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Revenue growth for 9MFY17 was subdued due to lower commodity prices and demonetization. But the operating margin continues to remain
accretive during the same period. We expect 5% and 15% revenue growth in FY17E and FY18E respectively based on the strong traction in
Transmission and railway business with strong operating margin. We recommended this stock at Rs. 148 for the target price of Rs. 217 and the
stock have achieved our recommended target price. Fundamentally we remain bullish on the stock based on strong order book position and
improving operating margin but on the valuation front, we are not comfortable at current price level (currently stock is trading at 3.2x of P/B of
FY17). Hence, we advise our investors to Book profits at the current price..................... ( PAGE : 2-7)
Net sales de grew by the 6.5% YoY to Rs. 1965 Cr in Q3FY17 as compared to Rs. 2101 Cr in Q3FY16
EBITDA margin has improved by 135 bsp to Rs. 182 Cr as against Rs 167 Cr on account of 10% plus margin in T&D and
improved performance of railway and SAE business.
KEC has reported 102% YoY growth in PAT with 200 bps improvement on back of higher EBITDA
During the quarter KEC has secured Rs.2706 Cr of new orders in Q3FY17 (up by 20% YoY) and Rs. 8634 Cr in 9 months of
FY17, which is up by 26% YoY
Order book as on 31st December stands at Rs.11175 Cr, ie. 1.3x of TTM revenue.
Demonetization, delay in conversation of L1 orders into firm order and land acquisition issue at Jammu and Kashmir project led
to de growth in revenue
Management has guided 5% and 10-15% revenue growth in FY17 and FY18 respectively.
EBITDA margin in FY17 will be 9% and it will improve further in FY18
EBITDA margin of SAE tower was 8-9% in Q3FY17
Faced some serious issue in logistic in November and December month due to demonization but now situation is under control.
Losses in Cable segment has come down significantly on YoY
Revenue loss of 50-60 Cr due to demonization
Maintain revenue guidance in railway segment of Rs. 450-500 Cr and Rs.1000 cr in FY18
Interest cost as % of sales will be 2.7% in FY18
Significant improvement in solar business from next year as the KEC is in L1 position of large project. EBITDA margin is slightly
below than normal margin but cash generating on PBT level
Expect to bring down AR collection days to 180 from 218 days based on the release of retention money from Saudi projects
Land acquisition issue at Jammu and Kashmir project has been resolved
Expect more orders from SEBs compare to PGCIL
Order Book 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Transmission 7,356 6,921 7,131 7,903 7,207 7,028 7,087 7,334 7,442 8,054 15% 8%
SAE 931 876 951 948 1,086 937 1,134 1,769 1,510 1,342 43% -11%
Cables 279 263 570 632 592 469 472 104 216 224 -52% 4%
Railways 279 263 475 738 691 562 567 936 1,186 1,342 139% 13%
Water 466 438 380 316 - 281 189 208 216 112 -60% -48%
Solar 9 9 - - 296 75 38 52 183 101 34% -45%
Total 9,320 8,770 9,508 10,537 9,872 9,351 9,487 10,403 10,753 11,175 20% 4%
Order Intake
Transmission 583 1,478 1,909 2,375 1,024 1,595 1,370 1,469 1,738 1,651 4% -5%
SAE 231 485 421 123 181 247 206 678 465 298 20% -36%
Cables 253 412 393 309 181 270 206 198 279 244 -10% -13%
Railways - 48 84 278 90 90 56 424 528 460 412% -13%
Water - - - - - - - - - -
Solar 11 5 3 - 30 45 38 57 93 54 20% -42%
Total 1,078 2,428 2,811 3,085 1,506 2,246 1,877 2,825 3,103 2,706 20% -13%
4
Narnolia Securities Ltd
KEC International Limited is an India-based company, engaged in infrastructure engineering, procurement and construction
(EPC). The Company is also a manufacturer of power cables and telecom cables in India. The Company operates in four
business verticals, which include power transmission and distribution, cables, railways and water. The Company is also a provider
of turnkey solution in the railway infrastructure EPC space. The Company has powered infrastructure development across 50
countries in developed, developing and emerging economies of South Asia, the Middle East, Africa, Central Asia, the United
States and South East Asia. The Company has eight manufacturing facilities for lattice towers, monopoles, hardware and cables.
Power Transmission
Cabels Railways Water
& Distribution
Electrification
Supply EPC
Manufacturing Facilities
Tower Manufacturing
India, Brazil and Vadodara (Gujarat)
Mexico Mysore (Karnataka)
(SAE Annual Silvassa (Union
production capacity Territory)
100000 MTs)
Company Update Aurobindo Pharma clears USFDA inspection for Unit-11 in Srikakulam,
CMP 681 Andhra Pradesh with zero observations. The Unit-11 plant produces non-
antibiotic active ingredients,which is used for both the captive purpose of
Target Price 890
Aurobindos formulation manufacturing and for supplies to external
Previous Target Price 890 customers. The US formulation business contributes 45 percent of
Upside 31% Aurobindos total revenue Rs.13,890 cr. The acquired business(Agile
Change from Previous 0% Pharma) continues to see profitable during Q3FY17. As on 31 Dec 2016,
Auro pharma has transferred manufacturing of 60 products from Europe to
Vizag facility in India. Management expects supply from this facility to EU
Market Data markets from FY18E. The estimated sales revenue from this facility is Rs.
