Manugraph India Ltd. (MIL) ` 52.5 (12/07/12)

TM12 JULY 2012Manugraph India Ltd. (MIL) ` 52.5 (12/07/12)BUYMIL is the largest global manufacture of single width and single circumference presses. In India itis the leader in manufacture of web offset & sheet fed offset presses with 70% market share. Itspresses with speeds ranging from 35000-70000 copies per hour are used by all major publicationhouses in the country. It is also a leader in niche 4 page newspaper offset printing press market which camethrough acquisition of Dauphin Graphics Machines Inc., a US company. It has significant share of the worldmarket (20%) for its products, with leading publishers in Latin America, Europe, Middle East, Asia & CIScountries as its clients.As per latest reports, outlook for Indian print media is negative for 2012 as moderation in economicgrowth and cost reduction initiatives by corporates lead to slower growth in advertisement spending. Between70-90% of revenues of print media are attributable to the adspend. High newsprint costs are also expected toput pressure on operating margins in the print media industry. Imported newsprint costs have been pushedup by depreciating rupee. This will indirectly affect the new capex & expansion plans of media companies.However, in the medium term MIL should be big beneficiary of growing print media in the countrydue to its dominant position in printing machines. Cities with more than 10 lacs population are increasingrapidly in the country. Literacy rate, purchasing power & ambitions are growing in Tier II and III cities, hence,language media is still to grow. Ad spend in print media is also growing at a higher rate than circulationgrowth.A CONSILIUM INFORES & ADVISORS INITIATIVE FOR BALANCE EQUITY BROKING (INDIA) PVT LTD

Manugraph India Ltd.TMTie UpsIn July ’11 MIL & MDGM announced a new agent agreement for the United Kingdom and the Republic of Ireland with iPress Solutions.Experience of iPress solutions in marketing diverse groups of printing industry products such as EAE press controls & IST UV curingsystems with the addition of Manugraph portfolio are complementary to each other.In June ‘11, MIL has entered in to a tie up with Masterwork Machinery Co. Ltd. of China, for distribution of their packaging machinery.Masterwork is leading manufacturer of high precision, high speed automatic die cutting, foil stamping & embossing machines, apart fromhigh speed automatic folding & gluing machines.No significant business has been generated out of these tie ups till date.SubsidiariesCompany has sold off its entire stake in Manugraph Kenya Nairobi during FY ’12. The original investment was ` 22.66 lacs.During FY ’12 Company has provided for diminution in the value of investments/goodwill in its wholly owned US subsidiaryManugraph DGM Inc. USA, to the extent of ` 60 Crs. Original investment was ` 91.98 Crs. Over & above this, it has subscribed to Preferredstock of Manugraph DGM to the extent of ` 38.69 Crs.Company has assessed the impairment in the value of investment in its wholly owned subsidiary, Manugraph DGM, on account ofcontinuing slowdown in US & other Western economies. Based on the assessment of independent valuer on impairment in value of equityinvestment in subsidiary, Company has made provision of ` 60 Crs. in P & L account. It has written off ` 60 Crs. of goodwill & reserves fromits books. Also during the year, Company has converted its long term loan of ` 38. 69 Crs. in the US subsidiary, in to 100000 2% PreferredStocks with no par value, for an aggregate paid up value of US $ 7.85 million. The Preferred Stocks are non cumulative & redeemable at paranytime after 3 years. Also, they are convertible in to equity at any time at the option of the holder.Manugraph DGM Inc.Year ended ( ` Crs.) FY '10 FY '11 FY '12Turnover 43.66 24.78 60.22Net Loss -14.11 -3.73 -0.82Manugraph India Ltd. is also available on www.balance-equity.co.in

