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Supreme Industries
Accounting: GREEN
Bloomberg: SI IN EQUITY Predictability: GREEN
Reuters: SUPI NS BUY Earnings momentum: GREEN
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
CONTENTS
Source: Company, Ambit Capital research, Note: VAP= Value added products.
SWOT analysis
Exhibit 3: SWOT analysis of Supreme Industries
Strengths Weaknesses
Diversified product portfolio across segments such as pipes,
packaging and industrial products.
An unmatched distribution and production network—22 Our primary checks suggest that Supreme’s products are not
manufacturing plants and more than 1,250 dealers across available due to capacity constraints especially in Chennai. We
India, with a strong presence in south and east India. believe this is a lost opportunity for Supreme.
Market leader in the fast growing PVC pipes segment for PVC pipes of any company are easily replaceable by a competitor
buildings and has a monopoly in cross-laminated films in India. due to the standard nature of the product.
Technical tie-ups in all segments with reputed international The company has to continuously update technology through
players. international collaborations.
Higher EBIT margins through focus on value-added products The business is capital-intensive and requires continuous
(VAP) such as pipe fittings and its cross laminated film, reinvestment in gross block.
Silpaulin, (22% in FY09 vs 31.7% in FY13).
Strong balance sheet (FY13 gross debt:equity of 0.5x) vs other
organised competitors like Jain Irrigation (1.6x) and Finolex
Industries (0.99x).
Opportunities Threats
Organised PVC pipes account for only 50% of the market.
Increase in competition from international players: For example: the
Supreme, with a better quality product and a renowned brand,
Belgian firm, Aliaxis, acquired a majority stake in the unlisted,
is well placed to capture the structural shift to organised
Ashirvad Pipes. Other large international players like Tessenderlo
players.
Group and JM Eagle may also follow Aliaxis’ example.
Per capita plastic consumption of India is only 7kg, significantly
Weak monsoon and low GDP growth may affect PVC pipe demand
below the global average (of 28kg) especially in the agriculture
from agriculture (30% of total PVC pipe sales for Supreme).
and infrastructure sector.
Unavailability of raw material for PVC pipes and CPVC pipes can
Higher plastic pipe demand through PVC (replacement of GI)
probably reduce growth.
and better technology pipes such as CPVC
Supreme’s competitive advantage would be reduced if competitors
Supreme’s technology tie-ups with global players provides an
start innovating new products or improve distribution reach.
opportunity to add new products.
INR depreciation can increase the product price, thereby reducing
Recent entry into composite products especially composite
demand.
cylinder can be huge opportunity in India and the Middle East.
Exhibit 4: FY11 demand break-up of plastics by type Exhibit 5: Classification of plastics by manufacturing
process
Consumption Market
Market FY06-11 Moulding Products
volume share
share CAGR growth
(mn tonnes) Films and sheets, fibre and filaments pipes,
Polyethylene (PE) 36% 2.8 8% Extrusion 68% conduits and profiles, miscellaneous
applications
Polypropylene (PP) 34% 2.6 12% Industrial injection moulding, household
Injection 25% injection moulding and thermoware/
Poly Vinyl Chloride (PVC) 24% 1.9 10% moulded luggage
Blow 5% Bottles, containers, toys and houseware
Others 6% 0.6 3%
Roto 1% Large circular tanks such as water tanks
Total 7.9 9.2%
Source: Report of the Sub-group on Petrochemicals Source: CIPET
The Department of Chemicals and Petrochemicals, India expects a more than 10%
demand CAGR for commodity plastics and 10.7% demand CAGR for PVC pipes in
FY12-17. The competitive intensity is very high in the plastic processing industry,
due to the existence of more than 23,000 plastic processing units in India. The
industry is highly fragmented and has a large number of unorganised players. In
FY06-11, plastic processing capacity in India increased at a CAGR of 15%. The
Department of Chemicals and Petrochemicals expects capacity addition of 8.25mt
by FY17. We believe a large portion of this capacity addition will be from
organised players which will have better technology and higher applications.