BSE Code 524804 1300 Cr. per annum. Apart from that recent approvals from USFDA in
NSE Symbol AUROPHARMA various segment will enable the company to launch multiple products in
52wk Range H/L 895/622 FY18E
Mkt Capital (Rs Cr) 39900 Outlook
Av. Volume(,000) 232924
Nifty 9237 We expect Auropharma will be able to register growth from the US and EU
business, on the back of 40-45 launches which are expected in FY18.
Apart from that management is focusing to develop dermatology,
Stock Performance
Ophthalmology segments which will help the company to diversify its
1M 3M 12M
portfolio in future. Currently the stock is trading at 5 times FY17 P/B and 17
Absolute -0.3 0.9 -9.0 times FY17 P/E. Considering the above arguments we maintain HOLD
Rel.to Nifty -3.6 -12.3 -27.6 rating in this stock with the target price of Rs.890
Result Update
CMP 322 Recent Development :-
Target Price 350 Recently, KALPATPOWR has received orders worth of Rs. 1202 Cr in
Previous Target Price 320 Transmission and Railway segment. Company has secured 738 Cr worth of
Upside 9% transmission projects in Telengana (Rs.402 Cr) and Abu Dhabi (Rs.336 Cr)
Change from Previous 9% and big ticket size order worth of Rs.464 Cr in key Railway segment from
Railway Vikas Nigam Limited. With this order win KALPATPOWR
standalone order book stands at Rs.9502 Cr, which gives strong revenue
Market Data
visibility (1.95x of TTM revenue) going forward. Managements has reiterated
BSE Code 522287 15-20% revenue growth in FY 18 based on the current order book and
NSE Symbol KALPATPOWER company will continue to build portfolio of projects in Railway EPC sector,
52wk Range H/L 333/202 which will be key growth driver going forward. Companys real estate arm
Mkt Capital (Rs Cr) 4,942 JMC has also won orders in Residential and commercial building worth of
Av. Volume 23737 Rs.1058 Cr.
Nifty 9174
Strong Opportunity in Infra Segment:-
Stock Performance Currently, Infra segment (Pipeline and Railway) contributes only 10% of the
1Month 3 Month 1Year Order book but we see huge opportunity going forward especially in Railway
Absolute 14.5 29.9 57.4 segment. KALAPTPOWER has strong order pipeline of 3000 Cr and 1500
Rel.to Nifty 12.0 17.8 38.8 Cr in Railway and Pipeline business respectively. Railway Ministry has set a
target to award 2000 Km, 4000 Km and 6000 km of overhead electrification
orders in FY17, FY18 and FY19 respectively which provides huge
Share Holding Pattern-%
opportunity going forward. Shri Shubham logistics business remained
3QFY17 2QFY17 1QFY17
muted in Q3FY17 due to demonization and we do not expect significant
Promoters 59% 59% 59% improvement in it inFY17
Public 41% 41% 41%
Others 0% 0% 0%
Outlook & Valuation:-
Total 100% 100% 100%
The current order win of Rs.1202 Cr further strengthen the standalone order
Company Vs NIFTY book position, which provides strong revenue visibility (1.95x of TTM
155 revenue) going ahead. Advanced stage of overseas projects in transmission
KALPATPOWR NIFTY
will help to register strong revenue growth of 20% in FY17. Considering the
145 railway ministries ambitious target, we see tremendous growth opportunity
135 for the company like KAPLATPOWR. Based on the recent order win,
especially from Railway we have revised our target price to Rs.350
125
(Standalone business at 290 per share and Subsidiaries at 60 per share)
115 and we recommend HOLD on the stock.
105
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
95 Sales 1158 1143 899 29% 1%
Dec-16
Jun-16
EBITDA
Oct-16
Nov-16
Apr-16
Jul-16
Feb-17
Mar-16
Mar-17
Jan-17
Aug-16
May-16
Result Update BMC Blacklisting will not hurt Revenue and Profitability
CMP 260 BMC has issued show cause notice to JKIL for irregularities in execution of
Target Price 330 three projects namely I) W 266 -concreting of various roads in western
Previous Target Price suburbs II) W 277 improvement of side strips of linking roads in mastic
Upside 27% asphalt in H/W and K/W wards in western suburbs III) AW 90- improvement
of various roads in Asphalt in P/N ward in western sunburns. These projects
Change from Previous
were awarded by Municipal Corporation of Greater Mumbai (MCGM) to the
Joint Venture of J Kumar and KR construction. If the liabilities are
Market Data crystallized than JV has to pay penalty of 19 Cr, 1Cr and 1 Cr respectively
BSE Code 532940 and cumulatively J Kumars share will be 10 Cr. Further the same can be
NSE Symbol JKIL recovered from the sub-agencies to whom work has been given for the
52wk Range H/L 303/105 execution. So we assume there could be minimal impact on bottom line.
