CMP: Rs.94 Rating: BUY Target: Rs.149: J.B. Chemicals & Pharmaceuticals Ltd. (JBCL)

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JB CHEMICALS Sensex
IndiaNivesh Research
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
Initiating Coverage
October 25, 2013
J.B. Chemicals &
Pharmaceuticals Ltd. (JBCL)
STOCK INFO
BSE 506943
NSE JBCHEPHARM
Bloomberg JBCP.IN
Reuters JBCH.BO
Sector Pharmaceutical
Face Value (Rs) 2
Equity Capital (Rs mn) 169
Mkt Cap (Rs mn) 7,963
52w H/L (Rs) 96/67
Avg Daily Vol (BSE+NSE) 98,460
SHAREHOLDING PATTERN %
(as on 30th Sep. 2013)
Promoters 55.87
FIIs 2.33
DIIs 2.60
Public & Others 39.20
Source: Company, BSE
STOCK PERFORMANCE (%) 1m 3m 12m
JB CHEMICALS 13.3 22.8 35.4
SENSEX 4.6 3.6 11.1
JB CHEMICALS v/s SENSEX
Source: Capitaline, IndiaNivesh Research
Source: Capitaline, IndiaNivesh Research
Margins expansion on the cards, recommend BUY with the target price of Rs 149
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Daljeet S. Kohli
Head of Research
Mobile: +91 77383 93371, 99205 94087
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in
Bhagwan Singh Chaudhary
Research Analyst
Mobile: +91 77383 93427
Tel: +91 22 66188835
bhagwan.chaudhary@indianivesh.in
CMP : Rs.94
Rating : BUY
Target : Rs.149
JB Chemicals & Pharmaceuticals Ltd (JBCPL) is one among the very old venture in
pharmaceutical industry in India. The company was started by Mr JB Mody in 1950 in
the form of partnership firm M/s Unique Pharmaceutical Laboratories. Currently, its
product mix comprises of formulation business in domestic market, Russia & Row
markets (including Europe & US) & less than 10% of total revenue is contributed by
API. Other than this, JBCL is also engaged in contract manufacturing for various MNCs
across the worlds, including OTC products supply to Johnson & Johnson in Russia & CIS
region. Company is one among the largest manufacturers of lozenges across the world.
Investment Rationale
New Pharmaceutical Pricing Policy (NPPP) in domestic market to bode well for margins:
After implementation of DPCO 2013, JBCLs ~50% domestic portfolio has been shifted
from cost based ceiling price mechanism to average price mechanism, and now onwards
company has scope to increase its prices in the range of ~6-7% (in the range of previous
years WPI) annually. Companys two leading products (Metrogyl & Rantac) which were
under cost based ceiling pricing mechanism contributed revenue of ~Rs 1 bn out of
total domestic revenue of Rs 3.05 bn in FY13. We believe that price hike in line with WPI
for aforesaid portfolio would add ~Rs 100 million annually to the gross profit of the
company (~100 bps to FY15E gross margins).
Consolidating domestic formulation business: Management expects to maintain the
domestic growth at par with industry (~14-16%) but conservatively we estimate company
to report revenue CAGR of ~12% over FY13-FY16E mainly driven by increase in
productivity, penetration & pricing.
Russian Rx business to maintain healthy growth: Post selling Russian OTC business to
J&J, remaining Russian Rx (Prescription) business of JBCL was left with $23 mn (Rs 1 bn)
revenue in FY11. Due to hindrances linked with deal with DRL & Johnson & Johnson,
company could not supply sufficient inventory to Russian market in the year FY12 and
ended in 47% decline in revenue to Rs 550 mn. However, company managed its entire
market share in FY13 with 82% y-o-y growth to Rs 1 bn. Going forward, we expect
companys Russian business to report at least ~12% CAGR w.r.t underlying market growth
of 14-15%
US business contribution improving: JBCL has presence in regulated markets also
including USA, where currently it market 5 products, including recently approved
Tinidazole. JBCL has plans to file 6-10 ANDAs every year in this market. US had started
contributing to revenue from FY11 onwards and in FY13 contribution was $10 mn (6%
of total revenue). Though currently it is relatively small business for the company but
new products filing and launches may help in scaling up it at faster pace than our
expectations. We estimate this business to grow at 25% CAGR and to reach at $19mn in
FY16E.
Valuations
We analyzed that drag to stock valuations are OTC product supply to J&J Russia, where
visibility is only for next 5 years & cash of Rs 5.50 bn lying idle on the books. Among the
uncertainty of business to J&J, we believe that opportunity linked with appropriate and
effective utilization of cash cant be ruled out in the next five years, which should over
weigh the uncertainty of OTC products supply to J&J. Additionally; we have faith in
managements capabilities to utilize cash for appreciation of shareholders value.
