RESEARCH

CRISIL IER Independent Equity Research

Electrosteel
Castings Ltd

Q3FY14 Results First Cut

Enhancing investment decisions

CRISIL IER Independent Equity Research

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a fivepoint scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL
Fundamental Grade

Assessment

CRISIL
Valuation Grade

Assessment

5/5

Excellent fundamentals

5/5

Strong upside (>25% from CMP)

4/5

Superior fundamentals

4/5

Upside (10-25% from CMP)

3/5

Good fundamentals

3/5

Align (+-10% from CMP)

2/5

Moderate fundamentals

2/5

Downside (negative 10-25% from CMP)

1/5

Poor fundamentals

1/5

Strong downside (<-25% from CMP)

About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are Indias leading ratings agency.
We are also the foremost provider of high-end research to the worlds largest banks and leading corporations.

About CRISIL Research

CRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and analysis on the Indian
economy, industries, capital markets and companies. We are India's most credible provider of economy and industry research. Our industry
research covers 70 sectors and is known for its rich insights and perspectives. Our analysis is supported by inputs from our network of more
than 4,500 primary sources, including industry experts, industry associations, and trade channels. We play a key role in India's fixed income
markets. We are India's largest provider of valuations of fixed income securities, serving the mutual fund, insurance, and banking industries.
We are the sole provider of debt and hybrid indices to India's mutual fund and life insurance industries. We pioneered independent equity
research in India, and are today India's largest independent equity research house. Our defining trait is the ability to convert information and
data into expert judgements and forecasts with complete objectivity. We leverage our deep understanding of the macroeconomy and our
extensive sector coverage to provide unique insights on micro-macro and cross-sectoral linkages. We deliver our research through an
innovative web-based research platform. Our talent pool comprises economists, sector experts, company analysts, and information
management specialists.

CRISIL Privacy
CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service
your account and to provide you with additional information from CRISIL and other parts of McGraw Hill Financial you may find of interest.
For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy.
You can view McGraw Hill Financials Customer Privacy Policy at http://www.mhfi.com/privacy.
Last updated: May, 2013

Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.

Disclaimer:
This Company commissioned CRISIL IER report is based on data publicly available or from sources considered reliable. CRISIL Ltd.
(CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to
change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report
constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use
made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This
report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or
communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any
purpose.

Electrosteel Castings Ltd

Q3FY14 results first cut: Results in line with expectations
2/5 (Moderate fundamentals)

Valuation Grade

5/5 (CMP has strong upside)

Industry

Metals & Mining

February 05, 2014

Fair Value
CMP

The above grades are outstanding ones and are currently under review
Electrosteel Castings Ltds (ECLs) Q3FY14 results were in line with CRISIL Researchs
expectations. Highlights of Q3FY14 results are mentioned below and we will release a
detailed quarterly update post our discussion with ECLs management.

Excellent
Fundamentals

Q3FY14 results highlights

Revenues grew by 7% y-o-y (down by 10% q-o-q) to 5,127 mn.

The company reported EBITDA margin of 18.4% compared to 9.8% in Q3FY13 and
12.8% in Q2FY14. Raw material cost as a percentage of sales declined by 706 bps

5
4
3
2
1

y-o-y (764 bps q-o-q) to 46%.

Poor
Fundamentals

The company reported forex loss of 25.5 mn as compared to 58.2 mn in Q3FY13 and
227.7 mn in Q2FY14. Also, unaccounted mark-to-market loss on forward contracts at

the end of Q3FY14 amounted to 18.7 mn.

Valuation Grade

Finance costs increased by 34% y-o-y (down by 12% q-o-q) to 361 mn. PAT was flat
y-o-y (up by 73% q-o-q) at 337 mn.

Strong
Downside

Strong
Upside

25
14

CFV MATRIX

Fundamental Grade

Fundamental Grade

RESEARCH

During the quarter, ECL issued 17.1 mn equity shares on preferential basis at 13.85

KEY STOCK STATISTICS

per share (face value of 1) to the promoters and promoter group companies.

CNX 500/SENSEX
Valuations: Current market price has strong upside
Our outstanding fair value estimate for ECL, based on the sum-of-the-parts method, is 25
per share. At the current market price of 14, our valuation grade is 5/5.