Mkt Capital (Rs Cr) 1,967 Around 70% of the current order book contribute by Metro projects and rest
Av. Volume 172674 from Road projects but very minimal orders from BMC. So we believe it will
Nifty 9174 not impact execution and order inflow going ahead. So we remain bullish on
the stock despite BMC issue.
Stock Performance
1Month 3 Month 1Year Key Growth Driver:- Mumbai Metro projects
Absolute 15.8 26.8 -5.1 Mumbai metro projects are continue to be a growth driver for the JKIL for
Rel.to Nifty 13.3 14.7 -23.6 next 3-4 years. The unexecuted work on all 3 Mumbai metro projects
contributes nearly 67% to current order book. All the initial ground work is
Share Holding Pattern-% completed and we expect full swing in execution and management is
3QFY17 2QFY17 1QFY17
confident to complete significant portion of line 2A and 7 by FY19.We
expect Rs. 1275 Cr of revenue from 3 Mumbai metro projects in FY18,
Promoters 44% 44% 43%
around Rs.1000 Cr revenue from line 3 only in FY19 and Rs.770 Cr of
Public 56% 56% 57% revenue from line 2A & 7 in FY19. This will not only support the better
Others 0% 0% 0% revenue growth but also strengthen the operating margin as the metro
Total 100% 100% 100% projects have better margin compare to normal road projects.
Company Vs NIFTY
130
Strong Order Pipeline :-
JKIL NIFTY
110
Around Rs. 10000 Cr of new metro projects in state of Maharashtra will be
bided out in next 1-2 years. JKIL will bid for the Mumbai metro line 2B and 4,
90 total of 10 packages of 500 Cr each, tunnel work of Mumbai- Pune
70 expressway, Mumbai- Nasik expressway, Vijayawada and Bangalore metro
projects. But JKIL will go slow in terms of new order acquisition in order to
50
focus on execution.
30
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
10 Sales 369 310 310 19% 19%
Jul-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Mar-17
Will Maintain top line of 1600 Cr in FY17 and Rs. 2000 Cr in FY18
Employee expense has gone during the quarter as the JKIL has started metro project in big way and full fledge revenue yet to
come
Preliminary work has completed on Mumbai metro project and work is in full swing
Debtors of 563 Cr at the end of the Q3FY17, but has come down to 440 Cr in Feb
Inventory at the end of Q3FY17: - 106 Cr of RM, 280 Cr of WIP
Protest by localized people against tree cutting but its awarding authority concern and it will not hamper execution.
Advances of 125 Cr has taken from line 3 & 7 and in month time advances will receive from line 2A
Payment cycle for Mumbai metro project is 45 days from date of bill raised
No significant revenue during the Q3FY17 from JNPT project due to utility work is going on
Mgt. expects 200-250 Cr of revenue from Mumbai metro, 200 Cr from other road and flyover projects
Pending work on Delhi metro is tune of 250 Cr at the end of the Q3FY17
Unexecuted portion of JNPT road project is 1050 Cr
Utility revenue of 30 Cr was booked from JNPT road project in Q3FY17
480 Cr of Debt as on 31st Dec 2016
FY18 Top line :- 1300-1400 Cr from Mumbai metro, 400 Cr from JNPT, 200 cr from others
Will maintain 17-18% EBITDA margin going forward
Debt FY17:- 350-400 Cr, FY18 :- 500-550 Cr
Current Working capital days is 174 and expect to bring down to 160 days
1000 Cr of revenue from Line 3, 700-800 Cr of revenue from line 2A &7 in FY19
Strong order book and execution of Mumbai metro projects boosted revenue in Q3FY17and we expect it to continue. We believe
that the black listing from BMC projects and penalty will not affect the top and bottom line of the company in bigger way as 70% of
current order book is comes from metro projects. The current downfall in stock price is irrational and we believe it is the opportunity
for the investors. We continue to expect 9%, 20% and 27% revenue growth in FY17, FY18 & FY19 respectively based on the strong
order book and robust execution of Mumbai metro projects. Despite blacklisting from BMC projects we remain bullish on the
stock and maintain our BUY rating on the stock with unchanged target price of 330.
J. Kumar Infraprojects Limited is engaged in construction activities. The Company designs and constructs roads, bridges,
flyovers, subways, over bridges, skywalks and railway terminus/stations, among others. The Company's offerings in civil
construction segment include office/commercial buildings, sports complexes and swimming pools. In Irrigation Projects segment,
the Company builds dams, canals, aqueducts and irrigation tanks, and spillways. The Company has approximately 20 hydraulic
piling rigs, which are used to build pile foundations for buildings and flyovers, marine structures and offshore platforms. Its Piling
segment caters to various real estate and infrastructure companies. The Company's projects include Underground Metro CC-24,
Delhi Metro Tunnel, Ahmedabad Metro, Balewadi Bridge and Dhankawadi Flyover. Its other projects include Kapurbawadi
Flyover, Kherwadi Flyover, Amarmahal Flyover, Amarmahal Flyover, Thakur Flyover, Bhivandi Flyover and Aurangabad Flyover.