At CMP of Rs 94, the stock is trading at P/E multiple of 7.6x of FY14E & 6.0x of FY15E. We
initiate coverage on the stock with BUY recommendation, valuing stock on SOTP basis
with the target price of Rs 149.
Source: Company Filings; IndiaNivesh Research
Consolidated Financial Statements
in Rs mn Sales EBITDA EBITDA % PAT EPS ROE % P/E EV/EBITDA P/BV Div Yield %
FY12 8,019 1,003 12.5 666 7.9 8.3 11.1 3.6 0.8 55.9
FY13 8,661 1,056 12.2 795 9.4 11.0 8.7 2.7 0.7 1.4
FY14E 9,880 1,336 13.5 1,053 12.4 13.2 7.6 2.8 0.7 1.7
FY15E 11,196 1,643 14.7 1,321 15.6 15.9 6.0 2.0 0.6 2.2
FY16E 12,644 1,921 15.2 1,565 18.5 17.8 5.1 1.3 0.6 2.6
October 25, 2013 | 2
Initiating Coverage | J.B. Chemicals & Pharmaceuticals Ltd. Margins expansion on the cards, recommend BUY with the target price of Rs 149
60.5%
57.5% 57.5%
58.5% 58.8%
12.5% 12.2%
13.5%
14.7% 15.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
FY12 FY13 FY14E FY15E FY16E
Gross Margins EBITDA margins
Investment Rationale
New Pharmaceutical Pricing Policy (NPPP) in domestic
market to bode well for margins:
After a long discussion and intervention of Supreme Court, Department of
Pharmaceuticals had announced the Drugs (Price Control) Order in May 2013.
According to this 348 NLEM (National List of Essential Medicines) will come under
price control from earlier being only 74 under DPCO (Drug Price Control Order)
1995. Accordingly department of Pharmaceuticals has issued notification for the
pricing of drugs. The salient features of new pricing policy are a) Ceiling price has
been calculated by using simple average of all brands with market share >= 1%,
unlike DPCO 1995 where ceiling price was based on Cost Based mechanism, b)
Annual price hike will be adjusted annually based on inflation (previous year average
WPI) on 1
st
April every year, subject to 10%. c) Ceiling Price will be revised once in
five year. d) The drugs which are not under price control order, their price can be
increased maximum upto 10% annually. e) DPCO 1995 products, which are not part
of NLEM shall be out of price control.
Effectively after implementation of DPCO 2013, JBCLs ~50% domestic portfolio
has been shifted from cost based ceiling price mechanism to average price
mechanism, and now onwards company has scope to increase its prices in the range
of ~6-7% (in the range of previous years WPI) annually. Companys two leading
products (Metrogyl & Rantac) which were under cost based ceiling pricing
mechanism contributed revenue of ~Rs 1 bn out of total domestic revenue of
Rs 3.05 bn in FY13. In these two brands company has leadership position and bargain
power among the peers. We believe that price hike in line with WPI for aforesaid
portfolio would add ~Rs 100 million annually to the gross profit of the company
(~100 bps to FY15E gross margins).
Additionally, on account of 13.4% revenue CAGR over FY13-16E, we expect
improvement in operating leverage which would add another ~60-70 bps annual
improvement in margins. As a result, we expect EBITDA margins of the company to
reach at ~15% level in FY16E from 12.2% level in FY13.
Likely Expansion in Margins:
Consolidating in domestic formulation business:
Domestic business is the largest segment of JBCL and it contributed 39% of total
revenue in FY13. JBCL reported revenue growth of 10% y-o-y to Rs 3.05 bn in
domestic formulation business in FY13. The growth was attributed to the strategy
6-7% price hike opportunity for ~50% of
domestic portfolio would add ~Rs 100 mn
annual gross profit
Dometic
Formulation
37%
Russia Rx
12%
ROW
33%
CRAMS (J&J)
10%
API
7%
Contract
Services
1%
Dometic
Formulation
39%
Russia Rx
13%
ROW
28%
CRAMS (J&J)
11%
API
8%
Contract
Services
1%
Total Revenue Contribution: (FY13)
Total Revenue Contribution: (FY16E)
October 25, 2013 | 3
2,772
3,050
3,416
3,826
4,285
-6.7%
10.0%
12.0% 12.0% 12.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Domestic Formulation (Rs Mn) y-o-y
of consolidating business with focus on enhanced penetration in Tier II cities and
rural market, new product launches in potential therapeutic group and increase in
productivity. Two years back (FY11), JBCL launched new therapeutic division with
~100 field force & 15 products to cater to Gynecology & Dentist to increase active
promotion and client base. Company is focusing on active promotion of products in
Cardiac, antacid, pain management, anti-infective and anti-septic segments. Its five
brands, Rantac, Rantac D, Metrogyl , Nor Metrogyl & Nicardia Retard are among
top 300 brands sold unit wise. Although, there is large competition in the key
products of the company but due to large capacities available for Rantac & Metrogyl,
company has bargain power among the peers to manage low pricing of products.