KEY FORECAST
( mn)

NSE/BSE ticker
Face value ( per share)
Shares outstanding (mn)
Market cap ( mn)/(US$ mn)
Enterprise value ( mn)/(US$ mn)
52-week range ()/(H/L)
Beta
Free float (%)
Avg daily volumes (30-days)
Avg daily value (30-days) ( mn)

FY11

FY12

FY13

FY14E

FY15E

17,061

19,471

19,724

20,114

20,350

EBITDA

3,034

1,774

2,094

2,595

2,952

Adj net income

1,463

318

481

783

801

4.5

1.0

1.5

2.3

2.3

(6.8)

(78.3)

51.6

54.5

2.3

Dividend yield (%)

9.0

3.6

3.6

3.7

3.2

100%

RoCE (%)

8.3

3.7

3.8

4.3

4.5

90%

RoE (%)

9.0

1.9

2.4

3.3

3.3

PE (x)

3.1

14.3

9.5

6.1

6.0

60%

P/BV (x)

0.3

0.3

0.2

0.2

0.2

50%

4.6
10.7
NM: Not meaningful; CMP: Current market price

11.2

9.0

7.8

Operating income

Adj EPS ()
EPS growth (%)

EV/EBITDA (x)

Source: Company, CRISIL Research estimates

4,672/20,261
ELECTCAST/
ELECTROST
1
327
4,558/72
23,362/369
26/10
1.25
45
281,460
4.1

SHAREHOLDING PATTERN

37.4%

37.4%

37.4%

36.1%

9.9%
4.1%

9.9%
4.1%

9.9%
4.0%

8.8%
3.8%

48.7%

48.7%

48.7%

51.2%

Mar-13
Promoters

Jun-13
FII

Sep-13
DII

Dec-13
Others

80%
70%

40%
30%
20%
10%
0%

PERFORMANCE VIS--VIS MARKET

ECL
CNX 500

Returns
3-m
6-m
0%
33%
-3%
8%

1-m
-5%
-4%

12-m
-43%
-1%

ANALYTICAL CONTACT
Mohit Modi (Director)
Ankit Kedia
Vishal Rampuria

mohit.modi@crisil.com
ankit.kedia@crisil.com
vishal.rampuria@crisil.com

Client servicing desk

+91 22 3342 3561

clientservicing@crisil.com

For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

CRISIL IER Independent Equity Research

Q3FY14 Results Summary

( mn)

Q3FY14

Q2FY14

Q3FY13

q-o-q (%)

y-o-y (%)

9MFY14

9MFY13

y-o-y (%)

Net sales

5,127

5,670

4,796

(9.6)

6.9

15,719.0

14,202.7

10.7

Raw material cost

2,362

3,045

2,548

(22.4)

(7.3)

7,872.6

7,421.5

6.1

46.1%

53.7%

53.1%

-764 bps

-706 bps

50.1%

52.3%

-217 bps
9.0

Raw material cost(% of net sales)

Employees cost

370

390

353

(5.1)

4.9

1,101.1

1,009.7

Other expenses

1,450

1,511

1,427

(4.1)

1.6

4,699.1

4,376.7

7.4

945

723

468

30.7

101.9

2,046

1,395

46.7

18.4%

12.8%

9.8%

568 bps

868 bps

13.0%

9.8%

320 bps

971

951

494

2.1

96.3

2,708.5

1,586.0

70.8

18.9%

16.8%

10.3%

216 bps

862 bps

17.2%

11.2%

606 bps

Depreciation

132

135

133

(1.9)

(0.5)

399.2

403.7

(1.1)

EBIT

813

589

335

38.1

142.5

1,647

991

66.2

Interest and finance charges (net)

361

411

269

(12.3)

34.1

1,059.5

858.2

23.5

Operating PBT

452

178

66

154.7

582.3

588

133

342.2

EBITDA
EBITDA margin
Adjusted EBITDA
Adjusted EBITDA margin

Other Income

29

38

376

(22)

(92.3)

120.6

484.8

(75)

PBT

481

215

443

123.8

8.8

708

618

14.6

Tax

144

20

112

614.6

29.0

170.4

89.7

90.0

Reported PAT

337

195

331

73.1

1.9

538

528

1.8

25

228

(260)

(89)

(109.8)

662.3

(71.4)

(1,028)

Extraordinary Income/(expense)
Adjusted PAT
Adjusted PAT margin
No of equity shares (mn)

363

423

71

(14.1)