Exhibit 6: Supreme’s key competitors in plastic processing industry
Segment Companies
Supreme, Finolex Industries, Jain Irrigation, Astral Polytechnik, Ashirvad Pipes,
Plastic piping system
Prince
Packaging products Supreme, Polyplex, Jindal Poly, Uflex ltd, SKF
Consumer products Supreme, Neelkamal Plastics, National Plastics
Industrial products Supreme, Motherson Sumi, Tata Autocomp, Sintex Industries, Time Technoplast
Source: Company, Ambit Capital research
Auto industry: Replacement of iron and steel parts by relatively lower weight
plastics helps to improve fuel efficiency of the automobile.
We expect blue-collar wage growth in rural India to drive demand for entry-level
consumption products like PVC pipes for housing, plastic furniture etc. The wages
of blue-collar workers have recorded a 15% CAGR in FY10-12 despite GDP growth
slowing down by 550bps due to reverse migration, pursuit of education and
withdrawal of women from the labour force.
irrigation sector, resulting in lower RoIC. Astral Polytechnik has improved its
RoIC on a small base due to strong demand of CPVC pipes. Ashirvad Pipes has
the highest RoIC on a small base whereas Prince Pipes is the worst placed.
Piping revenue size and growth: In our opinion, growth on a large base
creates a platform for growth through internal accruals. Our rank is based on
the average of piping revenue size and piping revenue growth. Thus, Supreme
with market leadership and second-best growth is ranked 1. Astral has the
highest growth but due to its smaller size, it is ranked 3.
Financial leverage: We believe stronger balance sheet will enable the
company to expand through capacity expansion and acquisitions. Astral has
the best net debt:equity (0.22x) whilst Jain Irrigation (net debt:equity of 1.5x)
and Price Pipes (net debt/equity of 2.3x) are highly leveraged.
Product diversity: In our opinion, products catering to multiple industries
provide numerous growth avenues in the fast-penetrating engineered plastics
segment. Fittings account for 20-25% of sales for Supreme vs 35% for Astral
and only 10% for Finolex. We rank Supreme as rank 1 because it has a largest
product portfolio with 5,682 products in the plastic piping segments alone.
Also, Supreme has consistently increased its VAP contribution to the plastic
piping segment revenues in the past six years by launching new fittings and
PVC pipe products like CPVC, leading to higher-than-peer EBIT margin.
Supreme has products for multiple industries such as building, agriculture and
infrastructure.
Exhibit 11: VAP drives plastic piping revenue growth Exhibit 12: Fittings growth driven by consistent new
launches
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 14: Silpaulin has a unique positioning - high quality and value for money
High Price
Nylon
Cotton
Low Price
Silpaulin is three times cheaper than nylon films, thus limiting competition from
nylon films from price-sensitive buyers. Although Silpaulin is twice as expensive as
HDPE films, Silpaulin’s price range for small-ticket buyers like farmers is between
`150- `500, making it highly affordable. Also, Silpaulin has a longer life than
HDPE. Overall, our dealer checks also suggest that Supreme has created a brand
for Silpaulin and the demand is quite strong in India, except in/near Chennai
Exhibit 15: Industrial plastic products overview Exhibit 16: Supreme is an average player in the
industrial segment
Important % of
Industry Key Competitors
Clients sales
Motherson Sumi, Machino 30% 20%
Tata Motors,
Plastics, Sintex Industries, 25%
Auto Maruti Suzuki, 30%
Precision Pipes, Time 15%
Piaggio 20%
Technoplast
15% 10%
10%
Consumer 5%
Whirlpool 30% Precision Pipes, Plastiblends 5%
Durables
0% 0%
Supreme: Machino Time Plastiblend
Industrial Plastics Technoplast
Bottling Coca Cola, Nilkamal, Time Technoplast,
40%
Crates Pepsi Tulsi Extrusions 3 year CAGR sales growth
3 year average EBIT margin (RHS)
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Source: Company
(e) Composites: High potential, high uncertainty
Supreme will create a new segment in FY15 through composite products such as
composite cylinders, composite pipes, composite pallet and composite auto
components. To start off, the company will focus on export of composite cylinders
to the Middle East. We believe the market has underestimated the risks involved in
the composite products of Supreme Industries. We agree that composite cylinders
(the main focus in Supreme’s composite portfolio) have a large untapped potential
market in the Middle East and India. However, it will not be easy for Supreme to
enter the composites cylinder market because:
Supreme is a step behind competitors in product development: Supreme
has not yet developed composite cylinders whereas large international players
such as Hexagon Composites and Luxfer Gas Cylinders have been selling
composite cylinders for more than a decade. Even the local competitor, Time
Techoplast, has access to the composite cylinder product through the
acquisition of Kompozit-Praha for US$5.2mn in 2009.
