institutional equity research uniply industries ltd
TRANSCRIPT
INSTITUTIONAL EQUITY RESEARCH
Page | 1 | PHILLIPCAPITAL INDIA RESEARCH
Uniply Industries Ltd (UNIP IN)
In a new avatar
INDIA | MIDCAP | Initiating Coverage
4 May 2018
Read this report to see how these tremendous changes in Uniply will effect a rerating:
In FY15, a new promoter came in (by acquiring stake from the former owners), with a focus on stabilisation, consolidation, and growth.
Game changer: Acquired Vector, a leading player in interior fit-outs.
UNIP has moved towards becoming an end-to-end service provider with a larger addressable market size of at least Rs 3,000bn (vs. a plywood market of ~Rs 200bn).
Artmatrix (a higher margin business), helps in backward integration + value addition.
Diversified and healthy order book of Rs 15bn executable over 15-18 months.
De-leveraged its balance sheet by transferring its plywood business to Uniply Dećor.
With strong revenue visibility (for 2-3 years), improving margins, and better return ratios, UNIP will achieve revenue of Rs 7bn in FY19 vs. Rs 2.7bn in FY17.
UNIP in its new avatar is a game changer UNIP has become an end-to-end service provider in the building material space with Vector’s acquisition in 2016. UNIP now provides: (1) architecture and design services, (2) civil development, (3) mechanical, electrical, and plumbing (MEP), (4) interior fit-outs, and (5) furniture and furnishings. With this acquisition, it targets a bigger market size of Rs 3,000bn vs. plywood’s market size of Rs 200bn.
The Artmatrix merger will boost profitability In February 2018, UNIP announced the merger of Artmatrix (Malaysia) with itself to improve its product offerings and backward integration into premium furniture. Artmatrix manufactures modular workstations, partitions, and chairs, leveraging Malaysian competence in furniture manufacturing. It has strong global presence (22 countries, 5 continents) and a robust product profile (premium products), which helps it to achieve higher double digit margins and zero-debt. We expect the full benefits of this transaction to accrue from FY20 (have not factored Artmatrix in our estimates).
Plywood business sold to associate company Uniply Dećor UNIP aims to scale up its presence in the building solutions business. To achieve this, it reorganised its structure by selling its plywood division (in August 2017) to its associate company Uniply Décor ltd (UDL) for Rs 3bn. This took Uniply’s holding in UDL to 37% from 8% and has helped UNIP to reduce its debt. With the sale, UNIP has moved its manufacturing needs of plywood to UDL. UDL manufactures plywood, block-boards, doors, decorative veneers, adhesives, laminates, and flooring. Its two manufacturing facilities are located in Gujarat and Chennai.
Outlook and valuation We believe that over the next two years, UNIP will report strong growth, improvement in margins and return ratios, driven by: (1) Strong order book with improvement in its execution cycle (operating leverage), (2) product mix, (3) tight control on the working-capital cycle, and (4) higher asset:turnover (moved to an asset-light model). We expect UNIP to report healthy revenue of Rs 7.1/13.8bn in FY19/20 with an order book of Rs 15bn executable over the next 15 months. Backed by strong operating leverage we expect 158bps margin improvement over FY17-20.
At its CMP, UNIP trades at a FY19/20 PE of 36x/17x and EV/EBITDA of 20x/11.5x. We value company on SOTP bases and assign a FY20 target (a) PE of 13x to UNIP standalone business (designing, construction, and MEP) at Rs 295 per share, (b) PE of 20x to Vector - UNIP’s 100% subsidiary (mainly in interiors/furniture) at Rs 284per share, (c) PE of 20x to its associate company - UDL (37% stake) at Rs 21 per share. We arrive at an SOTP target (a+b+c) of Rs 600 (34% upside). We Initiate coverage with a BUY recommendation.
BUY CMP Rs 447 TARGET Rs 600 (+34%)
COMPANY DATA
O/S SHARES (MN) : 24
MARKET CAP (RSBN) : 11
MARKET CAP (USDBN) : 0.2
52 - WK HI/LO (RS) : 486 / 235
LIQUIDITY 3M (USDMN) : 0.9
PAR VALUE (RS) : 10
SHARE HOLDING PATTERN, %
Mar 18 Dec 17 Sep 17
PROMOTERS : 33.4 33.2 33.2
FII / NRI : 2.1 2.0 2.0
FI / MF : 0.2 0.1 0.1
NON PRO : 37.9 48.9 49.3
PUBLIC & OTHERS : 26.4 15.8 15.3
Note: After all the capital raising promoter holding
goes up to ~48%.
PRICE PERFORMANCE, %
1MTH 3MTH 1YR
ABS 21.6 6.2 38.8
REL TO BSE 15.0 8.4 21.2
PRICE VS. SENSEX
Source: Phillip Capital India Research
KEY FINANCIALS
Rs mn FY18E FY19E FY20E
Net Sales 3,693 7,091 13,888
EBIDTA 584 929 1,850
Net Profit 228 417 907
EPS, Rs 6.8 12.4 27.0
EV/EBIDTA, x 25.6 20.4 11.5
P/BV, x 3.2 3.0 1.7
Debt/Equity (%) 1.6 0.8 0.7
Source: PhillipCapital India Research Est. Deepak Agarwal (+ 9122 6246 4112) [email protected] Akshay Mokashe (+ 9122 6246 4130) [email protected]
0
30
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90
120
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180
Apr-16 Oct-16 Apr-17 Oct-17 Apr-18
Uniply BSE Sensex
Page | 2 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
DuPont analysis reveals rerating triggers
Over FY08‐15, UNIP’s ROE was in lower single-digits or in negative territory, mainly because of its lower profitability in its plywood business and lower utilisation of assets. In this period, its net margin was +2% to -7% and total asset‐turnover was low (from 1.3x to 1.9x).
In FY15, the new promoter came in (by acquiring stake from the former owner), with a focus on stabilisation, consolidation of the business and growth. This strategy resulted in lowering of debt and improved profitability.
In last two years, UNIP has gone through a complete restructuring, which has resulted in better profitability, lower debt, and higher return ratios.
RoE will improve due to: (1) higher asset sweating, improving margin and tight control on working capital requirements, and with not much capex.
Opportunities – larger market with strong order book.
While ramp up in sales would be gradual (over 10‐12 months) there are significant opportunities to increase execution and asset sweating.
From heavy to light, reduced debt, and profitable The journey: From an asset-heavy, loaded-with-debt, and lower-profitability business to an asset-light, reduced debt, and higher profitability business In last two years, UNIP has gone through business restructuring, asset acquisitions, capacity expansion, and business mergers. After all this, it is in a new ‘avatar’, where it captures the entire value chain: 1. Architecture and design 2. Civil development 3. Mechanical, electrical, plumbing (MEP) 4. Interior fit-outs 5. Furniture and furnishings Uniply was founded in 1996 by a team of professionals from Kitply and Greenply. From its inception to 2014, it increased its reach to north and west India from south India. In 2015, Mr Keshav Kantamneni acquired a stake in Uniply after which Uniply went through two years of business restructuring, asset acquisition, capacity expansion, and mergers.