JBCL launched various products in Derma, anti-infective and antacid segment in
FY13. Its focus is mainly on Cardiovascular, Pain management, Anti-infective &
Gastro-intestinal therapies. Currently JBCL has field force ~1000 (including
managers) and likely to increase numbers slowly and steadily.
Approximately 8.5% revenue (~Rs 260 mn) of domestic formulation business was
from Contrast Media products, where companys ~30 people sell diagnostic imaging
products including DEFINITY, and reported growth of ~15% in FY13.
Management expects to maintain the domestic growth at par with industry (~14-
16%) but conservatively we estimate company to report revenue CAGR of ~12%
over FY13-FY16E mainly driven by increase in productivity, penetration & pricing.
Due to favorable National Pharmaceutical Pricing Policy (NPPP), companys ~50%
domestic portfolio has scope to increase prices by 6-7% (previous years WPI) annually
which would further bode well for overall growth in domestic market.
Domestic business growth:
Russian Rx business to maintain healthy growth:
JBCL sold its Russian OTC business of $67 mn revenue (~Rs 3 bn revenue in FY11) to
Cilag (wholly owned subsidiary of Johnson & Johnson) for consideration of Rs 9.38
bn in May 2011. Excluding this, there was additional transaction of ~$47 mn for
receivables and inventories linked with same business in Russia & CIS and for ~Rs
61 mn for worldwide rights of 3 OTC brands (Doctor Mom, Rinza & Fitovit). Hence,
there was total transaction of Rs 11.60 bn in FY12.
Post this deal, Russian Rx (Prescription) business of the company was left with $23
mn (Rs 1 bn) revenue in FY11. Few months down the line in July 2011, JBCL signed
agreement with DRL (Dr Reddys Lab) to sell remaining Rx business in the region for
total transaction of ~Rs 1.38 bn. However, deal could not materialize and company
dropped the plan of selling that business. Due to hindrances linked with deal with
DRL & Johnson & Johnson, company could not supply sufficient inventory to Russian
market in the year FY12 and ended in 47% decline in revenue to Rs 550 mn. However,
company managed to regain its entire market share in FY13 with 82% y-o-y growth
to Rs 1 bn. Going forward, we expect companys Russian business to report at least
~12% CAGR w.r.t underlying market growth of 14-15%.
Conservatively domestic business should
grow @12%CAGR
Russian Rx business should grow @12CAGR
October 25, 2013 | 4
USA
29%
Non USA
37%
CRAMS
(excluding
CRAMS to J&J's
Russian OTC)
23%
Contrast
Media
11%
1,625
2,207
2,777
3,266
3,796
37%
35.8%
25.8%
17.6%
16.2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
ROW business (Rs Mn) y-o-y
Additionally, monetization of remaining Russian & CIS business cant be ruled out
in future given good valuation. In our view 2x multiple of sales, i.e ~Rs 2 bn (Rs 23
per share), would be good valuation for the business. Any deal above that would be
positive surprise.
ROW business to maintain the growth momentum:
On account of increase in focus across the geographies including USA, South Africa,
UK, Canada, Australia and several semi-regulated markets. The company is expected
to report maximum growth in this business segment. In the previous year (FY13) its
growth was ~25% in constant currency term to $44 mn & ~36% in INR term to
Rs 2.21 bn on the back of ~44% growth in US market and healthy growth in other
markets linked with product & geographic penetration. Additionally growth was
supported by CRAMS business & contrast media products. Due to limited regulatory
hurdles in semi-regulated markets and companys expertise in lozenges
manufacturing, it is planning to develop OTC products in these markets to carry
growth momentum going forward.
