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Housing and Urban Development Corporation Ltd 8th May 2017
HUDCO is a wholly-owned Government company with more than 46 years of experience in providing loans for housing and urban infrastructure
projects in India. HUDCOs AUM stands at ~Rs 36800Cr out of which 89% is to state government and their agencies. The loan book of the company
has till date been growing at 7.5% CAGR for last 4 years which appears low considering other listed housing finance company. GNPA of the
company stands at 6.80% while NNPA at 1.51% which is again higher than its listed peers. However the company is expected to benefit hugely
from Pradhan Mantri Awas Yojna under Housing for All by 2022. As the CAR is high at 63.9%, risk of any equity dilution in the near term gets
eliminated.
The company is attractively priced at 1.4 times BV with Return on Equity at 7.6% . We recommend SUBSCRIBE.
.......................................................... (Page : 12-15)
RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Net Sales 2,207 2,123 2,439 2,486 2,489 13% 0% 8,753 9,609 10%
Other Income 11 14 17 19 26 145% 36% 84 60 -29%
COGS 979 982 1,059 1,057 1,034 6% -2% 3,867 4,133 7%
Ad & P Expenses 154 168 203 192 155 1% -19%
Employee Cost 229 249 241 256 247 8% -3% 944 988 5%
Other Expenses 313 343 391 381 403 29% 6% 1,977 2,234 13%
EBITDA 456 381 466 517 551 21% 7% 1,636 1,913 17%
Depreciation 28 33 36 36 37 30% 2% 101 142 41%
Interest 25 33 35 40 38 50% -4% 119 145 22%
PBT 418 330 412 447 497 19% 11% 1,500 1,686 12%
Tax 102 75 91 99 115 12% 16% 336 379 13%
PAT 125 244 318 352 390 212% 11% 828 1,304 58%
1013
1018
1028
1086
1120
1220
1173
1078
200
1889
2060
2236
2092
1988
2197
2286
2207
2123
2439
2486
2489
889
910
920
50
0 0 0
Gross margin for this quarter improved by 282 bps YoY to 58.5% led by lower input prices, product
mix and price hike. On yearly basis gross margin improved by 117 bps to 57%.
EBITDA margin improved by 147 bps YoY to 22.1% led by 282 bps YoY decline in COGS,76 bps YoY
decline in A&P expense and 47 bps YoY decline in employee expenses in Q4FY17 whereas other
expenses went up by 202 bps YoY.
PAT margin remained 15.7%in Q4FY17 as compared to 5.7% in Q4FY16 due to onetime exceptional
item loss of Rs 189 cr in Q4FY16.
Domestic Soap Revenue growth YoY Segments Penetration
Domestic Soap Revenue growth YoY
20% Penetration
15%
15% 13% 13% 120%
11% 100%
9% 100%
10%
3% 80%
5% 2% 2%
1%
60% 48%
0% 38%
-6% -6% 40%
-5%
-10% 20%
-10%
0%
-15% Hair colour Household Soap
Insecticides(HI)
Make balance
between Concall Highlights(Q4FY17):
capital The company will maintain margin going forward. Try to improve it further.
allocation and
Focus to improve ROCE going forward. The company will make balance between capital
Div. Payout. allocation and Dividend payout going forward.
Confident of strong growth in medium to long term .
The company has seen recovery in consumer demand in Q4FY17.
Indonesian business: competitive intensity is decreasing in insecticide business. Expect better
growth going forward. Non insecticide business grew by 9% inQ4FY17. Insecticide business
maintained market share.
For the full year working capital has been reduced. The company sees it going down further.
The company launched HIT Gel Stick with a price point of Rs 30 in this quarter.
Domestic Soap business: The Company has initiated selective price increases in soap
portfolio and is scaling back consumer and trade offers.
The company is ready to leverage acquisition of Strength of Nature to build Wet Hair Care
platform in Africa.
European business: Overall demand environment remains challenging. Adjusted EBITDA
margins increased by 590 bps YoY led by judicious marketing investments and one-time
reversal of A&P provisions in Q4FY17.
African business (Potential growth driver): African business grew by 19% YoY in constant currency
(CC) terms and 54%YoY including Strength of Nature in Q3FY17. We expect similar growth in
Q4FY17.Although African business is facing some currency headwinds but by localizing production
facility and increasing prices company is expected to counter it.Going forward management sees
continuous margin improvement from African business in next 3-5 years.
