fundamental coverage- cheviot company ltd.… · overseas markets. the company is making all...

Price ` 734

Fair Value 892

Upside 22%

Div Yield 0.1%

Tenure 1Year

Sensex 36347.08

Nifty 10908.70

Group/Index

M.cap (` in cr) 475

Equity (` In cr) 6.47

52 wk H/L ` 1,157.25/652.05

Face Value ` 10

NSE code -

BSE code 526817

BUDGE-BUDGE

RONW 10%

P/E 8.97

P/BV 0.9

EV/EBIDTA 6.11 FALTA

IN `

EV (ìn cr) 486.62

BV (ìn cr) 813.21

NW(ìn cr) 526.15

Adj. EPS (TTM) 81.80

FY 19Est. Earnings 59.16

Equity Share Capital 6.47

10

0.65

EPS Est. (FY2019) 91.43

Estimated P/E Ratio 9.76

Fair Value 892

Year End 201803 201703 201603 201503

Tax Rate % 26.90 25.52 28.46 18.27

Receivable days 34 28 29 34

Source: Google Div. Payout % 1 1 21 30

INVESTMENT RESEARCH

FUNDAMENTAL COVERAGE- CHEVIOT COMPANY LTD.

Dated : 18 th December, 2018

BUY Investment Rationale

Key Valuation Ratios

Key Financial Data

Composite Jute Mill producing high quality jute yarns & traditional jute products such as-Hessiancloth & Bags in different sizes & constructions, Sacking bags like A-Twill, B- Twill & DWF Bags-bothNormal & Food Grade Quality.

VALUATION (` In Cr except per share)

Corporate Governance Transparency Ratio's

No. of Equity Shares

Stock Details

Share Holding Pattern

GOVERNMENT INITIATIVES TO ADD SPUNK

FV

Under the Jute Packaging Materials (Compulsory Use in Packing Commodities) [JPM Act], 1987,

Government specifies the commodities and the extent to which they are mandatorily required to be

packed in Jute Packaging Materials. At present, The Cabinet gave its nod to raise jute packaging for food

grains to 100 per cent from 80 per cent and 20 per cent for sugar. With this, the government has made

jute bags mandatory for food grain packaging in 2018-19.

The quantity of raw jute available during 2017-18 and projection for 2018-19, as per assessment of

the Jute Advisory Board, is 101.40 lakh bales (18.25 lakh tonnes) and 98.40 lakh bales (17.71 lakh

tonnes), respectively. The closing balance is 20.4 lakh bales (3.67 lakh tonnes) in jute year 2018-19.

Further, the decision to use diversified jute bags is meant to prevent contaminants such as jute fiber

and jute batching oil. The government sector buys bags worth about Rs 6,500 crore every year for

foodgrains.

With a view to boost demand in the jute sector, the Government of India has imposed definitive anti-

dumping duty on the import of jute goods from Bangladesh and Nepal with effect from January 5, 2017.

In order to improve the productivity and quality of raw jute through a carefully-designed intervention,

called the Jute ICARE, the Government has been supporting close to one lakh jute farmers.

With a view to support the diversification of the jute sector, the National Jute Board has collaborated

with National Institute of Design, and a jute design cell has been opened in Gandhinagar.

GROUP CHEVIOT - a renowned Industrial House of India having interest in JUTE, TEA & LEATHER

Industries. Company having presence in more than 100 years in manufacturing Eco Friendly & Bio-

Degradable products.

Apart from manufacturing Jute Fine Yarn, Normal Hessian & Sacking Products, the company is into the

production of high quality Jute Fabric for the Industrial & decorative Applications and have installed

around 100 Sulzer Looms for this purpose. As a forward integration, Company has also created a

facility for manufacturing jute-

Shopping Bags

Fashion bags

Beach bags

Cotton bags

Bottle bags

Artless Polka collection

Specialty Jute Weaving unit manufacturing high quality technical / Decorative Fabrics on SULZERLOOMS and Jute Shopping Bags.