Composite cylinders to be priced more than twice as much as current
steel LPG cylinders: Supreme’s composite cylinders will be priced around
`3,000/cylinder. In our opinion, the end consumer will have to bear the extra
cost of replacing the steel cylinder. Thus, price-sensitive consumers could
potentially avoid the lightweight advanced composite cylinders.
Composite drill pipes can be used in short radius oil drilling applications.
Their main advantage over steel pipes is that they can remain bent for a long
time without stress fatigue and can be used in multiple drills. However, the use
of composite drill pipes has been limited, as they break near the plastic and
steel joints due to stress. We are not very bullish on composite drill pipes due
to limited success of this product in other regions.
In order to account for the risks involved in the composite business, we expect
composite revenues of only `750mn in FY15 vs management guidance of `2bn.
Further, we have estimated long-term gross block turnover of 1.0x-1.5x for
composites, significantly below the gross block turnover of Supreme’s other plastic
products (2.3x-2.5x). In our opinion, EBIT margins will consistently increase from
15% in FY15 to 18% in FY17 due to economies of scale.
Phase1: First Phase2: Planted seeds for Phase3: Bore fruit from Phase4: Mega Capex
80 to drive growth with
failed attempt to high growth and RoE ideal product placement 19%
stable RoCE
70 improve business strategy Total Revenue
17%
Revenues (Rs. bn)
model
60
Composites
15%
50
13% Consumer
40
11% Industrial
30
20 9% Packaging
10 7% Plastic Piping
0 5% EBIT margin
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14E
FY15E
FY16E
Source: Company, Ambit Capital research
Phase1:
60% Phase2: Planted seeds Phase3: Bore fruit Phase4: 3.5
First failed
for high grow th and from ideal product MegaCapex to
attempt to 3.0 RoE
50% RoE placement strategy drive grow th
improve (LHS,%)
w ith stable RoE
business 2.5
40%
2.0
30% Capex-
1.5 to-CFO
20% (x) (RHS)
1.0
10% 0.5 Debt-to-
Equity (x)
0% 0.0
(RHS)
FY14E
FY15E
FY16E
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
35 Rsbn 40%
30% 30%
30 Consumer EBIT
durables 25% 25%
margin
25
30% Industrial 20% 20% (RHS)
20 products
15% 15% RoCE
Packaging (RHS)
15
products
20% 10% 10%
10 Plastic piping
5% 5% Revenue
5 Growth
VAP revenue 0% 0%
- 10% share (RHS)
FY09
FY10
FY11
FY12
FY13
FY09
FY10
FY11
FY12
FY13
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 22: Changes in product/ revenue mix towards piping and packaging systems
Year Plastic Piping System Consumer Products Industrial products Packaging Products
(+) Rigid PVC film and BOPP
2002
film.
(+) Cross laminated film, Wide
2003
Width film
(+) Polypropylene random Co-polymer
2004 (-) BOPP Film
pipes and fittings
2006 (-) Wide width film
(-) Food Service ware and (+) material handling
2007
embossed sheets pallets
(+) HDPE Pipe Systems, CPVC Pipe
2008
systems
(+) uPVC Pipes, LLDPE Tube and
2009
Inspection Chambers
2012 (+) Manholes (-) Mats
Source: Company, Ambit Capital research, Note: (+): new product addition, (-) product deletion from portfolio
Exhibit 23: Supreme has the highest RoIC amongst Exhibit 24: Supreme achieved 25% sales CAGR in
peers FY09-13 without stretching its balance sheet
30
60%
25
50%
20 40%
RoIC (%)
15 30%
10 20%
5 10%
0 0%
FY10 FY11 FY12 FY13 -10% FY10 FY11 FY12 FY13
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Packaging Products 20.0% 20.0% 20.0% 20.0% 20.0% We believe the piping segment’s EBIT margin of 16% in
FY13 are unsustainable and will decline to 14.7% in
Industrial products 13.0% 12.0% 10.0% 11.0% 12.0% FY14.