JKIL
Key Clinets
Vidharbh Irrigation
DMRC,MEGA, UPRNN, MCX, Development,
PWDs, Indian Pimpari Irrigation HCC,HDIL, Punj
MSRDC, MMRD, M
railway Division, Bambla Lloyd, JSW, LANCO
CMG
Canal Division
Margin Profile 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY (+/-) QoQ (+/-)
Gross Margin 42.3% 43.0% 38.8% 33.0% 35.1% 40.9% 38.9% 30.9% 37.0% 34.2% (670 bps) (280 bps)
EBIDTA 20.8% 19.7% 16.9% 18.5% 18.1% 18.3% 15.7% 16.9% 18.2% 17.1% (120 bps) (110 bps)
EBIT 16.7% 15.6% 13.7% 15.1% 14.3% 14.2% 12.4% 13.6% 13.9% 13.2% (100 bps) (70 bps)
PAT 6.7% 7.9% 6.8% 7.1% 6.6% 7.7% 7.1% 7.3% 7.4% 7.2% (50 bps) (20 bps)
Growth YoY
Sales Growth 27% 11% -11% 8% 10% 2% 0% 11% -6% 19%
EBIDTA Growth 45% 19% -7% 11% -4% -5% -7% 1% -6% 11%
EBIT Growth 44% 14% -10% 9% -6% -7% -9% 0% -9% 11%
PAT Growth 15% 21% -13% 13% 8% 0% 5% 14% 5% 11%
Operating Matrix FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 YoY% Q3FY16 Q3FY17 YoY%
Opening Order Book 737 1219 1480 1266 2512 3661 3122 3024 -3% 3658 10000 173%
Revenue Booking 365 723 878 879 955 1146 1285 1328 3% 310 369 19%
Order Intake 847 984 664 2125 2104 607 1187 1518 28% 32 0 -100%
Closing Order Book 1219 1480 1266 2512 3661 3122 3024 3214 6% 3380 9700 187%
Strong revenue growth of 19% in Q3FY17 was on account of work commencement on Mumbai metro projects.
JKIL will slow and selective in terms of new order intake in order to focus on execution. Management has guided for Rs.2000 Cr
of new order inflow for the next year to maintain 10000 Cr + order book.
We anticipate healthy operating margin in range of 16-18%, margin depend on revenue mix (tunnel work has better margin comparatively)
10,000
9,700
12000 2.5
8,646
10000 2 new order intake to focus
8000 1.5 more on execution. Avg.
order intake will be in range
3658.3
6000 1
3,380
2915.4
3,214
3198
3100
3024
Sales Growth %
450 30%
393 390 391
400 355 369 25%
350 322 20%
296 297 299 303
300 15%
250 10%
200 5%
Mumbai metro projects
150 0%
100 -5% will drive the revenue
50 -10% growth going ahead
- -15%
Line2 A
1,506 Line 7
4.00
3.58 3.52
3.50 3.23
2.97
3.00 2.65
2.50 D/E will remain strong in
2.00 range of 0.25 to 0.38
1.50
1.00 0.80
0.55
0.33 0.42
0.50 0.25
-
FY12 FY13 FY14 FY15 FY16
Disclaimer..15
Sep-16
Feb-17
Jan-17Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Mar-17
80
Cosmo is well poised to grow its sales and profitablity with changing
Sep-16
Feb-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Mar-17
Cosmo films has not only grown as a Key BOPP Player within the
country with 20% market share and became the largest exporter
of BOPP film from India, also it has been able to sustain as a
value added player with launching new innovative packaging film
products through focus on R&D and technology. Now Cosmo's
value added films contribute 49% to its revenue in FY16, grown
from 40% in FY14. In value terms, speciality films now contribute
almost 40% to the total volume. In traditional commodity (BOPP)
films, industry is competetive and one could not enjoy edge over
others as prices are largely dependent on prices of
homopolymer, (key raw material) ,a derivative of crude oil;
However unlike other BOPP players, Cosmo has been able to
position and prove itself as a value added high margin packaging
film player, through consistant innovations and R&D, providing
Cosmo, big comfort on margins, generating above normal
returns on shareholder's equity.
Cosmo's consistent focus on R&D is giving it space to grow higher vs its peers and a reason for outperformance in adverse
and difficult times when industry is depressed.. It is evident from the fact that Cosmo has been able to deliver above average
industry margins in after FY12, when industry was going through the phase of overcapacity, low demand and adverse
commodity cycle.
Though management has indicated for comparatively lower gross margins initially after commisioning of new BOPP line, they
are also confident of achieving 50% revenue contribution back from speciality films, and 50% volume (slightly longer term
target), which will give boost ROEs of company in longer term. Till date, Speciality films capacity is running at 60% utilisation on
name plate capacity and they according to them, this is enough for next one year. After achieving 70% utilisation on name plate
capacity.(considered 100% when 70% on name plate capacity).
On the back of strong product portfolio consisting high magin speciality films, higher bargain power, Cosmo has been able to
generate healthy operating cash flows, resultant recuction in gross debt level over year. Cosmo has stengthened its financial
health through improved balance sheet. Continious reuction in Debtor, Inventory days lead to overall reduction in working
capital requirement. This had an effect of generating higher FCFF, Return on equity and Return on capital employed, resultant
value creation for business and investors.