40%
35%
Currently, the stock is trading at 8.0x FY19E P/BV. We maintain BUY'
30% with the target price of Rs. 28009 .
25%
20%
15%
10%
5%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
0%
ation
Net Sales 8,738 6,173 7,033 7,923 8,915
EBITDA 1,115 1,690 2,174 2,448 2,902
EBIT 895 1,553 2,020 2,278 2,608
Shareholding patterns % PAT 615 1,338 1,667 1,872 2,148
4QFY17 3QFY17 2QFY17 EPS (Rs) 227 493 613 688 790
Promoters 50.6 50.6 50.6 EPS growth (%) 56% 117% 24% 12% 15%
Public 49.4 49.4 49.4 ROE (%) 24% 37% 31% 27% 25%
Total 100.0 100.0 100.0 ROCE (%) 36% 43% 38% 33% 30%
BV 928 1,345 1,964 2,532 3,202
Stock Performance % P/B (X) 16 14 13 11 8
1Mn 3Mn 1Yr P/E (x) 66 39 41 39 34
Absolute 4.4 12.7 33.1
Rel.to Nifty 3.1 6.5 12.7 RECENT DEVELOPMENT: Commencement of Vallam Vadagal plant
140
EICHERMOT NIFTY
Earlier the company was facing capacity constraints because of huge
demand for its classic models. But the management of the company took
130 right decision to increase the capacity in phased manner and in-line with
the demand.
120
110
The Vallam Vadagal facility is likely to commence production from August
2017 and with this expansion total capacity for two wheelers will reach to
100 825000 units per annum in FY18.
90 The company has target to take the production capacity to 900000 units
per annum by FY2018-19. Eicher Motors has planned Rs.800 crore of
80 capex in this regard in FY19.
Jul-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
May-17
Oct-16
Nov-16
Apr-17
Mar-17
Net sales grew by 23%YoY to Rs.1888 crore which was in-line with our estimates (Rs.1915 crore).
Volumes grew by 21%YoY and realization have also grown by 2%YoY.
Higher sales of Classic 350 motorcycles led to this volume growth. These motorcycles have more
than 2 months of waiting period in the domestic market. Export volumes have seen sharp increase
of 41%YoY during the quarter. On the commercial vehicle front VECV reported volume growth of
20%YoY in 4QFY17. The growth was supported by higher sales of Medium and Heavy Commercial
vehicles on the back of BS-IV transition.
Reported EBITDA grew by 30.9%YoY to Rs.585 crore. Lower advertising and promotion expenses
helped company to post 31% of EBITDA margin.
Depreciation and Amortization expenses remain higher in the quarter due to operationalization of
valam vadagal facility.
PAT stood Rs.459 crore at a growth of 34%YoY due to higher other income.
100,168
102,878
101,968
102,147
105,504
100,730
103,522
104,258
105,121
105,544
105,935
60000
106613
127611
125690
148186
147483
166941
173838
178228
20% 99,000
74131
81977
82215
92846
40000 1%
20000 10% 98,000
0 0% 97,000 0%
Gross Margin improved by 180 bps YoY to 47.4% on the back of lower commodity prices and higher
realization during the quarter.
The company has been taking the advantage of high operating leverage based on the higher volumes
which led the EBITDA margin to 31% during the quarter up by 180 bps YoY.
PAT margin increased by 190 bps owning to minimal finance cost and higher other income in the
4QFY17.
EBITDA and EBITDA Margin trend PAT and PAT Margin trend
EBITDA (Rs. Crore) EBITDA Margin PAT (Rs. Crore) PAT Margin
165
195
237
285
279
376
413
418
154
343
285
305
366
286
351
358
470
542
577
303
447
100 5% 50
- 0% - 0%
Concall Highlights:
The company has robust order book for classic 350 models
Valam vadagal facility will start from August 2017 and the total capcity will reach to 825000 units p.a.
Capex Rs.800 crore
Waiting period of more than 2 months for classic 350
Exports: RE sales is higher in developed markets than developing market. (UK, Germany, Italy and
France has on around 40-60 dealers in each countries)
The company has 1 store in Bangkok, 1 in Jakarta and 4 in Columbia.
22 new exclusive stores will be added in the international market.