FY12
FY13
FY14E
FY15E
FY16E systems
0 0% Total sales
growth (RHS)
FY11
FY12
FY13
FY14E
FY15E
FY16E
Capex (Rsmn, RHS)
Capital employed turnover ex. real estate (x) (LHS)
Source: Company, Ambit Capital research
Source: Company, Ambit Capital research
Exhibit 28: We expect 17% revenue CAGR in FY13-16 at Exhibit 29: Rising share of EBITDA from the Piping and
steady EBIT margins of ~13% Packaging products segment
FY15E
FY16E
FY11
FY12
FY13
1,000
Total EBIT
0 13% margin(RHS)
FY11
FY12
FY13
FY14E
FY15E
FY16E
Exhibit 30: High growth on a large base will lower Exhibit 31: High RoCEs leading to sufficient CFO to fund
financial gearing capex and repay debt
20 1.0 4 40%
18 0.8 3
30%
16 0.6
2
14 0.4 20%
1
12 0.2
- 10%
10 -
FY11 FY12 FY13 FY14E FY15E FY16E (1) 0%
FY11 FY12 FY13 FY14E FY15E FY16E
Working capital turnover excl. real estate (X) (LHS) CFO (Rsbn) FCF (Rsbn)
D/E (x) (RHS) RoCE (RHS) RoE (RHS)
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Ambit vs Consensus
Exhibit 32: Ambit vs consensus estimates
Consensus Ambit Divergence Comments
Revenue (` mn)
Our FY14 revenue estimates are in line with
FY2014 40,842 40,413 -1.1% consensus and management guidance of 19%
YoY revenue growth
FY2015 47,837 48,758 1.9%
Reported EBIT (` mn) Our EBIT margin forecasts are higher than
consensus estimates because we assume an
FY2014 5,081 5,387 6.0%
increase in the percentage of high-margin
FY2015 6,117 7,101 16.1% Silpaulin and CPVC pipes to overall EBIT.
Reported Cons. EPS (`)
Above consensus mainly due to higher EBIT
FY2014 26.5 28.1 6.2%
estimates
FY2015 31.3 37.7 20.4%
Source: Company, Bloomberg, Ambit Capital research
Quarterly performance
Exhibit 33: Quarterly performance of the company (` mn, unless specified)
1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Volumes sold (tonnes)
Plastic piping segment 26,290 41,067 39,948 43,959 36,972 40,935 47,500 54,105
Packaging products 8,481 9,979 9,557 9,360 9,572 10,417 11,117 9,635
Industrial products 7,949 8,870 11,589 9,917 9,487 10,373 10,952 11,346
Consumer products 4,041 4,778 4,890 5,025 3,981 4,862 4,947 4,944
Net realisation per kg (`) 100 109 114 133 101 120 120 127
Net Sales 5,012 7,697 7,685 9,263 6,176 8,150 9,177 10,362
YoY growth (%) 6% 32% 16% 24% 23% 6% 19% 12%
Total operating expenditure 4,301 6,494 6,637 7,507 5,329 6,956 7,833 8,644
% of net sales 86% 84% 86% 81% 86% 85% 85% 83%
EBITDA 711 1,203 1,048 1,756 848 1,194 1,344 1,718
YoY growth (%) -9% 48% 25% 54% 19% -1% 28% -2%
EBITDA margin (%) 14.2 15.6 13.6 19.0 13.7 14.7 14.6 16.6
Depreciation 172 171 172 211 186 190 197 291
EBIT 549 1,044 880 1,549 663 1,004 1,147 1,454
EBIT margin 11.1% 13.7% 11.6% 16.9% 10.9% 12.5% 12.7% 14.3%
YoY growth (%) -18% 57% 31% 56% 21% -4% 30% -6%
Interest 133 142 152 121 115 138 137 147
Profit before tax 416 902 728 1,428 548 866 1,010 1,335
YoY growth (%) -31% 61% 34% 65% 32% -4% 39% -7%
Tax 138 288 235 490 178 283 330 413
Adjusted net profit 326 593 548 950 390 664 758 995
YoY growth (%) -29% 43% 13% 58% 20% 12% 38% 5%
Net profit margin (%) 6.5 7.7 7.1 10.3 6.3 8.1 8.3 9.6
EPS 2.6 4.7 4.3 7.5 3.1 5.2 6.0 7.8
Source: Company
Exhibit 35: Capacity expansion in PVC pipes and Exhibit 36: ..leading to higher contribution of plastic