X / S&P BSE

SmallCap

Since the Company has the facility for manufacturing Fabric as well as Shopping Bags in house, it

gives an edge to the Company to offer Shopping Jute Bags at very competitive Price & also guarantee

quality & timely shipments.

Manufacturing Units

74.76%

25.24%

Promoter public

www.rudrashares.com

The industry incentives under different schemes:

Q2FY18 Results

` in crores

201809 201806 201709 2018 2017

96.35 86.41 94.74 11.50% 1.70% 376.12 393.54 -4.43%

19.88 19.30 21.05 3.01% -5.56% 79.23 74.97 5.68%

20.63% 22.34% 22.22% - - 21.07% 19.05% -

18.57 17.96 19.83 3.40% -6.35% 73.97 66.43 11.35%

19.27% 20.78% 20.93% - - 19.67% 16.88% 16.51%

12.68 13.08 14.42 -3.06% -12.07% 51.65 43.83 17.84%

13.16% 15.14% 15.22% - - 13.73% 11.14% 23.30%

19.61 30.35 32.74 -35.39% -40.10% 125.48 109.71 14.37%

19.6 20.2 22.3 -2.97% -12.11% 79.90 67.8 17.85%

Threats, Risks and Concerns

To support jute farmers, Jute Corporation of India (JCI) has been given a grant of Rs 100 crore for two years starting from 2018-19

to enable JCI to conduct minimum support price (MSP) operations and ensure price stabilization in the jute sector.

Further, promotion of jute geo textiles and agro-textiles has been taken up with the state governments, particularly those in the

North-Eastern region, and also with departments such as the Ministry of Road Transport and the Ministry of Water Resources.

Also, the imposition of definitive anti-dumping duty has provided scope for an additional demand of 2 lakh metric tonne (MT) of

jute goods in the domestic market for the Indian jute industry.

With a view to promoting transparency in jute sector, Jute Smart, an e-government initiative was launched in December 2016,

providing an integrated platform for procurement of B-Twill sacking by government agencies.

Looking ahead, demand of jute goods is expected to be buoyant. There has been regular flow of Government Orders and enquiries from

overseas markets. The Company is making all efforts to maintain steady production by incentivizing and mobilizing workforce in order to

make effective utilization of its production capacity to be able to execute orders.

Barring unforeseen circumstances, the outlook for the current year appears to be promising for the industry & for cheviot.

Adjusted EPS

] Weak rupee may offer better opportunity for export of jute

products at competitive prices

] Jute Goods, being bio-degradable and eco-friendly, will always

be preferred across the world.

] Demand for promotional bags, lifestyle products & made ups

and jute geo textiles are expected to see an upsurge

] Promotion of Jute diversified products by Government of

India will help in increasing market of jute goods

] Dilution of the Jute Packaging Material Act, 1987 remains a

primary area of concern and uncertainty

] Inadequate leverage of the environment-friendly nature of Jute

has been a bane for the industry.

] Shortage of workers posing threat to maintain stable capacity

utilization.

] Farmers opt for alternate agricultural activities in absence of

proper incentive to grow jute crop on continuous basis

] More competition from synthetic packaging materials specifically

because of falling crude prices

PBT

PBT%

EPS

“Amended Technology Upgradition Fund Scheme (ATUFS)”, which provides 15% Capital Investment Subsidy on eligible machines

with a Capital Investment Subsidy per individual entity of ` 30.00 crores for the period 13.01.2016 to 31.03.2022

In promoting the exports of Jute Goods from India, Government has increased the rate of rewards in the form of duty free scripts

from 5% to 7% of realised FOB value in free foreign currency under Merchandise Exports from India Scheme (MEIS) effective from

1st November, 2017. Moreover, National Jute Board is also continuing with scholarship scheme for children of jute mill workers,

export market development assistance and incentive scheme for acquisition of plant and machinery

Net Sales witnessed a marginal increase at ` 96.35 crore in September 2018 up 1.7% from ` 94.74 crore in September

2017. This mainly is due to lower prices of raw jute having consequential impact in prices of finished goods. However,

Net sales were up 11.5% from the previous quarter .