Currently the company has 675 dealers and the company does not have any plans for expanding
through sub-dealers.
The outlook for commercial vehcles can be subdued going ahead.
Management expects that the rollout of GST on July 1 and it will benefit the consumers tax wise and
so may incentivize them to buy more trucks.
The company will come out with refresh versions of existing Royal Enfield models the current fiscal.
Spare parts stands 5-6 percent of total revenue.
On the BS-III inventory, the management has stated that the company has left with very minimal BS-III
stocks which can be sold to export markets.
Capacity addition in-line with demand- Considering the 3 months waiting period the company
increased the capacity from 720000 units to 825000 units per annum looking at the demand scenario.
We expect that the Eicher Motors will enjoy the benefit of operating leverage with increasing volumes
going ahead.
Expanding footprints in export markets- RE has expanded its footprint in the exports by opening up
stores in the various export markets like; Latin America, indonesia, bangkok and Madrid. The
investments are becoming fruitful in terms of higher volumes from exports. The company has already
more than 150 RE stores in UK, Germany, Italy and France. However considering the potential in the
developing economies Royal Enfield has started looking for the big opportunity in the fast growing
Brazilian market.
VECV prepared to take advantage of recovery in the commercial vehicles space- Currently the
CV segment is going through the pain of BS-IV transition from BS-III. GST roll out and monsoon will
also keep the situation haizy for few months. However we are optimistic about the growth in the
commercial vehicle space because of growing infrastructure activity in the country. The Govt. of India
and SIAM is in talk to bring scrappage policy in the country, which will bring the huge demand for
commercial vehicles in the country.
VECV volume trend Growth in RE and VECV to drive ROE and ROCE
12128
11657
12687
15492
16071
13408
17341
11306
11784
4000 0%
9544
9217
-7% 10%
2000
0 -10% 5%
0%
FY16
FY17
FY18
FY19
CY13
CY14
Type 100% Book Building Housing and Urban Development Corporation Ltd (HUDCO) incorporated in 1970,which is a
wholly-owned Government company with more than 46 years experience in providing loans for
Issue Size Rs. 1224 Crore housing and urban infrastructure projects in India. They provides long term finance for
Offer Price *Rs (56-60)/Equity Share construction of houses and to undertake housing and urban infrastructure development
Min App Size 200 Shares programs. Apart from the financing operations, Hudco offers consultancy services, promotes
research and studies and help propagate use of local building materials, cost-effective and
Issue Open 8-May-17 innovative construction technologies.
Issue Close 11-May-17
Shares Offer 20.40 Cr. HUDCO offers loans for housing projects, such as urban and rural housing, co-operative
Face Value Rs 10 housing, community toilets, slum upgradation, staff housing, repairs and renewals, private
ICICI Securities Ltd,IDBI
sector projects, land acquisition, and housing programs. They also offers take out finance for
Capital Market Services Ltd, housing and infrastructure projects to state government, public agencies, and private corporate
Nomura Financial Advisory sector agencies. Company provide loans for implementing agencies comprising state
Lead Mgrs government bodies, co-operative societies, corporate employers, and community sectors; and
And Securities (India) Pvt Ltd
, SBI Capital Markets Ltd building technology and rent to own schemes. It also provides finance for infrastructure projects
in the sectors of water supply, sewerage, drainage, solid waste management, roads and
Listing BSE, NSE transport, and electricity in the urban areas; and social infrastructure component, such as
play/primary schools, health centers, play grounds, police stations, courts, jails, crematorium,
Registrar Alankit Assignments Ltd etc. In addition, the company offers consultancy services, including URP services,
Market Cap (Post environmental engineering, and government programs and disaster mitigation services.
11210.6
Issue)
Bid allocation pattern Company continue to participate in the implementation of govt housing and urban infrastructure
QIB 50% programme such as DAY- NULM , JNNURM & PMAY HFA among other.
Non-Institutional 15% Company is increaseing geographical footprint in smaller cities to cater to incresing financing
Retail 35% requirment in these cities.