Silpaulin will drive revenue growth… piping and packaging products in total revenue
60 30% 100% 8% 7% 6%
10% 8%
Rsbn Consumer
50 Consumer 17% 16% 16%
24% 80% 19% 19% durables
durables
40 Industrial 22% 21% 20% Industrial
18%
products
60% 25% 21% products
30
12% Packaging
40% Packaging
20 products
products
54% 56% 57%
6% Plastic piping
20% 46% 52%
10 systems Plastic piping
Total sales systems
0 0% 0%
growth (RHS)
FY11
FY12
FY13
FY14E
FY15E
FY16E
FY12
FY13
FY14E
FY15E
FY16E
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 37: Total EBIT margin will marginally increase Exhibit 38: Segmental EBIT margins to remain steady
from higher proportion of piping, packaging products
2,000
Plastic Piping 5%
Systems
FY10
FY11
FY12
FY13
FY14E
FY15E
FY16E
1,000
Total EBIT
0 13% margin(RHS)
Plastic Piping Systems Packaging products
FY11
FY12
FY13
FY14E
FY15E
FY16E
Terminal growth rate of 5%: We have taken a terminal growth rate of 5% for
the company post FY24 which is conservative in our opinion. Supreme’s revenues
have never declined on a YoY basis in the last 30 years and we do not think plastic
penetration will reach a level that will pull Supreme’s growth lower to 5%.
WACC of 14%: We assume Cost of Equity of 15% and take a WACC of 14%. We
believe Supreme’s beta is understated due to lower liquidity. Hence, we have
assumed beta of 1.25x for Supreme.
Our 12-month DCF-based valuation of `420/share valuation implies 16.8x FY14
adjusted plastics EPS and 13.7x FY15 adjusted plastics EPS.
Exhibit 39: FCF over FY14-24E Exhibit 40: Terminal value forms 67% of the enterprise
value
2,800 (Rs mn) 30% Particulars ` mn
2,400
25%
2,000 PV of the forecasting period up to FY24E 22,900
1,600 20%
FY15E
FY16E
FY17E
FY18E
FY19E
FY20E
FY21E
FY22E
FY23E
FY24E
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 43: Plastic processing relative valuation - Supreme deserves a premium due to its higher profitability
Revenue Revenue EBITDA PAT margin
Mcap RoE (%) P/E (x) EV/EBITDA (x)
Companies (US$mn) CAGR margin (%) (%)
US$ mn FY13 FY13-15 FY14 FY14 FY14 FY14E FY15E FY14E FY15E
Supreme Ind* 719 627 18.0 15.3 8.4 34.3 13.1 10.7 7.5 5.6
Motherson Sumi 2,258 4,655 14.6 8.4 2.8 30.4 17.0 12.9 7.5 6.1
Jain Irrigation 394 904 14.0 15.6 4.3 10.4 10.7 7.3 6.4 5.6
Sintex 122 934 9.2 15.1 6.8 9.9 2.3 2.0 4.0 3.5
Time Technoplast 121 331 17.7 16.3 6.1 13.7 5.9 4.7 4.1 3.6
Finolex Ind 237 391 9.5 10.7 7.8 22.0 18.6 14.6 7.8 6.9
Astral Polytechnik 202 152 18.3 12.9 8.8 25.7 14.5 11.9 10.3 8.4
Nilkamal 24 313 14.4 8.4 2.7 10.7 2.9 2.1 3.0 2.5
India Average 12.5 5.6 17.5 10.3 7.9 6.1 5.2
Global Players**
Aliaxis 1,342 3,057 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Tessenderlo Chemicals 881 2,738 (2.1) 9.8 2.9 14.3 13.4 11.1 5.8 5.1
China Liansu 1,848 1,726 14.8 17.9 11.7 21.5 8.6 7.6 4.7 4.2
Global Average 13.8 7.3 17.9 11.0 9.4 5.2 4.7
Source: Company, Bloomberg, Ambit Capital research; Note (a) * June-ending companies, rest are March-ending, (b) Market cap is as on 14 August
2013, (c) ** Global players are December-ending (d) We have used adjusted the financial performance of plastics of Supreme Industries to compare
with its peers.