Quarterly Net Profit was down 12.07% at ` 12.68 crore in September 2018 from ` 14.42 crore in September 2017.

EBITDA stands at ` 19.88 crore in September 2018 down 5.56% from ` 21.05 crore in September 2017.

Company's EPS has decreased to ` 19.61 in September 2018 from ` 32.74 in September 2017.

Opportunities

Tabular presentation

PAT

PAT %

Year ended

The Company’s export oriented unit at Falta Special Economic Zone has been running smoothly. Efforts are being

made to increase customer base in conventional and diversified hessian fabrics and jute shopping bags.

Qu

art

erl

y &

ye

arl

y R

esu

lts

An

aly

sis

Standalone Results

ParticularsQuarter Ended % change

Q-0-Q

% change

Y-0-Y

% change

Y-0-Y

Net Sales

EBITDA

EBITDA %

RUDRA SHARES &

STOCK BROKERS LTD.

www.rudrashares.com

COMPANY OVERVIEW

VALUATION CONCLUSION

Cheviot Company Ltd is an India-based company and is engaged in the manufacturing and sale of jute

goods. The Company's geographical segments are Within India and Outside India. It owns Cheviot Jute

Mills in West Bengal. The Company manufactures jute products and jute fabrics to cater to both domestic

and international market. Its jute bags and products include promotional bags, fashion bags, beach bags,

bottle bags, utility bags, cotton bags, and jute for hessian bags and sacking bags. The Company offers jute

bags of various sizes, styles, shapes and colors. It also offers jute yarn or twin yarn in single or multiple

twists available in cylindrical/conical/coneless spools or hanks. The Company also offers covering

fabrics; stuffings, and other materials that are used in upholstering.

The ATUFS scheme, which provides 15% Capital Investment Subsidy on eligible machines for the

period 13.01.2016 to 31.03.2022, Implementation of various schemes by The National Jute Board for

market development, workers' welfare and promotion of diversification and exports, issue of

notification by the Government, mandatory packaging for food grains & sugar in jute bags & various

other initiatives set up by the government is totally a BOON for this industry.

These decisions will give a fillip to the development of the jute sector, increasing the quality and

productivity of raw jute, diversification of jute sector and also boosting and sustaining demand for jute

product.

Estimating the share price of the company as per P/E valuation

P/E of FY19E at 9.76x , EPS(Est.) at ` 91.43, the estimated share price for next 1 year tenure turns

around to be ` 892. We recommend to BUY this script.

RUDRA SHARES &

STOCK BROKERS LTD.

www.rudrashares.com

LTM 201809 201806 201803 201712

377.20 96.35 86.41 104.89 89.57

79.60 19.88 19.30 15.99 24.45

4.60 1.10 1.09 1.40 1.05

75.00 18.78 18.21 14.59 23.40

19.30 5.50 4.03 0.01 9.73

1.00 0.21 0.25 0.34 0.20

74.00 18.57 17.96 14.25 23.20

21.10 5.89 4.89 5.58 4.73

52.90 12.68 13.08 8.67 18.47

- - - - -

52.90 12.68 13.08 8.67 18.47

112.90 19.60 30.35 20.12 42.85

81.80 19.60 20.20 13.40 28.60

Particulars 201503 201603 201703 201803 2019E 2020E 2021E

Revenue 266.99 343.04 393.54 376.12 391.02 409.23 432.14

Other operating Income - - - - - - -

Total Inc. from operations 266.99 343.04 393.54 376.12 391.02 409.23 432.14

Operating EBITA 20.54 39.08 35.68 50.88 60.60 65.16 71.30

Total Inc. from operations 266.99 343.04 393.54 376.12 391.02 409.23 432.14

TOTAL EXPENDITURE 239.97 298.23 349.94 320.87 325.72 339.25 355.87

EBITDA 27.02 44.81 43.6 55.25 65.30 69.98 76.27

Depreciation (6.48) (5.73) (7.92) (4.37) (4.70) (4.82) (4.97)