OBJECTS OF ISSUE:
To carry out the disinvestment of 204,058,747 Equity Shares by the Selling Shareholder
Rubi Burman constituting 10.19% of the companys pre-Offer paid up Equity Share Capital
rubi.burman@narnolia.com To achieve the benefits of listing the Equity Shares on the stock exchanges
RECOMMENDATION :
HUDCO is a wholly-owned Government company with more than 46 years of experience in providing loans for housing and urban infrastructure
projects in India. HUDCOs AUM stands at ~Rs 36800Cr out of which 89% is to state government and their agencies. The loan book of the
company has till date been growing at 7.5% CAGR for last 4 years which appears low considering other listed housing finance company. GNPA
of the company stands at 6.80% while NNPA at 1.51% which is again higher than its listed peers. However the company is expected to benefit
hugely from Pradhan Mantri Awas Yojna under Housing for All by 2022. As the CAR is high at 63.9%, risk of any equity dilution in the near term
gets eliminated.
The company is attractively priced at 1.4 times BV with Return on Equity at 7.6%
We recommend SUBSCRIBE
India Ratings (Fitch Group), ICRA and CARE have assigned a rating of AAA to HUDCOs long-term bonds, long-
term bank facilities and fixed deposit programme
Average Maturity
Amount (INR Interests Rate
Borrowing Type Period (From date of Residual Maturity
bn) Range
allotment)
Tax Free Bonds 173.88 10-20 years 4.83-17.25 years 7.00%-9.01%
Taxable Bonds 34.4 Upto 10 years 0.75-5.50 years 6.80%-8.14%
Refinance Assistance
21.2 7-10 years 1.83-8.08 years 6.25%-8.00%
from NHB
Fixed: 2.10%
ECB 4.89 25-30 years 6.58-13.75 years Floating USD 6M
LIBOR + (18-40bps)
COMPETITIVE RISKS
If the level of non-performing assets in their outstanding loans, advances and investments in project-linked bonds
were to increase or the NHB-mandated provisioning requirements were to increase.The results of operations and
financial condition would be adversely affected.
If borrowers default on their obligations to company, they may be unable to foreclose on their loans on a timely
basis, or at all, or realise the expected value collaterals and this may have a material adverse effect on results of
operations and financial condition.
Company operations are substantially dependent upon the amount of our NII and NIM. The interest rates
company pay on their borrowings and the interest rates company charge on their loans are sensitive to many
factors, many of which are beyond our control, including the RBIs monetary policies . Volatility in interest rates
could adversely affect our business, net interest income and net interest margin, which in turn would adversely
affect our results of operations and financial condition.
Company business is dependent upon timely access to, and the costs associated with, borrowings. The debt
funding requirements historically have been primarily met from a combination of the issuance of tax-free
bonds,the issuance of unsecured taxable bonds, foreign currency loans, refinance assistance from NHB, public
deposits . Company may be unable to secure funding on commercially acceptable terms and at competitive rates,
which could adversely affect business and results of operations.
-10.0% FY14 FY15 FY16 FY17E FY18E FY19E Cosmo films announced thr launch of a Low Noice Tape film, used in
making of low noice tapes.
Return on capital employed Return on Equity The BOPP based low noise tape film with a proprietary release surface
treatment enables easy release and generates low noise on unwinding.
Share Holding patterns % low noise tape film take significantly less release force as compared to a
3QFY17 2QFY17 1QFY17 normal tape film. The film can easily take up any adhesive be it water
Promoters 43.5 43.5 43.5 based, solvent based, rubber based or hot melt type.
Public 56.5 56.5 56.5 Value added tape film does not come at a significant incremental cost
Total 100.0 100.0 100.0 and therefore is easier to switch to. In most of the tape applications,
Stock Performance % printing on the filmtakes place on the other side of the release coating.
1Mn 3Mn 1Yr However, the release side could also be made printable.
Absolute 14.6 21.7 21.8
Rel.to Nifty 13.5 14.3 0.7 Financials/Valu FY15 FY16 FY17E FY18E FY19E
130 COSMOFILMS NIFTY
ation
Net Sales 1,647 1,621 1,715 2,276 2,461
125 EBITDA 104 191 183 285 314
120
EBIT 70 156 144 234 263
115
110
PAT 28 96 95 155 169
105 EPS (Rs) 14 50 49 80 87
100 EPS growth (%) - 248% -1% 64% 9%
95
ROE (%) 7% 21% 18% 25% 23%
90
85 ROCE (%) 11% 23% 16% 26% 28%
80 BV 196 235 269 325 381
Jul-16
Feb-17
Sep-16
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Apr-17
Mar-17
Cosmo Films Ltd, a leading global speciality films company, manufacturing multiple types of Bi-axially
Oriented Polypropelene (BOPP) and Cast Polypropelene (CPP) films has announced plans to install a
new product line for Speciality-Polyester BOPET (Bixially Oriented Polyethylene Terephthalate) films by
the third quarter of 2018-19.