14.0 60
12.0
50
10.0
40
8.0
30
6.0
4.0 20
2.0 10
0.0
0
FY15 FY16 FY17E FY18E FY19E
FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Interest Coverage Ratio Working Capital Turnover Ratio Debt/Equity Debtors Days Investory Days Payable Days
450 10.0
400 8.8 9.0
350 7.9 8.0
-10.0% FY14 FY15 FY16 FY17E FY18E FY19E
Polypropelene which is by product of petrochemical industry is a key raw material for the company with a strong co-relation
with crude prices. The relationship is not leniear with less volatility, however the trend in the price movement of PPE is similar
too that of the crude prices. There are about 4-5 domestic suppliers of PPE, and largest is Reliance Industries. Management
commented that sourcing of this raw material is mainly done through a major private Oil & Gas refinery company. Nominal
rebate and favourable terms are offered to the buyers of PPE who buy PPE in bulk form these suppliers.
Also there is transparent index globally known as PLATT index, which releases prices of PPE every fortnightly. Suppliers of
PPE use this data for price identification and post this they supply PPE to domestic BOPP film producers with applicable rebate
structure as discussed with each BOPP manufacturer. Cosmo films in turn revise its price list on the same day for all its
cusotmers. THis practice is followed by the entire BOPP industry in India. This there is no or minimal commodity pricing risk for
the companies and any fluctuations in te prices of PPE is fully passed-on to the customers.
Cosmo is fairly immune to the risk related to mamcro-economic environment of a particular country as it has strategically
diversified its presence into 80 countries across the world. It does not have exposure of more than 4% of total turnover to a
particular country except for US. Company will face minimal impact from Brexit, either directly or indirectly (through forex
fluctuations) owing to raw material imports, which nullify and provies a natural hedge for the same, as Cosmo's valu added
films contributes almost 50% of the total turnover till FY17.
Cosmo has long history of sharing its profits with the investors in form of dividend. Cosmo has been sustaining its dividend
payout in the range of 20-30% depending on the capital which company needs from time to time for expansion and other
capital needs. At CMP Cosmo's stock price offering 3% dividend yield as distributed by the company for FY16, providing
investment opportunity with healthy dividend yield on the invested capital.
In FY15, Cosmo incurred a loss of $5mn in its US subsidiary and this got reduced to $2.2 mn in FY16. Of this loss in FY16,
50% was booked in only Q1FY16. Though the whole picture of US operations is not very rosy in FY17 despite serious steps
taken by the company for turning it around through restructuring of business and launching of newer value added products
epciality for US markets, Management has guided for much better numbers and break even of US business by FY18. Cosmo is
working for making US business cost efficient through manufacturing new value added producs in US. In past, US business
loss was mainly attributed from forex losses incurred by the US Subsidiary. We believe US break even will give major boost to
company's consolidated performance which has been a drag on stock price since long, leading to rerating of stock in near
future.
The Size of global packaging industry is $700 bn and that of India is at $ 32bn. Te size of global packaging industry is expected
to see a CAGR of 7.5% to $ 1tn over FY15-20. Indian packaigng industry is expected to reach $73bn, to be more double over
the same period.
Both organised and unorganised industry are established in Indian Packaging industry, and also giving intense competetion to
each other.
Indian Packaging industry is divided into rigid and flexible packaging. Rigid is expected to grow at 15% whereas flexible
packaging is expected to grow at 25% annually, thereby gaining share from rigid packaging.
Growing consumption of packaged food, FMCG, personal care and other packaged products in level in Tier II and tier II cities
leading to uge demand and growth for flexible packaging. The continious improvement in lifestyle and per capital income level
will aid significant benifit to flexible packaging industry over medium to long term.
The Indian Food & Beverage industry has nearly 25% yearly growth and major application of plastics in food products is in
packaging. Thus growth in food and beverage sector highlights the growth potential for plastics in packaging. Similarly,
personal care sector, which is growing at nearly 15%, will also drive demand for rigid plastics, as it is the most used material for
packaging of personal care products. Other industrial sectors such as, pharmaceutical that is proposed to grow at 13-15% over
next five years, retail industry, that is currently witnessing the shift from unorganized to organized retail; will also stimulate the
demand of plastic in packaging material. Government's current campaign on "Make in India" which aims to turn the country into
a global manufactruing hug will have positive impact on the growth packaging industry.
KEY POINTS
Packaging is one of the fastest growing industries stands at $700
bn globally. It has grown higher than GDP in most of countries. In
developing countries like India, it grew at a CAGR of 16% in last
five years and touched $32bn in FY15.
PRODUCT PORTFOLIO
1. Printing & Pouching Films 1.Dry Thermal Lam.Films 1.Pressure Sensitive Label stock 1. Pressure Sensitive films
2. Barrier Films 2.Wet Print Lam. Films Films 2. Tape & textile Films
3. Overwrap Films 2. Direct Thermal Printable Film
3. In-mould films
4. Wrap around label films
Chart showing export share over years Cosmo Films Limited is Pioneer of BOPP Industry in
70% India and one of the global leaders and
60% manufacturers of BOPP Films. Company is also the
largest BOPP film exporter from India.