In ROW markets, companys major revenue contribution is from branded generic
business across the geographies, where it has reported healthy growth of ~20% in
last two years in constant currency terms. Considering further penetration across
the geographies and new launches, we expect this business to reach at $23 mn in
FY16E from ~$16mn level in FY13 reporting growth of ~14% CAGR. CRAMS business
(Excluding Contract manufacturing to Johnson & Johsons Russian OTC business) is
another major segment in ROW, where JBCL supply drugs to various clients across
the geographies. Among the formulations, injectables, tablets & lozenges are area
of expertise of the company. CRAMS contributed ~$11 mn revenue in FY13, we
estimate it to contribute ~$15 mn by the end of FY16E.
In the same segment, company also deals with Contrast Media products which
contributed $5 mn in FY13. We are of the view that given the capacity of
manufacturing facilities available with the company, JBCL has strong potential to
improve CRAMS business, which will eventually improve its operating leverage also.
Row business breakup: (FY16E)
ROW revenue growth:
US business contribution improving:
JBCL has presence in regulated markets also including USA, where currently it market
5 products, including recently approved Tinidazole. JBCL has plans to file 6-10 ANDAs
every year in this market. Its all the three formulation manufacturing facilities (two
in Panoli & one in Daman) & API facility in Panoli (Gujrat) are USFDA approved.
Companys R&D expenditure stood at Rs 159 mn in FY13 (2% of total revenue). US
had started contributing to revenue from FY11 onwards and in FY13 contribution
was $10 mn (6% of total revenue). Though currently it is small business but new
products filing and launches may help in scaling up business at faster pace than our
expectations. We estimate this business to grow at 25% CAGR and to reach at $19mn
in FY16.
ROW business has the potential to grow
@18% CAGR
US business may grow at faster pace than
anticipation
Row business breakup: (FY13)
USA
24%
Non USA
36%
CRAMS
(excluding
CRAMS to J&J's
Russian OTC)
26%
Contrast
Media
14%
October 25, 2013 | 5
850
935
1,029
1,131
-
200
400
600
800
1,000
1,200
FY13 FY14E FY15E FY16E
Revenue from J&J (in Rs Mn)
7
10
12
15
19
-
2
4
6
8
10
12
14
16
18
20
USA Revenue ($Mn)
Revenue trend in US market:
List of products in US markets:
Manufacturing facilities:
Optimistic on OTC products supply to J&J in Russian market:
After selling its Russian OTC business to Cilag (subsidiary of Johnson & Johson) in
May 2011, JBCL signed manufacturing contract agreement with Johnson & Johnson
for supplying products for the same business for next 5 years (upto year 2015).
Recently, both the companies have extended their agreement for another 2 years,
upto the year 2017. This business of the company contributed ~Rs 850 mn to JBCLs
total revenue (~10% of total revenue) in FY13. According to the management, this
contract is based on cost based mechanism, where companys margins are fixed in
the range of ~14-16%. Hence, currency depreciation and any change in commodity
prices do not have any impact on the profitability. On the other hand, we conclude
that recent extension in time period indicate satisfactory services by JBCL to Johnson
& Johnson, which may be seen in positive aspect in terms of further extension in
contract & any new manufacturing contract proposal by the same innovator.
However, risk of discontinuation of Russian OTC product manufacturing contract
after five years cant be ruled out. Conservatively, we expect 10% annual growth in
this segment for next five years.
CRAMS (Revenue from supplying OTC products to J&J in Russia):
Products Dosage Form
ATENOLOL, 100mg, 25mg, 50 mg Tablets
CIPROFLOXACIN, 250 mg, 500mg, 750mg Tablets
Diclofenac 25mg, 50mg, 75mg Tablets Delayed Release
Fluconazole 50 mg, 100 mg, 200 mg Tablets
Tinidazole 250mg, 500mg Tablets
Facilities Formualations State
Unique Pharmceuticals Lab Formulations Panoli, Gujrat
State of art facility API Panoli, Gujrat
State of art facility Tablets & Lozenges Kadaiya, Daman
State of the art facility tablets Panoli, Gujrat
JBCL may remain supplier to J&Js Russian
OTC products
Source: USFDA; IndiaNivesh Research
October 25, 2013 | 6
666
795
1,053
1,321
1,565
19.3%
32.5%
25.5%
18.5%
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Adj PAT y-o-y
8,019
8,661
9,880
11,196
12,644
8.0%
14.1%
13.3%
12.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Consolidated Revenue (Rs Mn) y-o-y
14.1%
16.1%
9.2%
8.3%
9.5%
10.9%
12.0%
18.1%
20.2%
8.3%
11.0%
13.2%
15.9%
17.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
FY10 FY11 FY12 FY13 FY14E FY15E FY16E
ROCE ROE (Adj for Cash & Equivalents)
Financials
Consolidated earnings to grow @~22% CAGR over FY13-
16E linked with margin expansion:
Assuming 12% CAGR in domestic market and ~16% CAGR in exports over FY13-16E,
we expect JBCLs consolidated revenue to grow at 13.4% CAGR over the same period.