Timeline of restructuring 2015 Takeover: Manufacturing plant in Gujarat (Euro Décor, distress sale) from a bank for Rs 420mn. 2016: Forward integration: Buys 100% stake in Vector Projects, which has a state-of-the-art manufacturing plant in Pen, Maharashtra. Migration: To turnkey interior solutions industry (Rs 2,000-4,000bn size, according to the management) from the plywood industry (size Rs 200bn). Acquisition: 8% stake in Uniply Décor (UV Board earlier, plywood manufacturer) from former Uniply promoters) 2017: Hive off: UNIP sells its plywood business to Uniply Décor for an economic value of Rs 3bn, which enables it to deleverage and move to an asset-light model, enhancing its return on capital. Uniply Industries stake in UV Board increases to 37% from 8%. 2018 Merger: UNIP announced merger of a high-margin business, Artmatrix.
With all these products, UNIP is now a ‘one-point’ solution for customers looking for constructing offices, commercial hubs, or residential spaces
The current Chairman, Keshav Kantameni, has been a catalyst of change
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UNIPLY INDUSTRIES INITIATING COVERAGE
UNIP in its new avatar - Game changing step of Uniply
Source: Company, PhillipCapital India Research
Until FY16, UNIP was a face-veneers and plywood company It had a revenue of Rs 1.2bn and OPM of ~10% and face-veneers (single-digit margins) accounted for ~40% of revenue in FY17. The management gradually discontinued this business. The company scaled up its plywood business (higher margin then face veneers) to 96% in FY17. Over the same period, the management also focused on widening its plywood mix; focused on value-added product extensions (such as anti-termite whose share increased to 60% of plywood sales in FY17 from 25% in FY15). Euro Décor: To increase its plywood capacity and presence, UNIP acquired another plywood manufacturing facility (Euro Décor, 38,400 CBM), a plywood unit in Gujarat) in FY16 for Rs 420mn. This acquisition helps UNIP to service the growing markets of west and north India. Additionally, port proximity makes it potentially possible to import and transport timber to this manufacturing facility and would lead to freight savings (UNIP expects to save around 3-5 % on logistics). The acquisition was completed in 4QFY18 and the management expects this plant to deliver attractive throughput from Q1FY19. At full utilization it expects additional revenues of Rs 3.5bn from this plant. Vector: After streamlining its plywood business, the management moved from being a product company to a service company by acquiring Vector Infrastructure Projects. This move helped UNIP to move from a thin-margin competitive-pricing industry (plywood) to one of India’s fastest growing industries, i.e., interior infrastructure fit-outs, with higher margins. Now Uniply caters to a larger market of over Rs 3,000bn vs. the Rs 200bn plywood industry. The Vector acquisition not only helps Uniply to cater to a larger market, but also helps increase its footprints pan-India. Vector also helps UNIP to service customised requirements of downstream customers. This move has helped UNIP to increase its product offering and capture larger wallet share of customers. All of these restructuring moves helped UNIP to increase its plywood capacity to 57,600 CBM from 19,200 CBM/annum in FY15, its presence to pan-India from about 15 cities, and its product profile to a complete fit-out solutions provider from just plywood, and also improved the company’s profitability.
2015 2016 2017 2018
U N I P L Y
New Owner
takeover
Acquires 100% stake in Vector Projects for Rs
640mn
Initiate take over of Gujarat plywood facility - (Euro Décor) for Rs 420mn
Merger of Artmatrix
UNIPLY DECOR8%
stak
e
From
8%
to 3
7%This step will help in increasing its presence in North India.
In FY17 sold of its plywood buiness to Uniply Décor (UDL) for an economic value of Rs 3.0bn & increased its stake in Uniply décor to 37%
In FY15 Manufactured plywood revenue was Rs 728mn (75% of revenue), out of that more than 50% from lower price products.
Source: Company
Value Added products (ATS & BWR), 25%
Lower price products, 50%
Interior infrastructure is a bigger industry with completely fragmented and unorganized players – big growth opportunity for organized players (Like – Uniply)
Page | 4 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
Sold its plywood business to an associate company In FY18, UNIP sold of its plywood business to its associate company, Uniply Décor Ltd (UDL), for an economic value of Rs 3bn, which helped UNIP to reduce its debt, move to an asset-light model, and improve its profitability (the plywood business is now with Uniply Décor). The plywood business is now completely professionally managed, with higher capacity and better product profile, which should lead to better financials and balance sheet. UNIP: Financials after the sell-off of the plywood business:
Revenue shut up in FY17, majorly because of Vector Margins improved to~19% in 9HFY18 from 12% in FY16
Source: Company, PhillipCapital India Research Estimates Note: * No. are consolidated numbers.
Why was Uniply not making money between FY11 and FY15? Problems faced by UNIP between FY11 and FY15
Higher share of lower-margin products
Higher RM cost (82% of sales) resulted in lower margins
UNIP was losing money (in FY14/15 PAT was Rs -29/+4mn).
The balance sheet was in need of repair (debt of Rs 618mn; interest cost of Rs 92mn in FY15)
Key moves by new owners: Improved utilisation to ~60% currently from 40% earlier (on increased capacity).
Improved product mix (by increasing contribution of premium products).
Lowered working capital requirement –brought down other liabilities toRs 300mnthrough better realisation of inventory and reducing the working-capital cycle through quicker collections).
Reduced RM costs (sourcing RM from Laos, Vietnam).
Reduced debt (restructured and paid off).
UNIP: Debt and debt-to-equity UNIP: ROCE and ROE#
Source: Company, PhillipCapital India Research Estimates
Note: * No. are consolidated numbers & FY18 no. are estimates. # Return ratio calculated after adjusting fund raised through preferential
and warrants.
86
6
1,0
26
1,2
10
1,2
22
1,4
60
1,1
67
1,3
57
2,7
47
2,7
08
-
500
1,000
1,500
2,000
2,500
3,000
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7*
9M
FY1
8*
41 97 104 17 42 114 162 323 517
5%
9% 9%
1% 3%
10% 12% 12%
19%
0%
5%
10%
15%
20%
25%
-
100
200
300
400
500
600
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7*
9M
FY1
8*
EBITDA OPM (%) RHS
2,427
2,699
-
0.5
1.0
1.5
2.0
2.5
-
500
1,000
1,500
2,000
2,500
3,000
FY11 FY12 FY13 FY14 FY15 FY16 FY17* FY18*
Debt Rs mn Debt:Equity (x) RHS
Debt increased in FY17 & 18 - mainly on the back of Working Capital
0
2
4
6
8
10
12
14
16
0
2
4
6
8
10
12
14
16
FY15 FY16 FY17* FY18*
ROCE (%) ROE (%) RHS
Pre-new owner, UNIP was paying an interest rate of 17%, which dropped to 12% after the new ownership
- -
9MFY18 saw better margins because of high margin from modular furniture business as well the synergy with UDL resulting in more attractively priced raw material sourcing
Strong revenue growth resulting in improvement in return ratios
UNIP: will focus on large earnings accretive Building Solutions & MEP Turnkey projects along with Interior Fit Outs through its 100% subsidiary, Vector.
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UNIPLY INDUSTRIES INITIATING COVERAGE
Vector is a game changer for Uniply Largest turnkey interior infrastructure solution provider in India: Complete
turnkey solution (design, execution and services), with superior quality and timely execution. More than 90% projects delivered on scheduled time.
Strong team of ~350 architects, engineers, interior designers, and project managers.
For delivery, Vector has deployed 3000+ employees at execution sites.
Track record of ~2000 completed projects (+10mn sq. ft.), delivered 250,000+ workstations and chairs.