Goodwill amortization - - - - - - -

OTHER INCOME 22.64 12.72 31.36 23.98 21.25 22.29 25.43

Net financials

Interest income - - - - - - -

Interest expenses (0.87) (0.82) (0.62) (0.89) (0.93) (0.89) (0.87)

Net Financial Items (0.87) (0.82) (0.62) (0.89) (0.93) (0.89) (0.87)

Reported Pre-tax profit 42.31 50.98 66.42 73.97 80.93 86.56 95.86

Reported Tax charge (7.73) (14.53) (16.95) (19.90) (21.77) (23.29) (25.79)

Reported Net profit 34.58 36.45 49.47 54.07 59.16 63.28 70.08

Minorities - - - - - - -

P/L OF ASSOCIATE CO. - - - - - - -

34.58 36.45 49.47 54.07 59.16 63.28 70.08

Extra Ordinary income 0.79 - 0.61 - - - -

Dividend Paid (7.67) (7.67) (0.45) (0.43) (0.64) (0.65) (0.64)

Retained earnings 26.12 28.78 48.41 53.64 58.51 62.63 69.43

Reported EPS 76.67 80.82 109.69 125.45 91.43 97.80 108.31

Adjusted Basic EPS 52.23 56.34 75.52 83.57 91.43 97.80 108.31

DPS 17.00 17.00 1.00 1.00 1.00 1.00 1.00

Opening Balance 4.51 4.51 4.51 4.51 4.31 6.47 6.47

Issued - - - - 2.16 - -

Bought Back - - - 0.20 - - -

Closing Balance 4.51 4.51 4.51 4.31 6.47 6.47 6.47

FV 10.00 10.00 10.00 10.00 10.00 10.00 10.00

Wtd. Avg. no. of shares 0.451 0.451 0.451 0.431 0.647 0.647 0.647

Note:- The figures shown in the brackets means NEGATIVE.

Rep Net Inc

Depreciation

Net Sales

EPS

Taxes

Op Income

EBT

Adjusted EPS

Income Statement and Estimates ( ` in Cr except per share)

Profit & Loss

Rep. profit before othrinc.,

fin.cost,tax & excp. Item20.54

Misc.Inc (Exp.)

Extraord. Items

Net Inc(Reg)

Interest Exp

Quarterly Results (` in cr except per share)

EBITDA

Particulars

74.86 81.86 87.45 96.73

Rep. NP after min. Int.

39.08 35.68 50.88 60.60 65.16 71.30

Rep. profit before othrinc.,

fin.cost,tax & excp. Item20.54 39.08 35.68 50.88 60.60 65.16 71.30

Number Of Shares

RUDRA SHARES &

STOCK BROKERS LTD.