Exhibit 44: Think out of the (plastic) box - Supreme is trading at a discount to peers
Revenue Revenue EBITDA PAT margin
Mcap RoE (%) PE (x) EV/EBITDA (x)
Companies (US$mn) CAGR margin (%) (%)
US$ mn FY13 FY13-15 FY14 FY14 FY14 FY14E FY15E FY14E FY15E
Supreme Industries* 719 627 18.0 15.3 8.4 34.3 13.1 10.7 7.5 5.6
Finolex Industries 237 391 9.5 10.7 7.8 22.0 18.6 14.6 7.8 6.9
Astral PolyTechnik 202 152 18.3 12.9 8.8 25.7 14.5 11.9 10.3 8.4
Bajaj Electricals 269 622 15.9 6.0 2.8 19.4 15.0 9.2 7.8 5.4
Kajaria Ceramics 283 296 18.9 15.1 6.6 30.1 13.6 10.5 7.2 6.0
Cera Sanitaryware 107 90 24.2 15.3 9.0 26.1 11.8 9.8 7.1 6.0
V-Guard 266 250 22.2 8.8 5.0 19.5 15.5 12.1 9.8
Average 18.2 11.5 6.7 24.7 15.5 11.9 8.7 7.1
Source: Company, Bloomberg, Ambit Capital research; Note (a)* Companies are June-ending, rest are March-ending, (b) Market cap is as on 14
August 2013 (c) We have used the core plastic business’ financials of Supreme to compare with peers.
Exhibit 45: Supreme’s one-year forward P/E has Exhibit 46: Supreme is trading near its all-time high
marginally corrected from all-time highs valuations backed by a strong operating performance
15 9
13 8
7
11
6
9 5
7 4
5 3
Aug-13
Aug-11
Aug-12
Nov-11
Nov-12
Feb-12
May-12
Feb-13
May-13
Aug/11
May/12
Aug/12
May/13
Aug/13
Nov/11
Feb/12
Nov/12
Feb/13
Key catalysts
Higher-than-industry-average volume growth due to recent capacity
expansions: Supreme has spent `3.75bn in FY13 to increase capacity in PVC
pipes and cross-laminated films. The increase in capacity in these two high-
demand products can lead to higher-than-industry volume growth for Supreme
Industries.
Strong balance sheet to launch new products with the help of
technology tie-ups with international players: We expect Supreme
Industries to generate strong cash flow from PVC pipes and cross laminated
films in at least the next five years. In sync with the company’s strategy,
Supreme could potentially tie-up with an international player to launch a new
product in the Indian market. For example, Supreme acquired the patents for
manufacturing and distribution of cross-laminated films from RPD Rasmussen
Polymer Development AG, Switzerland. In FY13, the product contributed
`3.7bn to the company’s topline, with EBIT margins in excess of 20%.
Future product modifications could increase turnover and margins:
Supreme has a strong track record of introducing product modification of the
existing product-line to meet consumer needs. For example, Supreme will
launch no-noise high-rise pipes in 1QFY14 in the VAP range (above 17%). The
company could consistently launch such product modifications to increase
turnover and margins.