50%
40%
Cosmo's healthy export share in overall topline is
30%
evident of its product quality and strength. Company
20% exports its products to more than 80 countries
10% worldwide.
0% Cosmo operates form its units in India, Korea and
FY12 FY13 FY14 FY15 FY16 US. Korea facility completely caters to Japanese
market. Cosmo is in process of restructuring its US
Domestic share Exports share
subsidiary business by launching new products
there.
FY12 FY13 FY14 FY15 FY16
CF Global Holdings Limited GK (CGHG) (Japan) Cosmo has fairly large Board with 3/4th number of
Cosmo Films (Netherlands) Cooperatief U.A independent directors on the Board with persons
CF (Netherlands) Holdings Limited B.V. having decent qualification and rich experience in
Cosmo Films Japan, GK different industry working..
Cosmo Films Singapore Pte Limited Mr. Ashok Jaipuria, Chairman & MD
Cosmo Films Korea Limited Mr. A.K Jain, Whole time Director
Cosmo Films Inc Mr. H.K Aggarwal, Independent Director
CF Investment Holding Private (Thailand) Company Mr. Rajeev Gupta, Independent Director
Cosmo Films Inc. (US) Ms. Alpana, Non Ecex. Non Independent Director
Mr. Ashish Kumar Guha, Independent Director
Mr. Pratip Chaudhary, Independent Director
Mr. H.N. Sinor, Independent Director
Purchases Homopolymer (derivative of petrochemicals) as Source from Reliance Industries, which updates
raw material for processing of BOPP & Speciality Films prices of homopolymer every fortnight or whenever
Source
any sharp movement seen in crude oil.
In BOPP Industry in India and across globe, name plate ( a unit measurement) capacity is calculated based on 25 micron film
under standard 24 hour unit of production for 365 days. Based on customer requirements, Cosmo can produce different micron
films. If a company produces 70% of total name plate capacity, it is considered as 100% utilisation. In FY16, Cosmo has
produced 100000 MT on a name plate installed capacity of 136000 MT. p.a., thereby implying a 100% capacity utilisation.
Currently Cosmo is operating at 72-73% utilisation on name plate capacity which is more than 100%, as guided by
management.
FINANCIALS & VALUATIONS
15.0 20
15
10.0
10
5.0
5
0.0 0
201209
201303
201309
201403
201409
201503
201509
201603
201609
201212
201306
201312
201406
201412
201506
201512
201606
-5.0
Asset Turnover
1.4 Price/Book
1.8
1.6
1.2
1.4 1
1.2 0.8
1
0.6
0.8
0.4
0.6
0.4 0.2
0.2 0
0 FY13 FY14 FY15 FY16
1 2 3 4 5
Jindal Poly Polyplex Cosmo Jindal Poly Polyplex Cosmo
Cosmo Has recently acquired 34 acres of adjoining land available for sale close to its Waluj plant. Cosmo has entered into a
definite agreement to purchase this land, for which advance has been paid and deal will be concluded by FY17 end. This land
is acquired to target future growth plans of Cosmo. Management has guided that whatever the growth plans will be, it will be in
direction to create value addition in current portfolio. New land will only be used to either to add speciality film capacity or any
related value added project complementary to packaging business, of which company Cosmo possess knowledge.
FOREX FLUCTUATIONS
Cosmo's almost 40% sales comes from the export markets. Cosmo has been incurring huge losses in the past due to adverse
currency movements. Cosmo is being exposed to USD/INR and USD/YEN . It sells its products in US and is exposed to
USD/INR fluctuation risk. Also It sells it products manufactured in Korean plant to Japanese local markets in yen and pays to
Korean Subsidiary in USD, thus exposed to cross currency fluctiation risk. Any future adverse movement may impact Cosmo's
earnings.
THREAT OF NEW CAPACITY AND INCREASED COMPETETION
Though Cosmo's new capsacity addition will easily be get absorbed as Indian markets need 50000 MTPA additional BOPP
film. Also it takes 12-15 months for any additional capacity to come in the market and there is no expansion announced by any
other player in India till date, as per management, However any new capacity going forward may impact future sales growth in
future.
PRICING RISK
As per management there is no raw material commodity risk as far as product pricing is concerned as any increase or
decrease in raw material is passed on to customers every time whenever PPE prices are updated through Global PLATT
Index, however lots of economic conditions play role in product pricing. Thus any delay in pass on of raw material price hike
may hamper gross margins for the short duration.
DELAY IN RAMP UP OF NEWLY EXPANDED CAPACITY
As per management , within 5-6 months of the commercial production start in new capacity, Company is hopeful of achieving
100% utilisation, however any delay in ramp up of utilisation may adversly impact our revenue and profit projections.