The new line will be commisioned at the Waluj plant site in Aurangabad, Maharashtra, India with a
capacity of 36000 MT per annum. The project for the new line will entail an investment of Rs. 250
crores and shall be funded through a mix of internal accruals and debt. As per management guidance,
Debt-Equity mix for this new project will be in the ratio of 75:25.
This plant already houses BOPP lines, extursion coating lines, chemical coating lines, metallizers and a
CPP line. The new production line will complement the existing BOPP capacity of 200000 MT per
annum and allow Cosmo Films to offer a more comprehensive speciality product basket to flexible
packaging , labeling and industrial applications.
According to Mr. Pankaj Poddar, CEO, Cosmo Films, Speciality BOPET is one of the fastest growing
substrates and we anticipate a strong demand for these films. This will enable Cosmo to do import
substitution as well as take global market share.
BOPET offr high tensile strength, chemical and dimensional stability, tranparency reflectivity, gas and
aroma barrier properties and electical insulation.
Key Competetors
In BOPET segment, Cosmo will have competetion with other packaging players Like Jindal Polyfilms,
Polyplex Corporation, Uflex and others. Jindal Poly is the largest BOPET manufacturer in India with a
total capacity of 127000 mt per annum. A big part of the Indian demand for BOPET films is fulfilled
through imports as of now.
ABOUT BOPET
BOPET- Thin
Thin( 8-36 microns) BOPET films constitute nearly
three fourth of the worlds consumption of BOPET
films and are mainly used in packaging.
BOPET- Thick Industrial
Thick (50-350- microns) PET film is suitable for
various industrial applications.
Opportunities for BOPET
Asia (excluding Japan and Korea) has emerged as
the largest market for BOPET films accounting for
nearly 50% of the world consumption.
Penetration of flexible packaging in developing
countries in Asia still is low and huge opportunity
exist for growth with increase in organized retail,
small serve packs and increasing consumerism all
Image: BOPET film roll requiring better & attractive packaging.
Narnolia Securities Ltd Please refer to the Disclaimers at the end of this Report
Details of New Product Launch
Cosmo films recently announced the launch of a low noise tape film, used in making of low noise tapes. The
BOPP based low noise tape film with a proprietary release surface treatment enables easy release and
generates low noise on unwinding. This feature becomes extremely significant in industrial settings where
multiple packing lines work in tandem and auto dispensing machines are installed and packing takes place
atrelatively higher speeds. In most developed countries, factory guidelines require manufacturers to adhere to
low decibel levels and therefore low noise tapes become significantly relevant.
The low noise tape film also take significantly less release force as compared to a normal tape film. The film can
easily take up any adhesive be it water based, solvent based, rubber based or hot melt type. The value added
tape film does not come at a significant incremental cost and therefore is easier to switch to. In most of the
tape applications, printing on the film takes place on the other side of the release coating. However, the
release side could also be made printable.
100 The company has launched a new Demand Sensing model which will
improve response to within month forecasting changes thereby lowering
90
the possibility of stock-outs.
80
The company has entered into super-premium oil segment with the
launch of Saffola Aura whereas Saffola multigrain flakes introduced in
selected markets.
RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Net Sales 1,291 1,754 1,443 1,417 1,322 2% -7% 6,024 5,936 -1%
Other Income 27.77 27.52 24.7 23.28 22.28 -20% -4% 93.33 97.31 4%
COGS 599 842 685 686 637 6% -7% 3,078 2,849 -7%
Ad & P Expenses 161 209 189 151 111 -31% -27%
Employee Cost 95 105 105 96 98 3% 2% 373 404 8%
Other Expenses 220 224 211 212 217 -1% 3% 1,522 1,523 0%
EBITDA 214 374 253 272 259 21% -5% 1,051 1,159 10%
Depreciation 31 21 21 21 27 -12% 28% 95 90 -5%
Interest 7 5 2 4 5 -30% 7% 21 17 -20%
PBT 204 375 255 270 250 22% -8% 1,029 1,150 12%
Tax 68 107 74 78 78 16% 0% 305 338 11%
PAT 136 268 181 192 171 26% -11% 723 811 12%
Domestic MARICOs revenue for this quarter grew by 2%YoY to Rs1322 cr led by robust volume growth in
Parachute rigid portfolio(grew by 15% YoY) and VAHO(grew by 10%) while Suffola maintained its
business
growth of 6% in this quarter.
volume grew
by 10% YoY. Domestic business has clocked double digit volume(10%) growth after four quarters while overall
realization declined by ~4%.