Rep.Net Income after

extra ordinary items33.79 36.45 48.86 54.07 59.16 63.28 70.08

EPS and Dividend

Profit from ordinary act. Before

Fin.Cost ,TAX & Exp.Items 43.18 51.8 67.04

www.rudrashares.com

201503 201603 201703 201803 2019E 2020E 2021E

Equity & Liabilities

Shareholders' Fund

Share Capital 4.51 4.51 4.51 4.31 6.47 6.47 6.47

Reserves and Surplus 352.43 413.58 470.05 496.08 554.59 617.22 686.65

- - - - - - -

Total Shareholders' Fund 356.94 418.09 474.56 500.39 561.06 623.69 693.12

Non-Current Liabilities

Long-term Borrowings - - 0.03 0.85 0.71 0.68 0.9

Other LT Liabilities 0.1 0.08 1.37 1.63 1.98 2.38 2.85

Deferred Tax Liability 1.08 1.06 9.12 9.7 10.19 10.69 11.23

Long term Provisions - - - - - - -

Total Non-Current Liab. 1.18 1.14 10.52 12.18 12.88 13.75 14.98

Current Liabilities

Short term Borrowings 14.03 12.59 13.3 4.59 5.05 5.55 6.11

Trade Payables 8.14 9.33 5.27 5.61 9.78 10.64 11.67

Other current liability 2.78 4.54 10.65 17.26 16.42 15.55 15.12

Short term Provisions 14.48 5.09 4.92 4.92 5.41 5.95 6.55

Total current Liab. 39.43 31.55 34.14 32.38 36.66 37.70 39.45

Total Equity & Liab. 397.55 450.78 519.22 544.95 610.60 675.14 747.56

Assets

Non-Current Assets

Fixed Assets

Tangible fixed Assets 112.18 145.78 150.26 149.29 151.83 155.81 160.77

G/W On Consolidation - - - - - - -

Non-current Investment 168.63 162.46 208.59 214.46 246.63 278.60 316.40

Long term L&A 0.61 1.51 0.36 2.59 2.74 2.90 3.07

Other Non current Ass. 3.33 3.48 3.5 1.04 1.12 1.21 1.31

Deferred tax receiv. - - - - - - -

Total Non-Current Ass. 284.75 313.23 362.71 367.38 402.32 438.52 481.55

Current Assets

Current Investments 24.81 25.03 37.34 50.57 62.26 73.30 81.14

Inventories 45.26 59.29 60.05 61.42 66.47 73.66 82.11

Trade Receivables 24.64 29.7 30.9 38.24 43.01 49.11 56.18

Cash & cash Equi. 7.51 8.41 11.52 10.98 18.89 22.13 27.10

Short Term L&A 6.13 9.79 - - - - -

Other current Assets 4.47 5.33 16.72 16.38 17.60 18.42 19.45

Total current Assets 112.82 137.55 156.53 177.59 208.24 236.61 265.97

Total Assets 397.55 450.78 519.22 544.95 610.60 675.14 747.56

Cash & cash equivalents 7.51 8.41 11.52 10.98 18.89 22.13 27.10

Other int. bearing assets 193.44 187.49 245.93 265.03 308.89 351.90 397.54

Interest-bearing debt 16.81 17.13 23.98 22.70 22.18 21.78 22.13

Net interest-bearing debt (184.14) (178.77) (233.47) (253.31) (305.60) (352.24) (402.51)

Net gearing (%) - - - - - - -

Tangible assets

Gross capex (2.63) (6.63) (10.22) (3.51) (7.23) (8.80) (9.94)

Sale of fixed assets 0.19 0.31 0.38 0.16 - - -

Net capex (2.44) (6.32) (9.84) (3.35) (7.23) (8.80) (9.94)

Depreciation tangibles (6.48) (5.73) (7.92) (4.37) (4.70) (4.82) (4.97)


BALANCE SHEET

Particulars

Minority Interests

Investments

RUDRA SHARES &

STOCK BROKERS LTD.

www.rudrashares.com

201503 201603 201703 201803 2019E 2020E 2021E

Return on assets - 8.59% 10.07% 10.16% 10.24% 9.84% 9.85%

Return on equity - 9.41% 10.95% 11.09% 11.15% 10.68% 10.64%

ROCE - 10.02% 7.79% 9.97% 10.90% 10.53% 10.38%

EBIT Margin - 15.10% 17.04% 19.90% 20.93% 21.37% 22.38%

Pre tax margin - 14.86% 16.88% 19.67% 20.70% 21.15% 22.18%

Net Profit Margin - 10.63% 12.42% 14.38% 15.13% 15.46% 16.22%

Total asset turnover - 0.81 0.81 0.71 0.68 0.64 0.61

Fixed asset turnover - 2.66 2.66 2.51 2.60 2.66 2.73

Equity turnover - 0.89 0.88 0.77 0.74 0.69 0.66

Current Ratio - 4.36 4.58 5.48 5.68 6.28 6.74

Quick Ratio - 2.48 2.83 3.59 3.87 4.32 4.66

Cash Ratio - 0.27 0.34 0.34 0.52 0.59 0.69

Receivable Days - 28.91 28.10 33.55 37.92 41.08 44.46

Inventory Days - 63.98 62.24 69.09 71.66 75.39 79.88

Payable Days - 10.21 12.23 10.48 14.42 18.19 18.80

Conversion Cycle (Days) - 82.68 78.11 92.15 95.16 98.28 105.54

Financial Leverage Effect - 1.23 0.89 1.02 1.10 1.11 1.09

Debt to Capital - 0.04 0.05 0.04 0.04 0.03 0.03

Debt to Equity - 0.04 0.05 0.05 0.04 0.03 0.03


RATIO ANALYSIS

Particulars

RUDRA SHARES &

STOCK BROKERS LTD.