60% revenues are from repeat customers (working for more than 5 years with Vector). Diversified and strong client base – IT, banks, financial institutions, corporates, hotels. About 60% of its order book is from IT, 30% from BFSI, and balance from other corporates.
Through its acquisition of Vector Projects India Pvt ltd in 2016, UNIP improved its product offering and extended its reach into the downstream business of ‘building and interior solutions’. This allows UNIP to offer plywood solutions, enhance transaction value, and account for a larger customer wallet share.
Offerings by Vector: Interior solutions that comprise electrical networks, air-conditioning, tiling, and workstations (commercial interiors – plug-and-play). Furniture is a part of its overall solutions. Product range includes: Panel-based systems (70mm, 60mm, and 45mm), executive furniture, laptop caddy, workplace analysis process, desk-based systems, and level-up workstations. Vector’s distinct advantages:
Ability to pre-fabricate offsite, resulting in minimum onsite congestion. (~30% of work done at onsite).
Resident pool of in-house architects and engineers provide integrated solutions within stringent deadlines (90% of its projects are completed before their deadline).
Ability to generate most consumables (plywood, laminates, flooring) in-house; rest are covered by back-to-back outsourcing arrangements.
Ability to provide turnkey solutions that enhance return on the architect’s time.
Track record of profitability with significant growth potential and attractive margins.
Vector: Strength Specialists Its electrical, HVAC, and BMS teams provide plug-
and-play infrastructure
Acquisitions Acquired Protocol 7 in 2008 to provide a turnkey managed networking service;
join hand with Artmatrix Malaysia to source global modular workstations &
chairs.
Turnkey Specializes in complete design and build solutions
for corporate offices.
Customers Some of the largest and most respectable Indian companies
Alliances Engaged with premium brands in Italy, Turkey,
China and India for executive and lounge seating.
Infrastructure 1,00,000 sq ft Mumbai factory with imported equipment (Germany) for wood
working and carpentry.
Vector: A quick history
Promoted by Mr Umesh Rao. He worked in Gammon India as a site manager and was head of ICICI Bank in the facility management team.
Mr Rao registered Vector Projects in January 2001 and managed to secure a few clients almost immediately; broke even in the first year.
Factory in Mumbai, in 2005
2009, tied-up with Artmatrix, a Malaysia-based factory. This factory supplied material such as chairs, shelves, and other furniture.
Until 2013, Vector delivered ~1,000 projects, which amounts to over 7mn sq. ft. area and 100,000 work stations and chairs
Vector: UNIP acquired this Mumbai-based company for Rs 640mn (Rs 230mn stock swap and Rs 410mn cash payout)
Key projects executed by Vector:
TCS: Has been working with Vector
Projects for 7 years; executed 40+
projects over 20 locations.
SARASWAT BANK: For its accelerated
branch rollout, Vector delivered in just 5
weeks (expected 5 months). Saraswat
selected Vector across all its new branch
locations.
KPIT: KPIT Navi Mumbai office — 950
seats across 80,000 sq. ft., VC room,
meeting rooms, café, service rooms.
Delivered in 120 days.
ZEECO INDIA, MUMBAI: 60 seats, 4,800
sq. ft.+ VC room, meeting rooms, pantry,
service rooms. Delivered in 75 days.
Page | 6 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
Vector: No. of repeat clients – contributes ~50% of rev. No of projects
Source: Company, PhillipCapital India Research
Vector: Capacity and orders
Vector enhanced its manufacturing facility to 100,000 sq. ft. in FY17 (capex of ~Rs 300 mn) from 45,000 sq. ft., to serve its increased order book. At full utilization this facility can generate revenue of Rs 8.0bn.
For faster execution and timely delivery, UNIP is carving out some space from its plywood facility (Gujarat + Chennai) for Vector.
In 9MFY18, Vector had a revenue of Rs 2.14bn.
With the healthy order pipe line and strong offering (servicers) we expect additionally order inflow of Rs 11bn over 2-3 years.
Strong order book should help Vector report healthy revenue CAGR of 26% over FY17-20. Improved product mix, premium products, and RM sourcing from associate company (UDL), will help Vector improve its margin by ~380bps over FY17-20 (PC FY19/20 OPM estimates: 12.9%/13.4%).
Vector: Strong revenue growth RM sourcing and product mix = margin improvement
Source: Company, PhillipCapital India Research Estimates
50 52
26
69
81
52
0
10
20
30
40
50
60
70
80
90
FY15 FY16 FY17
New Repeat
111
145 132
0
20
40
60
80
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120
140
160
FY15 FY16 FY17
Number of Projects 2
,02
6
2,0
69
2,5
21
2,9
00
4,0
02
5,4
03
-
1,000
2,000
3,000
4,000
5,000
6,000
FY15 FY16 FY17 FY18e FY19e FY20e
197 199 242 460 523 754
9.7% 9.6% 9.6%
15.9%
13.1%
14.0%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
-
100
200
300
400
500
600
700
800
FY15 FY16 FY17 FY18e FY19e FY20e
EBITDA (Rs mn)
OPM (%) RHS
9MFY 18 witnessed better margins on account of high margin from modular furniture orders
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UNIPLY INDUSTRIES INITIATING COVERAGE
Artmatrix to boost UNIP profitability In January 2018, UNIP announced the merger of Artmatrix. It is expected to contribute fully to earnings from FY20 (we have not yet factored Artmatrix in our estimates). Merger rationale
Margin expansion: Captive furniture manufacturing and premium products will increase UNIP’s overall margins.
Business growth: Widens market reach.
Strong synergies: To gain insight into manufacturing cost structures outside and inside India, this can then be optimized. Artmatrix will also have captive supply of plywood from UDL, leading to cost benefits.
Financials: A zero-debt company; healthy margins (higher double digits) and profitability since inception.
About Artmatrix Designs and manufactures office furniture: Modular workstations, partitions, and
chairs, leveraging rich Malaysian competence in furniture manufacturing.
Offices in Malaysia; global project presence in 22 countries with visible presence in Malaysia, Singapore, Dubai; in India (showrooms) with Vector.
85,000 sq. ft. (green) manufacturing facility in Malaysia; good Environmental Choice Australia (GECA) certified.
Brief history of Artmatrix Incorporated in 2006; based out of Kuala Lumpur, Malaysia.
Provides one-stop solutions for design, manufacture, and supply of office furniture, primarily to corporate offices and institutions.
First overseas branch set up in April 2007 in Dubai Strong product portfolio with a wide customer base
Full solutions for office interiors –plug-and-play.
Products: Seating, workstations, accessories.
Services: Space planning, project management and installation.
Strong customer base dealing with more than 250 clients.
With UNIP’s acquisition, Artmatrix is spreading its wings in the Indian market. Artmatrix – Financial – Strong profitability Diversified customer & product mix (presence in premium products) gives Artmatrix a strong revenue visibility with healthy margins. Company has state of art manufacturing facility in Malaysia. Management has indicated that Artmatrix has healthy PAT margins of more the 20% and also expect this business to grow at 15-20% over the next 2-3 years. We have not factored Art Matrix numbers in our estimates.
S.no. Country No. of Clients Worked with
Artmatrix
1 Malaysia 107
2 India 80
3 Singapore 39
4 Mauritius 7
5 Indonesia 4
6 UAE 3
7 Myanmar 2
8 Pakistan 2
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UNIPLY INDUSTRIES INITIATING COVERAGE
UNIPLY Dećor Ltd – a plywood manufacturing unit Uniply Dećor Ltd (UDL) is UNIP’s associate company.