Supreme Industries
Directors
B. L. Taparia, Chairman
M. P. Taparia, Managing Director
B. V. Bhargava, Director
H. S. Parikh, Director
N. N. Khandwala, Director
S. R. Taparia, Director
Y. P. Trivedi, Ind Director
Source: Company
Balance sheet
Year to June (` mn) FY12 FY13 FY14E FY15E FY16E
Shareholders' equity 254 254 254 254 254
Reserves & surpluses 5,223 6,713 8,536 10,753 13,798
Total net worth 5,477 6,967 8,790 11,007 14,052
Debt 5,203 3,520 4,089 4,089 3,589
Deferred tax liability 812 840 907 907 907
Total liabilities 11,491 11,327 13,785 16,002 18,547
Gross block 12,021 12,451 16,068 18,548 21,798
Net block 7,417 7,394 10,277 11,737 13,797
CWIP 262 338 330 350 350
Investments 916 887 1,098 1,098 1,098
Cash & equivalents 142 144 239 486 1,130
Debtors 1,529 1,712 2,031 2,412 2,848
Inventory 3,454 3,140 4,668 5,284 5,524
Loans & advances 1,536 1,706 1,660 2,028 2,395
Other current assets 19 19 19
Total current assets 6,660 6,702 8,617 10,228 11,916
Current liabilities 2,456 3,027 5,342 6,054 6,872
Provisions 1,323 975 1,196 1,357 1,742
Current liabilities and provisions 3,779 4,001 6,538 7,411 8,613
Net current assets 2,881 2,700 2,079 2,817 3,302
Miscellaneous 16 7 - - -
Total assets 11,492 11,327 13,785 16,002 18,547
Source: Company, Ambit Capital research
Income statement
Year to June (` mn) FY12 FY13 FY14E FY15E FY16E
Operating income 29,279 34,040 40,413 48,758 56,288
growth 18.6% 16.3% 18.7% 20.6% 15.4%
Operating expenditure 24,560 28,684 34,005 40,467 47,015
EBITDA 4,719 5,356 6,408 8,291 9,273
EBITDA margin 16.1% 15.7% 15.9% 17.0% 16.5%
Depreciation 725 817 1,021 1,190 1,366
EBIT 3,994 4,539 5,387 7,101 7,907
Interest expenditure 548 523 452 382 283
Non-operating income 28 (2) 30 32 33
Adjusted PBT 3,474 4,014 4,965 6,751 7,657
Tax 1,150 1,330 1,613 2,194 2,489
Adjusted PAT/ Net profit 2,014 2,617 3,170 3,878 4,744
growth 31.6% 29.9% 21.1% 22.3% 22.3%
Share of associates 93 217 223 230 237
Adjusted Consolidated net profit 2,107 2,834 3,394 4,108 4,980
Source: Company, Ambit Capital research
Ratio analysis
Year to June FY12 FY13 FY14E FY15E FY16E
EBITDA margin 16.1% 15.7% 15.9% 17.0% 16.5%
EBIT margin 13.6% 13.3% 13.3% 14.6% 14.0%
Net profit margin 7.2% 8.3% 8.4% 8.4% 8.8%
Dividend payout ratio 31.5% 33.9% 35.3% 33.0% 35.0%
Net debt: equity (x) 0.5 0.4 0.3 0.2 0.1
Working capital turnover (x) 17.8 18.5 16.1 14.6 13.7
Gross block turnover (x) 2.8 2.9 2.9 2.8 2.8
RoCE 22.8% 25.6% 24.7% 24.6% 24.7%
RoE 33.9% 36.0% 34.3% 32.8% 31.5%
Source: Company, Ambit Capital research
Valuation parameters
Year to June (` mn) FY12 FY13 FY14E FY15E FY16E
Adjusted EPS (`) 15.9 20.6 25.0 30.5 37.3
Reported EPS (`) 16.6 22.3 26.7 32.3 39.2
Book value per share (`) 55 69 87 111 138
Dividend per share (`) 6 8 9 12 13
P/E (x) 21.0 15.6 13.0 10.8 8.9
P/BV (x) 6.3 5.0 4.0 3.1 2.5
EV/EBITDA (x) 10.1 9.0 7.5 5.6 4.9
Source: Company, Ambit Capital research
Research
Buy >5%
Sell <5%
Disclaimer
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