Manugraph India Ltd.TMFinancialsIf provision for diminution in the value of investments is not considered, the Company has reported net profit of ~ ` 30 Crs. and an EPSof ` 10/-. These figures are after accounting for other exceptional items in the Company’s accounts.About 86% of raw materials is formed by electrical parts & other components. Balance 14% is contributed by steel & metals &castings. Company has reduced its imported raw material component in FY ’12 to 22% from 30% in previous year. Exports from Indianstandalone operations have reduced from ` 114 Crs. in FY ’11 to ` 97 Crs. in FY ’12. Company covers its outstanding forex position.Although debtors have remained more or less at 30 days level in last two fiscal years, more than 6 months debtors have gone up from` 2.4 Crs. in FY ’11 to ` 12.8 Crs. in FY ’12.Order book position as on March ’12 for Indian standalone operations was `120 Crs. For MDGM the order book stood at US $ 5 million.DGM caters to US & Europe markets. Both the markets are undergoing difficult period at present. It may end FY ’13 with a small profitat net level, depending on how the things pan out in US & Europe markets.CommentsuuuuuuuuMIL has strong leadership in printing machinery industry in domestic market. It supplies almost all kinds of printingmachineries & spares. Its machines are supplied to almost all the leading newspaper manufacturers in the country. Its presses havethe capability now to give top mechanical speed of 70000 copies per hour for meeting the demands of medium & large commercialprinting houses.MIL ’s sales performance is satisfactory in Latin America. Over the last 10 years, the Cityline Express is by far the most popular singlewidth press in that market.In addition to new equipment order book, the MDGM factory in Pennsylvania has been successful with used equipment sales as wellas press relocation and reconditioning projects in North and South America.Company acknowledges that situation in US & Europe can pose challenges & impact operations. However, it hopes to make it upin African & Latin American markets. US subsidiary restructuring has started showing results & losses at net level has come downto ` 82 lacs in FY ’12 from ` 14 Crs. in FY ’10. Company expects this trend to continue in FY ’13.Company expects current year performance to be steady. It does not expect to replicate y-o-y 26% growth in revenues, reported in FY’12. For the next three years it hopes to grow at an average CAGR of ~ 10%. Individual year performance can see peaks & troughsdepending on the market conditions.The printing machinery has good potential for exports mainly because of cost advantage and international quality standards.We continue to remain positive on MIL’s long-term prospects primarily due to strong growth in its user industry i.e. printmedia. Indian newspaper industry has grown at 13% CAGR over the last five years to ` 17,400 Crs. in 2010 despite deceleration inglobal newspaper industry. Country has recorded 40% rise in circulation levels in last five years. Print advertising has gone up at amuch faster pace than the circulation.If you consider earnings without provision for diminution of investments, the share is available at ~ 5.3 x historical earnings. Weconsider it a good bargain for a company with no long term debt, 30% market cap in cash & ROE of 15%.Manugraph India Ltd. is also available on www.balance-equity.co.in

Manugraph India Ltd.TMConsolidated FinancialsYear Ended (` Crs.) FY '10 FY '11 FY '12Domestic sales 147.84 182.48 272.88Export sales 96.72 135.47 159.58Other Operating Income 9.49 9.78 18.15Total Income 254.05 327.73 450.61(Inc.)/Dec in Stock & WIP 57.16 -44.52 22.67Raw Materials 92.6 229.31 252.67Employee Cost 51.58 57.53 63.85Other Expenditure 41.26 48.78 51.48Total Expenditure 242.6 291.1 390.67EBITDA 11.45 36.63 59.94EBITDA Margin (%) 4.5 11.2 13.3Depreciation 11.07 11.86 12.66Interest 4.35 3.58 2.15Taxation -0.21 5.45 15.95Other Income 3.7 3.23 4.25Exceptional Items 5.17 2.05 -3.47Net Profit 5.11 21.02 29.96Net Profit Margin (%) 2.0 6.4 6.6Equity Capital 6.08 6.08 6.08Equity Shares (in Crs.) 3.04 3.04 3.04Reserves 218.11 231.7 193.75EPS (`) 1.7 6.9 9.9Book Value (`) 73.7 78.2 65.7ROE (%) 2.3 8.8 15.0Note: If diminution in the value of investment in US subsidiary of ` 60 Crs. isprovided for, FY ‘12 will show loss of ` 26.57 Crs. as per figures reported byCompany.Standalone FinancialsYear Ended (` Crs.) FY '10 FY '11 FY '12Domestic sales 147.84 182.48 272.88Export sales 54.1 113.82 97.07Other Operating Income 3.7 4.62 11.57Total Income 205.64 300.92 381.52(Inc.)/Dec in Stock & WIP 41.99 -41.72 20.51Raw Materials 78.74 214.4 213.54Employee Cost 31.75 44.8 47.89Other Expenditure 26.83 41.78 43.71Total Expenditure 179.31 259.26 325.65EBITDA 26.33 41.66 55.87EBITDA Margin (%) 12.8 13.8 14.6Depreciation 7.83 10.24 11.08Interest 3.21 2.9 1.24Taxation 6.12 10.13 15.67Other Income 4.13 3.99 8.32Exceptional Items 2.19 1.82 -6.67Net Profit 15.49 24.2 29.53Net Profit Margin (%) 7.5 8.0 7.7Equity Capital 6.08 6.08 6.08Equity Shares (in Crs.) 3.04 3.04 3.04Reserves 241.31 258.39 225.75EPS (`) 5.1 8.0 9.7Book Value (`) 81.4 87.0 76.3ROE (%) 6.3 9.2 12.7Note: If diminution in the value of investment in US subsidiary of ` 60 Crs. isprovided for, FY '12 will show loss of ` 23.8 Crs. as per figures reported byCompany.Manugraph India Ltd. is also available on www.balance-equity.co.in

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