UDL manufactures plywood and allied products.
Transition details
Plywood business valued at Rs 3bn – Rs 1.83bn business value (slump sale value Rs 1.47bn + working capital Rs 360mn) – Rs 750mn to be paid for using the ‘Uniply’ brand over the next 10 years – Rs 420mn to be paid for the Gujarat plant
Mode of payment: – 1.11bn shares, increasing UNIP stake in UDL to 37% from 8% – Cash of Rs 1.6bn – Stock purchased worth Rs 300mn
Use of proceeds: Deleveraging Uniply Industries Ltd.
UDL – India’s third-largest trading and manufacturing company of high-grade plywood, veneer, laminates, flooring, and adhesives with an all-India presence.
It has two state-of-the-art manufacturing facilities: Chennai (19,200 CBM/annum) and Gujarat (38,400 CBM/annum). Total manufacturing capacity is 57,600 CBM.
Strong product profile with a healthy distribution network UDL product profile 1. Plywood, boards, and doors 2. Laminates, adhesives, and flooring 3. Decorative veneers Presence
Healthy product mix as a result of the restructuring
Uniply is a national brand and a leading player in south India and #2 in Punjab and Chandigarh.
Uniply products have been well received in Delhi and NCR markets as well.
Pan-India presence with a dealer network of 800+. Expects to add 500 dealers in the next two years.
Increasing presence in tier-2/3 cities and in pockets in north and west India.
Manufacturing Facility:
South plant - serves
south, west, and east
India
Branch office: Chennai, Bangalore, Hyderabad, Mumbai, Delhi Large regional distributors: Kerala, Delhi, Punjab, Haryana, UP, Uttarakhand, Rajasthan, Gujarat
Gujarat Plant (45 acre),
provides logistic advantage
and saves 3-5% logistics
cost, as it serves north,
central, and west India
Uniply Industries Ltd.
Uniply Decor Ltd. (Capital increased by Rs
2.70bn)
Sells plywood business for an
economic value of Rs 3.0bn
Pays: Rs 1.11bn in shares, Rs 1.59bn in cash, and Rs 300mn Stock
purchase
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UNIPLY INDUSTRIES INITIATING COVERAGE
UDL - In a sweet spot: Improved revenue visibility with healthy margins After the restructuring, UDL is in a sweet spot with: 1) Entire product range of plywood and wood products – presence in premium and
mass segments 2) Adequate installed capacity for 2-3 years. Current capacity of 57,600 CBM and
operating at ~40 CUF% 3) Strong distribution network (pan-India presence). 4) Backward integration for UNIP. 5) GST now @ 18% vs. 28% earlier resulting in lower price difference (currently at
15%) between organised and unorganised (was 25% earlier). All these factors place UDL as a strong candidate for healthy revenue growth. We expect UDL to see revenue of Rs 2.1/2.7bn in FY19/20 with improvement in utilization levels to 70%/90% in FY19/20.
UDL: Plywood Business – Revenue & OPM (%) RHS UDL: Adj. PAT, PAT margin (%)*
Source: Company, PhillipCapital India Research Estimates Note*: UDL PAT Ex. Royalty Paid to UNIP
Strong product profile (product mix), moving up in premium products
Management expect sales of products like ATS to increase to 30% from currently 15% as it is focusing more on high-margin products.
Lately, realisation has improved as UDL has hiked prices by 3% (to pass on higher RM cost).
We expect these factors (Product mix) to lead to 120bps higher margins over the next two years. PC: OPM of 8.4%/8.9% in FY19/FY20 with EBITDA of Rs 179/242mn. With strong revenue visibility, improved utilization, and improvement in margins, UDL will report strong improvement in profitability (PAT). We see PAT at Rs 24/62mn in FY19/20 (after deducting Rs 75mn annually – Royalty payment to Uniply for using UNIPLY as a brand). With not much capex under way and higher asset sweating, we expect improvement in return ratios. UDL will start generating FCF from FY20 onwards.
74
0
57
9
17
8
92
7
2,1
36
2,7
31
2.6%
4.0%
-0.4%
7.7% 8.4%
9.2%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
-
500
1,000
1,500
2,000
2,500
3,000
FY15 FY16 FY17 FY18e FY19e FY20e
1
1 (10) 47 99 142
0.1% 0.2%
-5.8%
5.1% 4.6%
5.2%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
(20)
-
20
40
60
80
100
120
140
160
FY15 FY16 FY17 FY18e FY19e FY20e
PAT (Rs mn) PAT Margin (%) RHS
Plywood
(Rs/sft) Uniply Century Price diff.
4mm 64 63 1.6%
4mm 83 77 7.8%
9mm 96 94 2.1%
12mm 121 115 5.2%
16mm 154 143 7.7%
19mm 177 162 9.3%
Source: PhillipCapital Channel Check
Maharashtra prices
FY18 numbers reflects
only five months of UNIP
plywood business. From
FY15-17 it became Uniply
Décor (plywood business)
Additionally UDL, is a backbone (backward integration) for UIL, as around 60% of the consumables (plywood, laminates and flooring) that Vector buys is now sourced from UDL
Channel check: Uniply is a Premium brand and has price difference of ~ 5% This help company to enjoy high margins
Channel check: Uniply Premium brand in the space and has a superior price which will help them in improving profitability (Maharashtra prices)
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UNIPLY INDUSTRIES INITIATING COVERAGE
UNIP: Healthy order book, strong revenue visibility UNIP (along with Vector and Artmatrix) is now an architecture, design and
interior fit out company, which handles large projects in the commercial and residential space — from designing, to fully furnished spaces, including electrical and plumbing works.
As of now, UNIP’s construction order book spans commercial and residential spaces across Maharashtra, Karnataka, Telengana, Tamil Nadu and Delhi. It is increasing its footprint pan-India and Artmatrix allows it to spread its wings in overseas markets (as Artmatrix has a strong presence in 22 countries).
With two years of restructuring, strong product profile (complete solution), and a dynamic management team, UNIP has a strong order book of Rs 15bn in design and turnkey projects, which has led to sizeable expansion in its business (reflected in healthy order book). Orders are likely to be executed over the next 15-18 months.
Order book: Break up – FY18 Rs 15bn order book
Source: Company, PhillipCapital India Research Estimates
Significant strides in expanding national footprint of building solutions business because of improved distribution network and better product profile.
With India’s lifestyle standards increasing, the Pradhan Mantri Awas Yojna, RERA, Smart Cities, and the government’s other strategic initiatives, we foresee tremendous demand for integrated and turnkey building solutions providers. Uniply is well places to capture huge demand in this space and will focus on residential and commercial building solutions.
Experienced management team: Mr Sarma with 35 years of experience in IT (TCS) and Mr Rao with 30 years in banking will put Uniply in the priority list of many big corporate. We expect that over the next two years it will bag ~Rs 25bn of orders.
UNIP: Order book (Rs bn) and book-to-sales (x)
Source: Company, PhillipCapital India Research Estimates
Affordabel Housing, 6000
Others, 3500
Furniture & Fit Outs, 5500
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
-
5,000
10,000
15,000
20,000
25,000
FY17 FY18e FY19e FY20e
Order Book Order Book to Sales (x) RHS
FY18: Order book of Rs 15bn We expect execution to pick up from FY19.
