2,186 2,405 2,875 3,076
PAT (107.9) 242.9 189.0 222.7
% chg (261.8) (325.1) (22.2) 17.8
Ad. PAT (104.0) 242.9 186.9 219.5
% chg (249.5) (333.5) (23.0) 17.4
Note: * For 18 months
69
Disclaimer
This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any otherperson. Persons into whose possession this document may come are required to observe these restrictions.
Opinion expressed is our current opinion as of the date appearing on this material only. While we endeavor to update on a reasonable basis the informationdi d i hi i l h b l li h h f d i P i i d h i ddiscussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautionedthat any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses maymake investment decisions that are inconsistent with the recommendations expressed herein.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true andare for general guidance only. While every effort is made to ensure the accuracy and completeness of information contained, the company takes no guaranteeand assumes no liability for any errors or omissions of the information. No one can use the information as the basis for any claim, demand or cause of action.
R i i t f thi t i l h ld l th i i ti ti d t k th i f i l d i E h i i t f thi d t h ld k hRecipients of this material should rely on their own investigations and take their own professional advice. Each recipient of this document should make suchinvestigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document(including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Price and value of theinvestments referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions - futures, options andother derivatives as well as non-investment grade securities - involve substantial risks and are not suitable for all investors. Reports based on technicalanalysis centers on studying charts of a stock's price movement and trading volume, as opposed to focusing on a company's fundamentals and as such, maynot match with a report on a company's fundamentals.
We do not undertake to advise you as to any change of our views expressed in this document. While we would endeavor to update the information herein on areasonable basis, Angel Securities, its subsidiaries and associated companies, their directors and employees are under no obligation to update or keep theinformation current. Also there may be regulatory, compliance, or other reasons that may prevent Angel Securities and affiliates from doing so. Prospectiveinvestors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Angel SecuritiesLimited and affiliates, including the analyst who has issued this report, may, on the date of this report, and from time to time, have long or short positions in,and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and earn brokerage orcompensation or act as advisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with anyp p p p y yrecommendation and related information and opinions.
Angel Securities Limited and affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in amerger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.
Note: Please refer important `Stock Holding Disclosure' report on Angel web-site (Research Section).
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059. Tel : (022) 3952 4568 / 4040 3800
Corporate Office