International business declined by 8% YoY and 5% YoY in constant currency(CC) term impacted by
46% decline in MENA business in CC terms.
Gross margin for this quarter declined by 170 bps YoY to 51.9% due to sharp increase in copra
prices(up by 25%QoQ), Rice Bran oil(up by 20% YoY), Liquid Paraffin (LP)(up by 27% YoY) and
HDPE(up by 5% YoY).
EBITDA margin improved by 301 bps YoY to 19.6% backed by 413 bps decline in Advertisement
expenses.
PAT grew by 26% YoY to Rs171 and PAT margin improved by 237 bps YoY in Q4FY17.
Robust volume gr. of 15% YoY in Parachute Rigid PortfolioVAHO grew by 10% YoY
Parachute Rigid Volume growth YoY Value added Hair Oils volume growth YoY
-1% 0%
0%
-5%
-6%
-5% -12%
-10%
-10% -15%
Gross margin for this quarter declined by 170 bps YoY to 51.9% due to sharp increase input prices.
On yearly basis companys gross margin improved by 309 bps to 52% from 48.9%.
EBITDA margin improved by 301 bps YoY to 19.6% backed by 413 bps decline in Ad. expenses in
Q4FY17. On yearly basis EBITDA margin improved by 208 bps to 19.5% led by lower COGS.
PAT for this quarter grew by 26% YoY to Rs 171 cr whereas PAT for FY17, grew by 12% to Rs 811 cr.
PAT margin improved by 237 bps YoY for Q4FY17 and 166 bps for FY17.
Margin improvement led by lower ad expenses Lower ad expense due to postponement of new launches
25.0% 16.0%
23.0% 21.3% 13.1% 13.1%
14.0% 11.8%11.7% 12.5%
11.9%
21.0% 18.9% 19.2%19.6% 11.2% 11.1%
18.2% 12.0% 10.5% 10.6%
19.0% 17.5% 9.8%
16.4% 16.3% 16.6%
15.7% 15.3% 10.0% 8.4%
17.0%
13.6% 14.0% 13.4% 13.5%12.9%
15.0% 13.1% 12.5% 8.0%
13.0% 11.4% 11.0% 10.5% 10.6% 6.0%
11.0% 8.3%
9.0%
4.0%
9.0%
7.0% 2.0%
5.0% 0.0%
Concall Highlights:
More than half of the product portfolio improved market shares on 12 months MAT basis.
Bangladesh business: Momentum to continue going forward.
Going forward, the volume growth in Parachute rigid is likely to remain in the range of 5-7%.
The company expects copra prices to increase further over the next two quarters due to lower
supplies. Company will take pricing action to make balance between volume growths and
threshold margins.
The Company aims to become the volume market leader in the Amla hair oil category in FY18.
The company plans to add 14000 outlets in FY18.
Company launched Project Marval EDGE in Q1FY17 to improve efficiency and effectiveness
of current trade and marketing spends. Management expects Rs 35 cr gain from this project in
FY18.
Ad&P
expenses The Company will try maintaining international margins at ~16-17%
will remain The estimated capital expenditure in each of the years FY18 and FY19 is likely to be around
in the band Rs 100125 cr .
of 11-12%. Ad&P expenses: The Company expects to operate in a band of 11-12% in the medium term.
The expected effective tax rate during FY18 and FY19 would be around 27-28%.
Ad expenses: will move up marginally in FY18.
Innovation led growth: The Company is focusing on innovation and new products
launches going forward. The company has entered into super-premium oil segment with
the launch of Saffola Aura whereas Saffola multigrain flakes introduced in selected
markets. Parachute Advansed Aloe Vera Hair Oil was launched in the markets of Andhra
Pradesh, Telangana & Tamil Nadu in the month of November 2017. Going forward we
expect new launches will drive growth for the company.