412.3

1200

457

162.8

7.1%

7.5%

1.5%

-38 bps

560 bps

7.6%

3.2%

442 bps

344

327

327

5.2

5.2

344

327

5.2

1.0

0.6

1.0

64.5

(3.1)

1.6

1.6

(1.3)

EPS ()
Source: Company, CRISIL Research

Revenue and EBITDA margin trend

PAT and PAT margin trend

( mn)

1,000
5,298

4,468

4,939

4,796

5,143

4,922

5,670

5,127

Revenue

Source: Company, CRISIL Research

Q3FY14

Q2FY14

Q1FY14

Q4FY13

Q3FY13

Q2FY13

Q1FY13

Q4FY12

EBITDA margin (RHS)

5%

100

0%

-5%

-100

-10%

-200

-15%

-300

1.1%

370

2%

0.1%
331

59

4%

444

195

337

0%
-2%

-3.9%

-4%
-173

-6%
-8%

PAT

Source: Company, CRISIL Research

PAT margin (RHS)

Q3FY14

2,000

10%

8%
6%

3.4%

Q2FY14

2.5%

200

Q1FY14

7.7%

300

10%
6.6%

6.9%

Q4FY13

0.9%

7.8%

15%

8.6%
7.5%

Q3FY13

9.8%

4,000

400

Q2FY13

12.8%

500

20%

Q4FY12

5,000

3,000

18.4%

16.5%

25%

Q1FY13

( mn)
6,000

Electrosteel Castings Ltd

RESEARCH

Share price movement

Fair value movement since initiation

140
120
100

()

('000)

70

6,000

60

5,000

50

80

40

60

30

40

20

4,000
3,000
2,000
1,000

10

20

CNX 500

Total Traded Quantity(RHS)

Electrosteel

Jan-14

Nov-13

Jul-13

Sep-13

Feb-13

May-13

Oct-12

Dec-12

Aug-12

May-12

Jan-12

Mar-12

Nov-11

Sep-11

Apr-11

Jun-11

Feb-11

Jan-14

Sep-13

May-13

Jan-13

Sep-12

May-12

Jan-12

Sep-11

May-11

Jan-11

Sep-10

May-10

Jan-10

Electrosteel

Dec-10

0
0

CRISIL Fair Value

-Indexed to 100
Source: NSE, CRISIL Research

Source: NSE, BSE, CRISIL Research

CRISIL IER Independent Equity Research

Annexure: Financials
Income statement
( m n)
Ope rating incom e
EBITDA
EBITDA m argin
Depreciation
EBIT
Interest
Ope rating PBT
Other income
Exceptional inc/(exp)
PBT
Tax provision
Minority interest
PAT (Reported)
Less: Exceptionals
Adjusted PAT

Balance Sheet
FY11
17,061
3,034
17.8%
544
2,489
783
1,706
360
22
2,088
603
1,485
22
1,463

FY12
19,471
1,774
9.1%
543
1,231
1,745
(514)
633
54
120
(198)
318
54
263

FY13
19,724
2,094
10.6%
531
1,563
1,122
441
278
484
1,203
238
966
484
481

FY11

FY12

FY13

Operating income (%)

EBITDA (%)
Adj PAT (%)
Adj EPS (%)

13.5
(3.0)
(6.8)
(6.8)

14.1
(41.5)
(82.0)
(78.3)

1.3
18.1
82.7
51.6

Profitability
EBITDA margin (%)
Adj PAT Margin (%)
RoE (%)
RoCE (%)
RoIC (%)

17.8
8.6
9.0
8.3
14.3

9.1
1.4
1.9
3.7
12.3

10.6
2.4
2.4
3.8
6.6

3.1
0.3
4.6
0.8
27.5
9.0

14.3
0.3
10.7
1.0
43.9
3.6

9.5
0.2
11.2
1.2
16.9
3.6

151
121
122
137
2.0
3.2
1.8
3.0
0.9
0.6

139
100
146
150
2.1
3.6
1.8
3.4
1.1
0.8

113
47
144
192
1.5
2.4
1.2
5.8
1.0
0.8

Ratios
Grow th

Valuations
Price-earnings (x)
Price-book (x)
EV/EBITDA (x)
EV/Sales (x)
Dividend payout ratio (%)
Dividend yield (%)
B/S ratios
Inventory days
Creditors days
Debtor days
Working capital days
Gross asset turnover (x)
Net asset turnover (x)
Sales/operating assets (x)
Current ratio (x)
Debt-equity (x)
Net debt/equity (x)
Intere st coverage
-EBITDA/Interest
-EBIT/Interest