Within two wheeler industry the hit will be more on Hero Commercial Vehicles industry will get impacted most because
Motocorp and Honda Motorcycles because these two players it has highest inventory value wise. Majority of the OEMs have
combined holds around 80% of the total two wheeler upgraded themselves to BS-IV but they have not stopped
inventories. Bajaj Auto has an inventory of around 80000 units production of BS-III vehicles. The management of Ashok
but considering the 50% contribution from exports it will not Leyland has stated that the majority of the vehicles in pipeline
get impacted. TVS Motors does not have much BS-III have been sold and left over stock will be exported to other
inventory and it has also started selling & manufacturing BS-IV markets where they have significance presence.
vehicles.
Result Update M&M, the leader in the Farm Equipment business, has geared itself to
CMP 1276 become a full-line farm machinery player under the global strategy. To exploit
Target Price 1600 the growth opportunities in segments like harvesters, tillage, haying & plant
and fertilizers, its product mix is set to see a substantial shift in the next 2
Previous Target Price
years. The geographical mix of M&M's farm machinery products stood at
Upside 25% around 30 percent in FY16 which rose to 37 percent in the FY17 YTD and the
Change from Previous - company aims to take it to 50 per cent by FY19. Launch of new vehicles by
the competitors in the fast growing UV segment led to decrease in the market
share of M&M. The company will launch a multi-utility vehicle code named
Market Data
U321 before the end of next financial year preceded by a sports utility
BSE Code 500520 vehicle code named S201 in the second half of the year. On Korean
NSE Symbol M&M subsidiary, M&M has capital expenditure plan of more than USD700 million
for the next three-four years to bring out one new product every year and this
52wk Range H/L 1509/1142
could lead further expansion in margins of the company going ahead. The
Mkt Capital (Rs Cr) 79,292 Company has built adequate manufacturing capacity for the immediate future
Av. Volume 114489 and is planning to invest in additional capacity in preparation for the mid to
Nifty 9,101 long term.
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-17
Mar-16
Investment Arguments
Monsoon has played a significant role in shaping the rural demand in favour of M&M, because about 90% of the tractors and
more than 40% of the utility vehicles have been sold in rural areas by the company. So M&M remains the big beneficiary of
improving rural demand in long run.
Recently launched "Yuvo" brand tractors have made the Farm Equipment segment portfolio stronger and M&M is all set to take
advantage of growing demand of 41-50 HP tractors. This category contributes more than 45% of total tractor sales.
The Company has built adequate manufacturing capacity for the immediate future and is planning to invest in additional
capacity in preparation for the mid to long term.
Ssangyong can be a new growth driver for M&M in utility vehicles segment and this could lead further expansion in margins of
the company going ahead.
M&M is going full-throttle on a global strategy to transform itself into a full-line farm machinery player. This should see the
contribution of non-tractor farm equipment to the product mix increasing 5-fold from 4 percent in December 2015 to 20 percent by
FY19.
Management Highlights
16-17% industry volume growth in Tractor segment for FY17. 15-20% growth in FY18.
EBITDA Margin may stay in FY17 at the similar level of FY16.
Effective Tax rate is 21-22% for FY17.
As per management there will not be significant price change in the truck segment due to GST.
Capex of around Rs.2500 crore every year.
Inventory level for Tractor is 60 days and for Auto 50 days.
The company will launch a multi-utility vehicle codenamed U321 before the end of next financial year preceded by a sports
utility vehicle codenamed S201 in the second half of the year.
Ssangyong has a capital expenditure plan of more than $700 million for the next three-four years to bring out one new product
every year.
Mahindra and the Ssangyong version of the SUV will drive the Korean brands ambitious entry into the North American market
by 2020.
M&M aims to get 50 percent of its farm equipment revenues from international markets.
59714
38604
62358
45246
62666
43321
74595
61658
76486
61152
10000 -30%
0 -40%
Market Data Indusind Bank posted the strong set of 3Q FY17 results. NII grew by 35%
YoY backed by healthy loan growth as well as improvement in NIM. C/I ratio
BSE Code 532187 was well within control to 47.5%. Operating Profit remained healthy with
NSE Symbol 29% YoY growth. PAT grew by 29% YoY. NIM improved by 9 bps YoY to
INDUSINDBK
52wk Range H/L 1414/912 4%, it remained flat QoQ. Sequentially assets quality saw marginal
deterioration with GNPA at 94bps against 90bps. Advances increased by
Mkt Capital (Rs Cr) 69444
25% YoY backed by growth in both consumer as well as corporate portfolio.
Av. Volume (,000) 141 Deposits Increased by 38% YoY, whereas CASA Increased by 46% YoY.
Nifty 9045 CASA ratio increased by 50 bps QoQ to 37%.