16% Order book CAGR
over FY18-FY20e
Key orders: Order wins in design and builds projects to be executed in the next 15-18 months:
– Rs 5.0bn affordable housing project in Telangana covering nearly 5,000 homes
– Other projects across India in the commercial sector
– Win by Vector – from key clients such as TCS, Infosys, JP Morgan
Page | 11 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
UNIP: Consolidated financials Strong order book: Rs 15bn in design and build turnkey projects (L1 in ~Rs 4bn of
projects – PC estimate), which provides strong revenue visibility for 1-2 years; executable over 15 months.
9MFY18: Revenue of Rs 2.7bn, EBITDA of Rs 517mn, OPM of 19%, PAT of Rs 185mn.
Project execution to pick up from FY19.
UNIP PC expectations: FY19/20 revenue at Rs 7.1/13.8bn, majorly driven by improvement in execution cycle and large-ticket-size projects which will be completed in FY19-20.
UNIP: Revenue – strong execution EBITDA, OPM
Source: Company, PhillipCapital India Research Estimates
UNIP margins to improve to 13.3% in FY20 from 11.7% in FY17, majorly driven by strong operating leverage and product mix. We expect major saving will come from employee cost – currently 9% of sales. Additionally, we have not factored Artmatrix (a premium furniture business) numbers in our FY20 estimates. This segment has high double-digit margins.
UNIP – Key Financials: Rs mn FY16 FY17 FY18e FY19e FY20e
Revenues 1,357 2,747 3,693 7,091 13,888
Operating Profit 162 323 584 929 1,850
Profit after tax 38 133 228 417 907
Net worth 585 1,529 3,656 4,031 8,879
Debt 580 2,427 2,699 4,253 6,561
Capital Employed 1,145 3,992 6,391 8,321 15,477
Gross Fixed Assets 386 1,014 1,259 1,459 1,669
Cash & Bank balance 13 850 2,779 337 264
Investments 0 26 1,699 4,689 7,689
Source: Company, PhillipCapital India Research Estimates
1,167 1,357
2,747 3,693
7,091
13,888
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
FY15 FY16 FY17 FY18e FY19e FY20e
114 162
323
584 929
1,850
9.8% 12.0%
11.7%
15.8%
13.1% 13.3%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
-
400
800
1,200
1,600
2,000
FY15 FY16 FY17 FY18e FY19e FY20e
EBITDA (Rs mn) OPM (%) RHS
Management expects a revenue of Rs 11bn in FY19 and Rs 18bn in FY20
Uptake in Order execution
Networth includes - fund raised of ~Rs 6.0bn (through preferential and warrants)
Networth includes - fund raised of ~Rs 6.0bn (through preferential and warrants)
Increase in debt mainly on account of increase working capital loan.
In investments we have added – fund raised of ~Rs 6.0bn (through preferential and warrants) As we have not taken Artmatroix no in our estimates.
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UNIPLY INDUSTRIES INITIATING COVERAGE
Sensitivity Analysis: Execution rate and profitability
Sensitivity with PC estimates Variation with PC estimates FY19: Execution rate with operating margins... ...variation with PC estimates
Revenues / Execution rate (%)
Revenue - FY19 4,610 5,850 7,091 9,075 11,308
Execution / Margin 18.6% 23.6% 28.6% 36.6% 45.6%
12.1% 558 708 858 1,098 1,368
12.6% 581 737 893 1,143 1,424
13.1% 604 766 929 1,188 1,481
13.6% 627 795 964 1,234 1,537
14.1% 650 825 999 1,279 1,594
Revenues / Execution rate (%)
Revenue - FY19 4,610 5,850 7,091 9,075 11,308
Execution / Margin 18.6% 23.6% 28.6% 36.6% 45.6%
12.1% -40% -24% -8% 18% 47%
12.6% -37% -21% -4% 23% 53%
13.1% -35% -17% 0% 28% 59%
13.6% -33% -14% 4% 33% 66%
14.1% -30% -11% 8% 38% 72%
FY19: Execution rate with PAT margins... ...variation with PC estimates
Revenues / Execution rate (%)
Revenue - FY19 3,370 5,850 7,091 9,075 11,308
Execution / Margin 13.6% 23.6% 28.6% 36.6% 45.6%
4.6% 164 286 346 443 552
5.1% 181 315 381 488 608
5.6% 198 344 417 534 665
6.1% 215 373 452 579 721
6.6% 232 403 488 624 778
Revenues / Execution rate (%)
Revenue - FY19 3,370 5,850 7,091 9,075 11,308
Execution / Margin 13.6% 23.6% 28.6% 36.6% 45.6%
4.6% -60% -30% -15% 9% 35%
5.1% -56% -23% -7% 20% 49%
5.6% -51% -16% 2% 31% 63%
6.1% -47% -9% 11% 42% 77%
6.6% -43% -1% 20% 53% 91%
Source: Company, PhillipCapital India Research Estimates
In FY19, we have taken a execution rate of 29% and we expect a revenue of Rs 7.0bn vs. management expectation of Rs 11bn.
For FY20, our execution rate is 41% and we expect revenue of Rs 13.9bn.
We have factored lower execution, mainly to keep some unforeseen delay in execution or revenue booking. If there are none, our numbers have scope for positive revision. FY20: Execution rate with operating margins... ...variation with PC estimates
Revenues / Execution rate (%)
Revenue – FY20 8,830 12,202 13,888 15,574 18,271
Execution / Margin 26.2% 36.2% 41.2% 46.2% 54.2%
12.3% 1,088 1,504 1,712 1,919 2,252
12.8% 1,132 1,565 1,781 1,997 2,343
13.3% 1,177 1,626 1,850 2,075 2,434
13.8% 1,221 1,687 1,920 2,153 2,526
14.3% 1,265 1,748 1,989 2,231 2,617
Revenues / Execution rate (%)
Revenue – FY20 8,830 12,202 13,888 15,574 18,271
Execution / Margin 26.2% 36.2% 41.2% 46.2% 54.2%
12.3% -41% -19% -8% 4% 22%
12.8% -39% -15% -4% 8% 27%
13.3% -36% -12% 0% 12% 32%
13.8% -34% -9% 4% 16% 36%
14.3% -32% -6% 8% 21% 41%
FY20: Execution rate with PAT margins... ...variation with PC estimates
Revenues / Execution rate (%)
Revenue – FY20 10,516 12,202 13,888 15,574 18,271
Execution / Margin 31.2% 36.2% 41.2% 46.2% 54.2%
5.2% 582 675 768 862 1,011
5.7% 634 736 838 939 1,102
6.2% 687 797 907 1,017 1,193
6.7% 740 858 977 1,095 1,285
7.2% 792 919 1,046 1,173 1,376
Revenues / Execution rate (%)
Revenue – FY20 10,516 12,202 13,888 15,574 18,271
Execution / Margin 31.2% 36.2% 41.2% 46.2% 54.2%
5.2% -34% -23% -13% -2% 15%
5.7% -28% -17% -5% 6% 25%
6.2% -22% -10% 3% 15% 35%
6.7% -16% -3% 11% 24% 46%
7.2% -10% 4% 19% 33% 56%
Source: Company, PhillipCapital India Research Estimates
Page | 13 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
Outlook and valuation: Huge potential In the backdrop of its operational strengths, improving financials and strong order book, we believe that the UNIP is a candidate for rerating. Then (FY11 to FY17) Now
Higher sales of lower margin product
Higher cost RM
Lower plant utilisation (operating @ 40%)
Higher debt and interest cost
Higher working capital cycle.