FY13

327
16,522
16,848
14,716
14,716
441
32,005

327
16,703
17,030
17,942
17,942
208
35,180

327
23,218
23,544
22,788
22,788
340
46,672

Net fixed assets

Capital WIP
Total fixed asse ts
Investm ents
Current as sets

5,380
4,472
9,852
10,638

5,555
6,714
12,269
9,671

10,945
10,109
21,055
10,646

Inventory
Sundry debtors
Loans and advances
Cash & bank balance
Marketable securities
Total current as sets
Total current liabilities
Net current ass ets
Intangibles /Misc. expenditure
Total asse ts

5,198
5,104
1,814
1,897
3,367
17,380
5,864
11,515

5,529
7,211
2,457
663
2,811
18,672
5,431
13,241

4,517
7,532
2,032
3,159
825
18,066
3,094
14,972

32,005

35,180

46,672

FY11
2,066
(631)
544
269
2,247

FY12
120
(35)
543
(3,516)
(2,888)

FY13
719
(106)
531
(1,221)
(77)

(1,241)
(3,763)
(5,003)

(2,959)
1,523
(1,436)

(9,317)
1,010
(8,306)

Equity raised/(repaid)
Debt raised/(repaid)
Dividend (incl. tax)
Others (incl extraordinaries)
Net cash from financing

(61)
2,297
(475)
83
1,844

(52)
3,226
(190)
106
3,090

4,846
(191)
6,224
10,879

Change in cash position

Closing cash

(912)
1,897

(1,234)
663

2,496
3,159

Cash flow
( m n)
Pre-tax profit
Total tax paid
Depreciation
Working capital changes
Net cash from operations
Cash from investm e nts
Capital expenditure
Investments and others
Net cash from investm ents
Cash from financing

Quarterly financials
Q4FY13
5,143

Q1FY14
4,922

Q2FY14
5,670

Q3FY14
5,127

FY13
1.5
3.1
72.1

Change (q-o-q)
EBITDA
Change (q-o-q)
EBITDA m argin
Reported PAT
Adj PAT
Change (q-o-q)

-3%
468
-43%
9.8%
331
71
-29%

7%
403
-14%
7.8%
444
444
528%

-4%
378
-6%
7.7%
5
415
-7%

15%
723
92%
12.8%
195
423
2%

-10%
945
31%
18.4%
337
363
-14%

1.5%

8.6%

8.4%

7.5%

7.1%

1.0

1.4

0.0

0.6

1.0

1.0
0.7

1.9
1.4

FY11
4.5
6.1
51.6

FY12
1.0
2.6
52.1

( m n)
Net Sale s

1.2

0.5

0.5

Adj PAT m argin

Actual o/s shares (mn)

327

327

327

Adj EPS

FY12

Equity share capital

Reserves
Minorities
Net w orth
Convertible debt
Other debt
Total de bt
Deferred tax liability (net)
Total liabilitie s
Ass ets

Dividend ()