Financials 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
NII Growth % (YoY) 18.0 18.4 22.5 31.3 36.2 37.1 38.3 33.4 34.5
Other Inc./Net Inc. % 41.5 41.6 42.5 41.7 41.7 41.9 41.8 39.9 39.2 (2.51) (0.74)
C/I Ratio % 47.4 46.3 45.9 46.4 47.3 47.2 47.0 47.3 47.5 0.19 0.19
Empl. Cost/ Tot. Exp. % 36.6 36.2 34.8 34.5 34.3 32.7 32.6 32.7 32.0 (2.35) (0.72)
Other Exp/Tot. Exp.% 63.4 63.8 65.2 65.5 65.7 67.3 67.4 67.3 68.0 2.35 0.72
PPP Growth % (YoY) (22.3) (10.9) 11.7 116.0 80.7 98.9 86.9 35.3 22.5
Provision/PPP % 12.7 12.6 13.4 15.7 16.7 18.6 18.7 16.7 15.9 (0.78) (0.78)
Tax % 33.8 33.3 34.3 34.0 34.3 33.8 34.1 34.0 34.5 0.26 0.48
PAT Growth % 28.9 25.1 24.7 30.2 29.9 25.3 26.0 25.8 29.2
RoE % 18.3 19.8 20.4 16.7 14.1 14.6 15.1 15.4 15.7 1.67 0.34
RoA % 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 (0.04) (0.05)
Margins Performance 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
Yield % on Advances 13.0 12.8 12.7 12.4 12.1 12.0 12.1 11.9 11.7 (0.34) (0.13)
Yield % on Corporate Bank 10.9 10.6 10.4 10.1 10.0 10.1 10.2 9.9 9.8 (0.22) (0.16)
Yield % on Consumer Finance 15.8 15.8 15.7 15.4 15.1 14.9 14.6 14.6 14.5 (0.53) (0.04)
Overall Yield % on Total Assets 10.3 10.1 10.1 9.8 9.7 9.7 9.6 9.5 9.3 (0.44) (0.24)
Cost of Deposits % 7.8 7.7 7.6 7.4 7.2 7.1 6.9 6.6 6.4 (0.80) (0.25)
Overall Cost Of Funds % 6.6 6.5 6.4 5.9 5.8 5.7 5.7 5.5 5.3 (0.53) (0.24)
NIM % 3.7 3.7 3.7 3.9 3.9 3.9 4.0 4.0 4.0 0.09 -
(Rs in Crore)
Other Income Break Up 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
Trade and Remittances 62 80 56 84 85 97 109 103 106 25% 4%
Foreign Exchange Income 169 110 159 170 170 140 151 156 179 5% 15%
Distribution Fees 98 127 107 119 126 138 137 156 181 44% 16%
General Banking Fees 42 45 49 41 46 48 56 49 64 38% 29%
Loan Processing fees 91 111 104 145 185 228 215 201 195 5% -3%
Investment Banking 59 96 123 114 113 122 114 161 160 41% -1%
Total Fee-Based Income 522 569 599 673 726 774 782 826 885 22% 7%
Securities/MM/FX 88 90 125 110 113 139 191 145 132 17% -9%
Trading/Others
Total Other Income 611 658 724 784 839 913 973 970 1017 21% 5%
42.00 0.88
41.00 0.86
40.00 0.84
39.00 0.82
38.00 0.80
37.00 0.78
3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
38
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
INDUSINDBK
Among the mid size private bank, Indusind bank remains one of the consistent performers in growth and profitability
parameter. Superior loan book growth, diversified fee income profile and low credit cost are the key drivers of the
bank. We expect the IIB to maintain 25%+ loan growth in near to mid-term backed by revival in economic environment
and declining interest rate. We expect the consumer loan demand to pick up with improving vehicle financing and card
business giving the boost. Spike in CASA ratio and focus on consumer finance segment will help to maintain the NIM
at 4%. With healthy capitalization of Tier 1 at 14.7% we expect the RoA of 1.9%+, RoE of 16%-17%. Since Indusind
Bank has achieved our target price and valuation has got little stretched but based on strong fundamentals we think
investors should hold the stock in their portfolio. We recommend part book profit and hold the rest with the target price
of Rs 1480.
Concall Highlights:
>> Bond book will do well as the rate goes down. But the issue lies in the reinvestment risk in the book of banks.
>> Credit cost is well within the guidance. May come up slightly better than the guidance of 60 Bps of full year.
>> Security Receipts is Rs 223 Cr.
>> 2 small accounts slipped from restructured book.
>> RWA to total assets declined to 79% from 83% previous quarter. Quality of book has improved.
>> Assets quality in vehicle book has improved except for Car.
>> CASA increased can be attributed 50% to demonetization effect and 50% for the customer accquisition.
>> Gained market share in vehicle finance in all segment except in 2 wheeler segment.
>> LAP was slow in the month of Nov, but the business came back in Dec.
>> MFI book is flat QoQ with Rs 3000 Cr. MFI loan book target is Rs 10000 Cr in 3 years.
Sectoral Breakup % 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Corporate Banking% 57.7 58.7 58.5 59.2 58.3 58.7 58.8 59.0 58.3
Consumer Finance% 42.3 41.3 41.5 40.8 41.7 41.3 41.2 41.0 41.7
Net Advances (Rs in Cr) Adv. Growth YoY % Corporate Banking % Consumer Finance %
1,20,000 35.00
60.00
1,00,000 30.00
50.00
25.00
80,000
20.00 40.00
60,000
15.00 30.00
40,000
10.00 20.00
20,000 5.00 10.00
- - -
Narnolia Securities
42 Ltd
Please refer to the Disclaimers at the end of this Report
N arnolia Securities Ltd
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