All these factors resulted in lower profitability,
and increase in debt (working capital)
With the new management coming in, its first focus
was on reducing debt, interest, and lowering working
capital. In its first year of operation, UNIP started
showing results and profit.
Strong revenue visibility with an order book of
Rs 15bn (to be executed over 15 months)
Strong product mix (complete building
solutions)
Diversified customer base (India + overseas)
Strong brands (Uniply, Vector, Artmatrix)
Management team with vast experience
Healthy balance sheet and cash flow, which will
support strong growth.
Over the next two years, the UNIP business will show very strong growth in revenue, improvement in margins and return ratios, majorly driven by:
Improvement in execution cycle (Will pick up from FY19)
Product mix (all of UNIP’s offerings enjoy higher margins of 10%-15%, excluding Artmatrix)
Tight control on the working-capital cycle (PC: 148 days vs. management estimate of 100 days). We have taken higher working capital days majorly to factor any unforeseen delay in receivables.
Higher asset-turnover (moved to an asset-light model)
158bps improvement in operating margins between FY17 and FY20e We expect UNIP to report healthy revenue of Rs 7.1/13.8bn in FY19/20, with an order book of Rs 15bn executable over next 15 months. Backed by operating leverage, we expect 158bps margin improvement between FY17 and FY20.To support its strong growth, and factoring in the nature of its business, we expect a working capital cycle of 148 days (management estimate is 100 days). This will result in increase in working capital debt. We expect UNIP to report a PAT of Rs 417mn/907 mn in FY19/FY20. At its CMP, UNIP trades at a FY19/20 PE of 36x/17x and EV/EBITDA of 20x/11.5x. We value company on SOTP based valuation, Our TP is Rs 600, We Initiate our coverage with BUY recommendation.
SOTP Breakup 1) Vector - (Interiors/Furniture)
PAT - Rs mn 342
PE (x) 20
Vector/ Share Value (Rs) 284
2) Uniply - S.A. (Construction + Design + MEP)
PAT - Rs mn 543
PE (x) 13
Uniply - S.A. (Construction & architect)/ Share Value (Rs) 295
3) Uniply Decor - 37% Shake
PAT - (37% of Uniply Decor) 25
PE (x) 20
Uniply Decro - 37% Shake/ Share Value (Rs) 21
TP - Uniply (1+2+3) 600
Source: Company, PhillipCapital India Research Estimates
Page | 14 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
UNIP: PE band (trading at below 1 SD) PAT CAGR over FY17-20 and FY20 PER: building material and EPC companies
Source: PhillipCapital India Research Estimates
Peer comparison: Building material companies
Financials Company MCap
(Rs bn)
__Revenue (Rs mn)__ _______OPM (%)_______ _______EPS (Rs) _______ _____Debt (Rs mn)______
FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
Green ply 37.8 17,296 21,006 26,138 14.9 14.8 15.4 12.1 13.1 16.5 6,145 6,909 5,700
Century Ply 72.5 20,589 25,472 29,448 16.1 18.0 18.6 7.9 11.7 14.6 7,056 6,101 3,817
Green lam 29.5 11,606 13,212 15,308 13.8 15.0 15.8 28.3 39.1 52.1 1,869 1,139 212
Source: PhillipCapital India Research Estimates
Key ratios
_______P/E (x) _______ ____EV/EBITDA(x)____ _____EV/Sales (x)____ _______ROE (%) ______ _____ROCE (%) ______
Company FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
Green ply 25.6 23.5 18.7 16.6 13.7 10.6 2.5 2.0 1.6 16.8 15.5 16.7 17.1 16.3 18.1
Century Ply 40.9 27.8 22.2 23.2 16.8 14.1 3.8 3.1 2.6 22.4 26.9 27.5 18.0 25.0 30.0
Green lam 42.1 30.5 22.9 19.5 15.8 12.9 2.8 2.4 2.0 21.1 23.6 25.0 22.2 26.8 31.4
Source: PhillipCapital India Research Estimates
Peer comparison: EPC companies
Financials Company MCap
(Rs bn)
__Revenue (Rs mn)__ _______OPM (%)_______ _______EPS (Rs) _______ _____Debt (Rs mn)______
FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
Ahluwalia 23.7 16,827 19,132 22,412 13.4 13.4 13.2 18.1 21.9 25.9 (922) (1,457) (2,347)
PSP 17.5 7,457 13,385 15,307 12.4 12.7 13.1 16.8 29.9 35.6 (1,212) (2,112) (3,555)
Capacite Infra 22.7 14,375 17,563 22,082 14.7 14.2 14.2 13.0 16.7 21.9 (3,191) (4,107) (5,104)
Source: PhillipCapital India Research Estimates
Key ratios
_______P/E (x) _______ ____EV/EBITDA(x)____ _____EV/Sales (x)____ _______ROE (%)______ _____ROCE(%)______
Company FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E
Ahluwalia 19.7 16.2 13.7 18.2 15.2 11.7 2.7 2.2 1.8 21.2 20.9 20.4 19.0 19.0 18.0
PSP 28.7 16.1 13.5 23.9 18.1 14.9 3.8 3.0 2.6 29.3 30.3 27.7 18.0 23.0 21.0
Capacite Infra 25.6 19.9 15.2 10.7 5.2 3.4 1.0 0.7 0.5 16.2 13.5 15.4 15.0 12.2 14.0
Source: Bloomberg, PhillipCapital India Research Estimates
Avg
+1SD
-1SD
0
10
20
30
40
50
60
Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18
P/E
UNIPLY
-20%
0%
20%
40%
60%
80%
100%
120%
5.0 15.0 25.0 35.0 45.0
PE - FY20
EPC Construction Companies
Ply Board Companies
Page | 15 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
UNIP: Experienced management team with a focus on execution Management Role Experience
Keshav Kantamneni Chairman • 12 years of experience in General Management, Finance & Banking and Management Consulting
Srinivasan Sethuraman Managing Director • 20 years across various operating functions
• Founder KASG Finnaissance, which provides strategic consultancy services to mid-sized companies
• Formerly head of corporate finance for CATISA
BVM Sharma Joint Managing Director • 33 years of experience in construction and infrastructure
• Formerly head of TCS of infrastructure planning; executing 33mn sq. ft. of IT space
• Conceptualisation and execution of Tidel Park in Tamil Nadu with 1.2mn sq. ft. area
Umesh Rao Joint Managing Director • 34 years of experience in infrastructure, interior design project development
• Delivered 1,500 projects with 10mn sq.ft. area
• Former head of infrastructure at ICICI
• Built Vector Projects from scratch to Rs 2bn top line in 16 years
Ramesh Malpani Joint Managing Director •40 years experience in plywood industry
•Former Head of Operations for Greenply Industries
Industry landscape
Plywood The Indian plywood industry’s size is Rs 200bn (30% organized, within which 20% of the industry is split between the top-2 brands – Century and Greenply). After GST, the price (final product) difference between organised and unorganised players has reduced to 15% from 25% earlier. Additionally, with E-Way bill implementation from February 2018, we expect a faster shift towards organized players, increasing the market size of branded players.