Source: CRISIL Research

FY11

Q3FY13
4,796

3.9
3.2

Per share
Adj EPS ()
CEPS
Book value

( m n)
Liabilitie s

RESEARCH

This page is intentionally left blank

CRISIL IER Independent Equity Research

CRISIL Research Team

President
Mukesh Agarwal

CRISIL Research

+91 22 3342 3035

mukesh.agarwal@crisil.com

Analytical Contacts
Sandeep Sabharwal

Senior Director, Capital Markets

+91 22 4097 8052

sandeep.sabharwal@crisil.com

Prasad Koparkar

Senior Director, Industry & Customised Research

+91 22 3342 3137

prasad.koparkar@crisil.com

Binaifer Jehani

Director, Customised Research

+91 22 3342 4091

binaifer.jehani@crisil.com

Manoj Mohta

Director, Customised Research

+91 22 3342 3554

manoj.mohta@crisil.com

Sudhir Nair

Director, Customised Research

+91 22 3342 3526

sudhir.nair@crisil.com

Mohit Modi

Director, Equity Research

+91 22 4254 2860

mohit.modi@crisil.com

Jiju Vidyadharan

Director, Funds & Fixed Income Research

+91 22 3342 8091

jiju.vidyadharan@crisil.com

Ajay D'Souza

Director, Industry Research

+91 22 3342 3567

ajay.dsouza@crisil.com

Ajay Srinivasan

Director, Industry Research

+91 22 3342 3530

ajay.srinivasan@crisil.com

Rahul Prithiani

Director, Industry Research

+91 22 3342 3574

rahul.prithiani@crisil.com

Business Development
Hani Jalan

Director, Capital Markets

+91 22 3342 3077

hani.jalan@crisil.com

Prosenjit Ghosh

Director, Industry & Customised Research

+91 22 3342 8008

prosenjit.ghosh@crisil.com

Business Development Equity Research

Vishal Shah Regional Manager

Priyanka Murarka Regional Manager

Email : vishal.shah@crisil.com

Email : priyanka.murarka@crisil.com

Phone : +91 9820598908

Phone : +91 9903060685

Shweta Adukia Regional Manager

Ankur Nehra Regional Manager

Email : Shweta.Adukia@crisil.com

Email : Ankur.Nehra@crisil.com

Phone : +91 9987855771

Phone : +91 9999575639

RESEARCH

Our Capabilities
Making Markets Function Better
Economy and Industry Research

Largest team of economy and industry research analysts in India

Coverage on 70 industries and 139 sub-sectors; provide growth forecasts, profitability analysis, emerging trends,
expected investments, industry structure and regulatory frameworks

90 per cent of Indias commercial banks use our industry research for credit decisions

Special coverage on key growth sectors including real estate, infrastructure, logistics, and financial services

Inputs to Indias leading corporates in market sizing, demand forecasting, and project feasibility

Published the first India-focused report on Ultra High Net-worth Individuals

All opinions and forecasts reviewed by a highly qualified panel with over 200 years of cumulative experience

Funds and Fixed Income Research

Largest and most comprehensive database on Indias debt market, covering more than 15,000 securities

Largest provider of fixed income valuations in India

Value more than 53 trillion (USD 960 billion) of Indian debt securities, comprising outstanding securities

Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain 12
standard indices and over 100 customised indices

Ranking of Indian mutual fund schemes covering 70 per cent of assets under management and 4.7 trillion
(USD 85 billion) by value

Retained by Indias Employees Provident Fund Organisation, the worlds largest retirement scheme covering
over 60 million individuals, for selecting fund managers and monitoring their performance

Equity and Company Research

Largest independent equity research house in India, focusing on small and mid-cap companies; coverage
exceeds 125 companies

Released company reports on 1,442 companies listed and traded on the National Stock Exchange; a global first
for any stock exchange

First research house to release exchange-commissioned equity research reports in India

Assigned the first IPO grade in India

Our Office
Ahmedabad
706, Venus Atlantis
Nr. Reliance Petrol Pump
Prahladnagar, Ahmedabad, India
Phone: +91 79 4024 4500
Fax: +91 79 2755 9863

Hyderabad
3rd Floor, Uma Chambers
Plot No. 9&10, Nagarjuna Hills,
(Near Punjagutta Cross Road)
Hyderabad - 500 482, India
Phone: +91 40 2335 8103/05
Fax: +91 40 2335 7507

Bengaluru
W-101, Sunrise Chambers,
22, Ulsoor Road,
Bengaluru - 560 042, India
Phone: +91 80 2558 0899
+91 80 2559 4802
Fax: +91 80 2559 4801

Kolkata
Horizon, Block 'B', 4th Floor
57 Chowringhee Road
Kolkata - 700 071, India
Phone: +91 33 2289 1949/50
Fax: +91 33 2283 0597

Chennai
Thapar House,
43/44, Montieth Road, Egmore,
Chennai - 600 008, India
Phone: +91 44 2854 6205/06
+91 44 2854 6093
Fax: +91 44 2854 7531

Pune
1187/17, Ghole Road,
Shivaji Nagar,
Pune - 411 005, India
Phone: +91 20 2553 9064/67
Fax: +91 20 4018 1930

Gurgaon
Plot No. 46
Sector 44
Opp. PF Office
Gurgaon - 122 003, India
Phone: +91 124 6722 000

Stay Connected | CRISIL Website |

Twitter

LinkedIn

YouTube

Facebook

CRISIL Limited
CRISIL House, Central Avenue,
Hiranandani Business Park, Powai, Mumbai 400076. India
Phone: +91 22 3342 3000 | Fax: +91 22 3342 8088
www.crisil.com
CRISIL Ltd is a Standard & Poor's company