Strong Volume growth in Q4FY17: Maricos domestic volume grew by 10% in a situation
where most of the FMCG players are struggling for volume growth. Parachute Rigid
volume grew by 15%YoY best in 18 months. VAHO grew by 10% in Q4FY17 as compared
to 12% decline in Q3FY17. Going forward management expects 8-9% overall volume
growth which is positive considering tough economic environment.
10.0% 10.4%
7.1% 7.1% Financials/Valu FY15 FY16 FY17E FY18E FY19E
5.0%
ation
Net Sales 4,49,509 3,55,927 5,81,260 6,05,700 6,09,900
0.0%
EBITDA 10,550 23,197 38,362 38,949 39,653
EBIT 5,331 17,278 31,289 31,275 31,142
Shareholding patterns % PAT 4,912 11,219 19,778 20,133 19,539
4QFY17 3QFY17 2QFY17 EPS (Rs) 20 46 41 41 40
Promoters 57.3 58.3 58.3 EPS growth (%) -31% 128% -12% 2% -3%
Public 42.7 41.7 41.7 ROE (%) 7% 15% 22% 20% 17%
Total 100.0 100.0 100.0 ROCE (%) 5% 16% 24% 22% 20%
BV 68,832 75,994 88,501 1,01,413 1,13,930
Stock Performance % P/B (X) 1.3 1.3 2.4 2.1 1.9
1Mn 3Mn 1Yr P/E (x) 18.2 8.5 10.8 10.6 10.9
Absolute 17.6 107.4 63.3
Rel.to Nifty 16.2 88.8 54.8 RECENT DEVELOPMENT:
200 IOC NIFTY National Green Tribunal (NGT) has confirmed its order dated August 2,
2016, permitting IndianOil to go ahead with its LPG import terminal
180
project at Puthuvypeen, Kerala. This will enable the company to cater
160 growing LNG demand in future.
140
IOC plans to come up with a 15-million-tonne (MT) refinery, with an
investment of about Rs 40,000 crore, at Nagapattinam in Tamil Nadu.
120 Currently, Nagapattinam has a 1-mt plant operated by Chennai Petroleum
Corporation (CPCL), an IOC subsidiary.
100
Oil companies to bear merchant discount rate fees on debit card
80
payments for fuel. The fee is 1% on credit card transactions and 0.25-1%
Jul-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Apr-17
Mar-17
10% 4%
4%
13,684
8,000 7% 4,000 4%
6,591
6,285
6% 6% 8% 4%
10,287
6,000 3,000 2%
3,995
9,284
6%
3,122
3,096
7,949
2,000 2%
1,685
4,000
5,772
4%
5,355
4,750
1,000 -1%
1% 0%
666
2,000 2% -
(450)
- 0% (1,000) -2%
Concall Highlights:
Management expecting a volume growth of between 3- 4 million tonne(MT) going forward.
IOC's management indicated merger with Chennai Petro,but no timeline yet
All units of Paradip refinery are fully commissioned with capacity utilization of 80% in
3QFY17.Management expects 95% capacity utilization by March 2017.
Management has guided for provisioning of Rs. 20000 Cr for the Entry tax. Out of which provision of
Rs. 10000 Cr already made.
Capex guidance for FY18 is Rs. 19600 Cr and FY19 is ~ Rs. 25000 Cr.
Anticipated VAT for Paradip refinery is Rs. 150 Cr per month.
Growth in Gasoline volume - Management indicated that volume growth of gasoline is gaining
traction from March17.Liquefied Petroleum Gas (LPG) volume is also growing at double digits. But,
diesel growth has remained flat.
Upcoming Projects- IOCL is investing Rs 34,000 Cr. on the petrochemical complex. The entire
petrochemical complex is expected to be commissioned by 2021. The polypropylene unit would have a
capacity of 7,000 kilo tonne per annum (KTPA) would be integrated with the oil refinery.
High Operational Efficiency- Paradip is expected to achieve GRM of USD 12/BBL post 95% capacity
utilisation. This will improve core GRM to USD 8/BBL.
LPG pipeline- The company is on track to construct 710km Paradip-Haldia-Durgapur LPG pipeline,
which will facilitate LPG transportation from Paradip and Haldia to the LPG bottling plants at Balasore,
Budge-Budge, Kalyani and Durgapur.
Volume Trend GRM Trend
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