Institutional Equities - Online Share Trading

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Institutional Equities Focus on reduction of debt, working capital During FY08-11, there has been a significant jump in working capital requirement to 0.5x FY11sales and the working capital days increased to 300 days in 1QFY12. The debt-equity ratio increased from1.7x in FY10 to 2.2x in FY11 due to investment in BOT portfolio, real estate, acquisition of KSAG overseas and is expected to further increase to 2.9x in FY13. Hence, the company has set up a strategic team to recover claims outstanding with various government agencies, which is around Rs10bn, and thereby reduce the leverage. The management expects to recover Rs4bn in FY12, which we have not factored in our model. Exhibit 19: Net debt/equity (x) (%) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 FY03 FY04 FY06 FY07 FY08 FY09 FY10 FY11 FY12E FY13E Source: Company, Nirmal Bang Institutional Equities Research 76 HCC
Institutional Equities Financials Exhibit 20: Income statement Y/E March (Rsmn) FY09 FY10 FY11 FY12E FY13E Net sales 33,137 36,442 40,932 47,414 55,267 Growth (%) 7.5 10.0 12.3 15.8 16.6 Total expenditure 28,823 32,013 35,534 41,511 48,330 EBITDA 4,314 4,429 5,398 5,903 6,936 Growth (%) 17.6 2.7 21.9 9.4 17.5 EBITDA margin (%) 13.0 12.2 13.2 12.5 12.6 Depreciation 1,152 1,139 1,527 1,681 1,834 Interest costs 2,105 2,052 2,899 3,686 4,036 Other income 588 130 170 197 229 Profit before tax 1,646 1,219 1,117 734 1,295 PBTM (% ) 5.0 3.3 2.7 1.5 2.3 Tax 392 404 407 220 389 Adj. PAT before E/O items 1,254 815 710 514 907 Growth (%) 15.2 (35.0) (12.9) (27.6) 76.5 Source: Company, Nirmal Bang Institutional Equities Research Exhibit 2: Balance Sheet Y/E March (Rsmn) FY09 FY10 FY11 FY12E FY13E Equity capital 256 303 607 607 607 Reserves & surplus 9,640 14,868 14,615 14,866 15,651 Net worth 10,048 15,172 15,222 15,472 16,258 Long term loan 9,041 8,880 14,603 16,969 17,267 FCCBs 5,000 4,353 - - - Short-term loan 9,177 11,914 20,111 23,786 29,254 Total loans 23,218 25,147 34,714 40,755 46,520 Deferred tax (liability)/assets 1,132 1,426 1,665 1,665 1,665 Total liabilities 34,398 41,745 51,601 57,892 64,443 Gross block 16,828 18,142 19,875 21,875 23,874 Less: Depreciation 5,546 6,645 8,032 9,713 11,547 Net block 11,282 11,497 11,843 12,162 12,327 Capital WIP 464 349 257 257 257 Investments 3,655 4,087 5,313 7,313 8,813 Inventories 30,731 36,548 44,991 51,961 57,689 Debtors 47 27 27 67 79 Cash & bank balance 1,539 1,884 1,937 3,160 2,415 Loans & advances 8,072 11,460 13,948 16,238 18,927 Other current assets 38 48 58 55 64 Total current assets 40,426 49,965 60,960 71,480 79,173 Creditors 19,778 22,241 26,066 32,596 35,427 Provisions 1,651 1,910 706 706 706 Total current liabilities 21,429 24,150 26,772 33,302 36,133 Net current assets 18,997 25,815 34,188 38,178 43,040 Total assets 34,398 41,745 51,601 57,892 64,443 Source: Company, Nirmal Bang Institutional Equities Research Exhibit 21:Cash flow Y/E March (Rsmn) FY09 FY10 FY11 FY12E FY13E EBIT 3,889 3,481 4,371 4,420 5,332 (Inc.)/dec in working capital (3,071) (3,608) (3,635) (2,767) (5,606) Cash flow from operations 818 (128) 736 1,652 (275) Other income (587) (32) (441) (197) (229) Depreciation 1,152 1,139 1,527 1,681 1,834 Interest paid (-) (2,084) (2,027) (2,911) (3,686) (4,036) Tax paid (-) (338) (411) (819) (220) (389) Dividends paid (-) (199) (204) (283) (243) (121) Net cash from operations (1,237) (1,662) (2,191) (1,013) (3,216) Capital expenditure (-) (2,215) (2,574) (2,336) (2,000) (1,999) Net cash after capex (3,452) (4,237) (4,527) (3,013) (5,215) Inc./(dec.) in borrowings 4,781 1,939 9,567 6,041 5,766 Inc./(dec.) in investments (993) (1,773) (4,989) (2,000) (1,500) Equity issue/(buyback) - 4,679 - - - Cash from financial activities (2,434) 2,643 (4,987) (1,806) (1,295) Others - - - - - Change in cash (1,105) 345 53 1,222 (744) Opening cash 2,644 1,539 1,884 1,937 3,160 Closing cash 1,539 1,884 1,937 3,160 2,415 Source: Company, Nirmal Bang Institutional Equities Research Exhibit 23: Key Ratios Y/E March FY09 FY10 FY11 FY12E FY13E Adj. EPS (Rs/share) 2.1 1.3 1.2 0.8 1.5 Operating ratios (%) NWC / total assets 0.6 0.6 0.7 0.7 0.7 Asset turnover 1.0 1.0 0.9 0.9 0.9 Fixed asset turnover 2.1 2.1 2.1 2.2 2.3 Turnover days Inventory turnover 338.5 366.1 401.2 400.0 381.0 Loans advances turnover 0.5 0.3 0.2 0.5 0.5 Creditors 88.9 114.8 124.4 125.0 125.0 Working capital cycle 236.0 241.9 238.7 256.4 238.6 Valuation ratios PE ratio (x) 14.0 33.9 24.8 34.2 19.4 Price/sales (x) 0.2 0.2 0.4 0.4 0.3 Price / BV (x) 1.8 1.2 1.2 1.1 1.1 EV/sales (x) 0.8 0.8 1.2 1.2 1.1 EV/EBITDA (x) 6.7 7.2 9.3 9.3 8.9 Margins (%) EBITDA margin 13.0 12.2 13.2 12.5 12.6 PBT margin 5.0 3.3 2.7 1.5 2.3 Net margin 3.7 2.2 1.7 1.1 1.6 Returns (%) RoCE 13.5 11.6 11.6 10.8 11.3 RoNW 12.5 4.1 4.7 3.3 5.7 Gearing ratios Net debt/ equity (x) 2.2 1.5 2.2 2.4 2.7 Total debt/equity (x) 2.3 1.7 2.3 2.6 2.9 Source: Company, Nirmal Bang Institutional Equities Research 77 HCC
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Institutional Equities - Online Share Trading

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