Size of the wood panel industry (USD bn) Plywood industry – largely unorganised
Source: Company, PhillipCapital India Research Estimates
Indian plywood industry Plywood industry value chain Market size
(Rs bn)
FY16
Market
share
CAGR FY10-
16
Brand break up (Rs mn) Market leaders Organised/unorganised
mix
Luxury/ Premium plywood - (Rs140-
100/sqf)
35 19% 15% Tire I Brand- Rs. 15bnTire II Brand- Rs.
10bn Tire III Brand- Rs. 10bn
Largely organised 70:30
Medium/Mass plywood - (Rs70-
90/sqf)
105 58% 5% -7% Tire I Brand- Rs. 4bn
Tire II Brand- Rs. 11bn Unorganised
Brand- Rs. 90bn
Largely organised 15:85
Low-end
plywood - (Rs40-60/sqf)
40 22% 0%-1% Unorganised Only Largely
unorganised
00:100
Plywood Total 180 67% 6-8% 25:75
Source: Company, PhillipCapital India Research
2.5 2.6 2.8 3
0.6 0.7
0.8 0.9
0.4 0.5
0.6 0.7
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2013 2014 2015 2016
Plywood Laminates Engineered Products
Organised market, 70%
Unorganised market, 30%
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UNIPLY INDUSTRIES INITIATING COVERAGE
Brand plays a important role Besides, there is a growing respect for branded products (slightly more expensive) over those produced by unorganised manufacturers (slightly cheaper). Consumers’ growing preference for environment-friendly brands presents a good opportunity for all players including Uniply. Indian building solutions and interior fit-outs industry has a size of Rs 2,000 to 4,000bn (according to the management). While the industry is growing, it is currently dominated by unorganized and fragmented service providers. However, exposure to global design trends is slowly pushing customers towards branded solutions providers with back-end integration to factory-based made-to-order fit-outs, which offers better cost advantages, design flexibility, uniformity, and flawless execution. The industry is also seeing lesser reliance on imports, as domestic manufacturers compete with ‘foreign’ products. E-commerce has also allowed manufacturers to offer their products and solutions to a larger customer base at a lower cost as compared to brick and mortar stores. The building solutions and interior fit-outs market should consolidate and grow at about 7% until 2022, with home furnishings being the largest contributor, followed by office and institutional furniture. Growth divers:
Shifting emphasis to overall solutions from furniture fabrication.
Customer wants integrated offerings on time, and within their budgets.
Growing aspiration levels of a population of 1.3bn; consumption and living standards will only keep increasing.
Large-scale strategic initiatives by the Indian government : Pradhan Mantri Awas Yojana Real Estate Regulation & Development Act (RERA) Smart Cities (in the recent budget, the government increased allocation to this
project to Rs 62bn from Rs 40bn earlier).
Uniply: Moving towards a bigger addressable market (providing complete building solutions)
Source: Company, PhillipCapital India Research Estimates
Design industry by turnover
Number of Companies (in %)*
Design Area less than Rs mn 25 Rs mn 25 - 49 Rs mn 50 - 250 Rs mn 250 +
Architectural Design 50 17 17 16
Interior Design + Landscape Architecture+ Furniture Design 47 10 26 17
Fashion + Textile + Jewellery + Leather Design 73 9 9 9
Graphic Design 64 12 15 9
Animation + New Media Design 53 0 20 27
Industrial + Automotive + Retail Design 55 5 24 16
Allied (Toy + Set & Exhibition + Design Research) 22 11 44 23
HCI 43 0 29 28
(*Based on a sample size of 170 studios surveyed) Source: CII National Committee on Design
Organised market, 70%
Unorganised market, 30%
Indian plywood industry: Rs 200bn
Management speak on the Indian plywood industry: India has half a dozen cement companies with an installed capacity in more than 5mn TPA and there are half a dozen steel companies with an installed capacity of more than 1mn TPA, but when it comes to interior infrastructure such as plywood, there are just two prominent pan-India brands. We believe that as India builds more and larger homes and offices, plywood consumption will increase, and consumers will gravitate towards value-added plywood. This will create opportunities for many large and profitable plywood brands, including Uniply
The size of the Indian building
solutions and interior fit-outs
industry is Rs 2,000bn and it is
completely unorganised and
fragmented. This provides larger
scope for organised players to gain
market share
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UNIPLY INDUSTRIES INITIATING COVERAGE
Financials
Income Statement Y/E Mar, Rs mn FY17 FY18E FY19E FY20E
Net sales 2,747 3,693 7,091 13,888
Growth, % 102% 34% 92% 96%
Other income 42 52 95 95
Total income 2,789 3,745 7,186 13,983
Raw material expenses 1,879 2,476 4,882 9,591
Employee expenses 250 352 608 1,090
Other Operating expenses 295 281 672 1,356
EBITDA (Core) 365 636 1,024 1,945
Growth, % 124.6% 74.3% 61.0% 90.1%
Margin, % 13.3% 17.2% 14.4% 14.0%
Depreciation 28 45 58 63
EBIT 336 590 966 1,883
Growth, % 130.7% 75.5% 63.6% 94.9%
Margin, % 12.2% 16.0% 13.6% 13.6%
Interest paid 140 259 348 541
Non-recurring Items -2 0 0 0
Pre-tax profit 195 331 618 1,342
Tax provided 62 110 210 460
Profit after tax 133 222 408 882
Others (Minorities, Associates) 0 6 9 25
Net Profit 133 228 417 907
Growth, % 267% 71% 83% 118%
Net Profit (adjusted) 135 228 417 907
Unadj. shares (m) 24 24 24 34
Balance Sheet Y/E Mar, Rs mn FY17 FY18E FY19E FY20E
Cash & bank 850 2,779 337 264
Debtors 1,762 1,518 2,945 6,013
Inventory 1,075 727 1,319 2,608
Loans & advances 280 519 499 629
Other current assets 28 1 1 1
Total current assets 3,995 5,544 5,100 9,514
Investments 26 1,699 4,689 7,689
Gross fixed assets 1,014 1,259 1,459 1,669
Less: Depreciation 266 311 369 431
Add: Capital WIP 24 40 30 30
Net fixed assets 773 988 1,120 1,267
Total assets 4,794 8,231 10,909 18,470
Current liabilities 735 724 1,472 2,878
Provisions 67 67 67 67
Total current liabilities 802 791 1,540 2,945
Non-current liabilities 2,463 2,735 4,290 6,598
Total liabilities 3,265 3,526 5,830 9,543
Paid-up capital 239 1,287 1,287 385
Reserves & surplus 1,290 3,417 3,792 8,543
Shareholders’ equity 1,529 4,705 5,080 8,928
Total equity & liabilities 4,794 8,231 10,909 18,470
Source: Company, PhillipCapital India Research Estimates
Cash Flow Y/E Mar, Rs mn FY17 FY18E FY19E FY20E
Pre-tax profit 195 331 618 1,342
Depreciation 28 45 58 63
Chg in working capital 313 590 937 1,875
Total tax paid -24 -110 -210 -460
Other operating activities -473 369 -1,250 -3,081
Cash flow from operating activities -184 849 -522 -1,666
Capital expenditure -71 -260 -190 -210
Chg in investments -587 -1,673 -2,990 -3,000
Other investing activities 41 52 95 95
Cash flow from investing activities -617 -1,881 -3,085 -3,115
Free cash flow -113 1,109 -332 -1,456
Equity raised/(repaid) 758 2,990 0 3,000
Debt raised/(repaid) 966 272 1,555 2,308
Dividend (incl. tax) 0 -42 -42 -59
Other financing activities -131 -259 -348 -541
Cash flow from financing activities 1,593 2,961 1,165 4,708
Net chg in cash 793 1,929 -2,442 -73
Valuation Ratios
FY17 FY18E FY19E FY20E
Per Share data
EPS (INR) 4.0 6.8 12.4 27.0
Growth, % n.a. 71% 83% 118%
Book NAV/share (INR) 63.9 152.9 168.6 263.9
CEPS (INR) 6.7 11.4 19.9 28.8
DPS (INR) - 1.5 1.5 1.5
Return ratios
Return on assets (%) 3% 3% 4% 5%
Return on equity (%) 9% 13% 20% 31%
Return on capital employed (%) 8% 13% 15% 20%
Turnover ratios
Asset turnover (x) 0.7 0.6 - 0.8
Sales/Net FA (x) 3.7 3.9 6.5 11.2
Working capital/Sales (x) 0.9 0.5 0.5 0.5
Receivable days 231 148 150 156
Inventory days 160 84 77 78
Payable days 109 84 86 86
Working capital days 281 148 141 148
Liquidity ratios
Current ratio (x) 5.0 7.0 3.3 3.2
Quick ratio (x) 3.6 6.1 2.5 2.3
Interest cover (x) 2.2 2.1 2.4 2.8
Dividend cover (x) - 6.4 11.6 18.0
Total debt/Equity (X) 1.6 1.6 0.8 0.7
Net debt/Equity (X) 1.0 (0.0) 0.2 0.0
Valuation
Price/Book (x) 9.8 3.2 3.0 1.7
Yield (%) - 0.3 0.3 0.3
EV/Net sales (x) 6.0 4.1 2.7 1.5
EV/EBITDA (x) 51.5 25.6 20.4 11.5
EV/EBIT (x) 49.4 25.3 19.6 11.3
Page | 18 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.
Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.
Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919
Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101
Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735
Research
Automobiles
Engineering, Capital Goods
Pharma & Specialty Chem
Dhawal Doshi (9122) 6246 4128
Jonas Bhutta (9122) 6246 4119
Surya Patra (9122) 6246 4121
Nitesh Sharma, CFA (9122) 6246 4126
Vikram Rawat (9122) 6246 4120
Mehul Sheth (9122) 6246 4123
Agro Chemicals
IT Services
Rishita Raja
Varun Vijayan (9122) 6246 4117
Vibhor Singhal (9122) 6246 4109
Raag Haria (9122) 6667 9943
Banking, NBFCs
Shyamal Dhruve (9122) 6246 4110
Strategy
Manish Agarwalla (9122) 6246 4125
Infrastructure
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Pradeep Agrawal (9122) 6246 4113
Vibhor Singhal (9122) 6246 4109
Neeraj Chadawar (9122) 6246 4116
Sujal Kumar (9122) 6246 4114
Logistics, Transportation & Midcap
Telecom
Consumer & Retail
Vikram Suryavanshi (9122) 6246 4111
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Media
Technicals
Preeyam Tolia (9122) 6246 4129
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Subodh Gupta, CMT (9122) 6246 4136
Vishal Gutka (9122) 6246 4118
Vishal Gutka (9122) 6246 4118
Production Manager
Akshay Mokashe (9122) 6246 4130
Metals
Ganesh Deorukhkar (9122) 6667 9966
Dhaval Somaiya (9122) 6246 4135
Dhawal Doshi (9122) 6246 4128
Editor
Cement
Vipul Agrawal (9122) 6246 4127
Roshan Sony 98199 72726
Vaibhav Agarwal (9122) 6246 4124
Mid-Caps
Sr. Manager – Equities Support
Economics
Deepak Agarwal (9122) 6246 4112
Rosie Ferns (9122) 6667 9971
Anjali Verma (9122) 6246 4115
Sales & Distribution Asia Sales
Corporate Communications
Ashvin Patil (9122) 6246 4105
Dhawal Shah 8522 277 6747
Zarine Damania (9122) 6667 9976
Kishor Binwal (9122) 6246 4106
Sales Trader
Bhavin Shah (9122) 6246 4102
Dilesh Doshi (9122) 6667 9747
Ashka Mehta Gulati (9122) 6246 4108
Suniil Pandit (9122) 6667 9745
Archan Vyas (9122) 6246 4107
Execution
Mayur Shah (9122) 6667 9945
Contact Information (Regional Member Companies)
SINGAPORE: Phillip Securities Pte Ltd
250 North Bridge Road, #06-00 RafflesCityTower,
Singapore 179101
Tel : (65) 6533 6001 Fax: (65) 6535 3834
www.phillip.com.sg
MALAYSIA: Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3, Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel (60) 3 2162 8841 Fax (60) 3 2166 5099
www.poems.com.my
HONG KONG: Phillip Securities (HK) Ltd
11/F United Centre 95 Queensway Hong Kong
Tel (852) 2277 6600 Fax: (852) 2868 5307
www.phillip.com.hk
JAPAN: Phillip Securities Japan, Ltd
4-2 Nihonbashi Kabutocho, Chuo-ku
Tokyo 103-0026
Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141
www.phillip.co.jp
INDONESIA: PT Phillip Securities Indonesia
ANZTower Level 23B, Jl Jend Sudirman Kav 33A,
Jakarta 10220, Indonesia
Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809
www.phillip.co.id
CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd.
No 550 Yan An East Road, OceanTower Unit 2318
Shanghai 200 001
Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940
www.phillip.com.cn
THAILAND: Phillip Securities (Thailand) Public Co. Ltd.
15th Floor, VorawatBuilding, 849 Silom Road,
Silom, Bangrak, Bangkok 10500 Thailand
Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921
www.phillip.co.th
FRANCE: King & Shaxson Capital Ltd.
3rd Floor, 35 Rue de la Bienfaisance
75008 Paris France
Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017
www.kingandshaxson.com
UNITED KINGDOM: King & Shaxson Ltd.
6th Floor, Candlewick House, 120 Cannon Street
London, EC4N 6AS
Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835
www.kingandshaxson.com
UNITED STATES: Phillip Futures Inc.
141 W Jackson Blvd Ste 3050
The Chicago Board of TradeBuilding
Chicago, IL 60604 USA
Tel (1) 312 356 9000 Fax: (1) 312 356 9005
AUSTRALIA: PhillipCapital Australia
Level 10, 330 Collins Street
Melbourne, VIC 3000, Australia
Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899
www.phillipcapital.com.au
SRI LANKA: Asha Phillip Securities Limited
Level 4, Millennium House, 46/58 Navam Mawatha,
Colombo 2, Sri Lanka
Tel: (94) 11 2429 100 Fax: (94) 11 2429 199
www.ashaphillip.net/home.htm
INDIA
PhillipCapital (India) Private Limited
No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2483 1919 Fax: (9122) 6667 9955 www.phillipcapital.in
Page | 19 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.
This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.
This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.
Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.
Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.
Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in
this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the
company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this
research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for
any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for
the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in
connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. no. Particulars Yes/No
1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL
No
2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report
No
3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No
4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report
No
5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
No
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.
Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.
Page | 20 | PHILLIPCAPITAL INDIA RESEARCH
UNIPLY INDUSTRIES INITIATING COVERAGE
Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.
Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.
Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.
Kindly note that past performance is not necessarily a guide to future performance.
For Detailed Disclaimer: Please visit our website www.phillipcapital.in
For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.-regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.
This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated, and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain
business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker-dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer.
If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827).
This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with
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PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013