www.rudrashares.com

Disclosures :

1) Business Activity :

2)

3)

4)

Sr. No. Yes/No

a) No

b) No

c) No

5)

Sr. No. Yes/No

a) No

b) No

c) No

6) Other Disclosures:

Yes/No

Sr. No.

a) No

b) No

c) No

Rudra or its associates have received any compensation or other benefits from the subject

company or third party in connection with the research report .

Rudra or its research analysts, or his/her relative or associates have actual/beneficial

ownership of one per cent or more securities of the subject company.

Rudra or its associates have managed or co-managed public offering of securities for the

subject in the past twelve months.

Disclosures

Rudra or its associates have received any compensation from the subject company in the

past twelve months.

Rudra or its research analysts, or his/her relative or associate has any direct or indirect

financial interest in the subject company.

Rudra or its research analysts, or his/her relative or associate has any other material

conflict of interest at time of publication of the research report.

Disclosures & Disclaimers

There has been no instance of any Disciplinary action, penalty etc. levied/passed by any regulation/administrative

agencies against RUDRA and its Directors. Pursuant to SEBI inspection of books and records of Rudra, as a Stock

Broker, SEBI has not issued any Administrative warning to Rudra.

Terms & Conditions of issuance of Research Report:

The Research report is issued to the registered clients. The Research Report is based on the facts, figures and

information that are considered true, correct and reliable. The information is obtained from publicly available media

or other sources believed to be reliable. The report is prepared solely for informational purpose and does not

constitute an offer document or solicitation to buy or sell or subscribe for securities or other financial instruments for

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Disclosures with regard to ownership and material conflicts of interest :

Rudra Shares & Stock Brokers Limited is engaged in the business of providing broking services & distribution of

various financial products. RUDRA is also registered as a Research Analyst under SEBI(Research Analyst) Regulations,

2014. SEBI Reg. No. INH100002524.

Disclosures with regard to receipt of compensation :

Disciplinary History :

Disclosures

Disclosures

The research analyst has served as an officer,director,employee of the subject company.

Rudra or its research analyst has been engaged in market making activity for the subject

company.

Rudra or its or associates have received any compensation from the subject company in the

past twelve months.

RUDRA SHARES &

STOCK BROKERS LTD.

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RUDRA SHARES & STOCK BROKERS LTD.

Phone: +91 – 512 – 67011055-54

Disclaimers:

This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS

LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in

this report, are for the intended recipients only. Further, the intended recipients are advised to exercise restraint in placing any

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Despite the information in this document has been previewed on the basis of publicly available information, internal data , personal

views of the research analyst(s)and other reliable sources, believed to be true, we do not represent it as accurate, complete or

exhaustive. It should not be relied on as such, as this document is for general guidance only. Besides this, the research analyst(s) are

bound by stringent internal regulations and legal and statutory requirements of the Securities and Exchange Board of India( SEBI) and

the analysts' compensation was, is, or will be not directly or indirectly related with the other companies and/or entities of Rudra

Shares & Stock Brokers Ltd and have no bearing whatsoever on any recommendation, that they have given in the research report.

Rudra Shares & Stock Brokers Ltd or any of its affiliates/group companies shall not be in any way responsible for any such loss or

damage that may arise to any person from any inadvertent error in the information contained in this report. Rudra Shares & Stock

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warranty, express or implied, of the accuracy, contents or data contained within this document. Rudra Share & Stock Brokers Ltd and

its affiliates are engaged in investment advisory, stock broking, retail & HNI and other financial services. Details of affiliates are

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fundamental coverage- cheviot company ltd.… · overseas markets. the company is making all...

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