However, due to better product mix going forward, improvement in pricing scenario
in domestic market, currency depreciation & better operating leverage, we expect
continuous expansion in companys gross margins as well as in EBITDA margins. As
a result, net profit is likely to grow at the faster pace than revenue growth. We
estimate consolidated earnings to grow at 21.6% CAGR over FY13-16E.
Prior to selling Russian OTC business, JBCLs EBITDA margins were at ~21% level.
After selling its most profitable business, EBITDA margins have declined to 12.2%
level in FY13. We believe that JBCLs exports business segments margins, including
CRAMS, would be in the range of 14-15%. The major drag to margins has been
domestic business because of its inherent problem of cost based ceiling price for
major chunk of products, where margins would have been in the range of 6-7%
only. In our view, new pricing policy, increase in productivity & focus on new therapies
would bode well to its margins going forward.
Consolidated Revenue Growth:
Consolidated Earnings growth:
ROCE & ROE to improve going forward:
Post selling Russian OTC business to Johnson & Johnson, JBCLs return ratios declined
from ~20% level in FY10 & FY11 to ~8% level in FY12. Given the aforesaid reasons,
including improvement in EBITDA margins linked with better pricing in domestic
market, partially benefiting from INR depreciation from exports & improvement in
operating leverage, we expect return ratios to improve going forward and ROE to
reach at 17.6% level in FY16E.
ROE & ROCE trend:
Net profit likely to grow @22% CAGR over
FY13-16E
Return ratios are expected to improve going
forward
October 25, 2013 | 7
Cash rich balance sheet to support the growth organically:
In May 2011, JBCL decided to exit Russian OTC business given the rationale of good
valuations (@3.2x of FY11 sales), increasing competition in Russian OTC market &
increasing advertising cost to sustain the momentum. From the proceeding, it
received cash of ~Rs 11 bn (including sell of receivables & inventories). Out of this,
company distributed ~Rs 4.12 bn (Rs 40 per share special dividend) to its
shareholders. Adjusting for dispute with certain amount, which was in escrow
account, and taxes paid on transaction, we estimate ~Rs 4.57 bn of cash left on
companys balance sheet from this transaction at the end of FY12. However, including
reduction in working capital (As Russian business has ~200 receivable days) & free
cash flow generation, there was cash & equivalents of ~Rs 5.50 bn (Rs 65 per share)
at the balance sheet at the end of FY13. Management is looking for better
opportunity to deploy the cash into business; hence any acquisition either in
domestic market or ROW marekts would be key trigger for re-rating of the stock.
Cash details received from Russian OTC business sell:
Cash rich balance sheet provide an
opportunity for organic growth
$ Mn Rs Mn
Revenue of Russian business in FY11 67 3,015
A Russian OTC business sold to J&J for 9,385
B Additional 3 OTC brands worldwide rights 61
C=A+B Total consideration from Russia OTC business 9,446
D Cash Received in FY11 P&L sheet 7,606
E Tax paid on transaction (@20.5% of transcation tax) 1,559
F=D-E Net Cash after tax 6,047
G Dividend Paid including tax (Rs 40 per share special dividend) 4,122
H=F-G Cash in hand 1,925
I=C-D Balance in Escrow account 1,840
J Additional cash from sell of inventory and receivables booked in FY12 47 2,350
K=J*(1-20.5%) Cash after tax @20.5% on it: 1,868
L Actual Cash Received from Escrow account 983
M= l*(1-20.5%) Cash after tax @20.5% on it: 781
N Net cash (after dividend & Taxes) from OTC Russian business sell: 4,575
O Cash per share (Rs) 54
P Actual Cash & Equivalent in BS at the end of FY13: 5509
Q Cash per share (Rs) 65
Details
October 25, 2013 | 8
Valuations
Given the business model of JBCL, two components of the business cant be included
in the core earnings of the business. First one is companys manufacturing contract
with Johnson & Johnson for supplying OTC products to Russian markets, which is
only for next 5 years, at this point in time (Though expansion in this business &
addition of new clients cant be ruled out). Hence, if we value this business separately
by assuming 10% annual growth in revenue, 15% margins & 25% effective tax rate
@10% discount rate, we reached at Rs 6.2 per share value for this business.
We look at the second factor i.e Rs 5.50 bn cash lying on the balance sheet in two
different ways. Either we consider other income to be part of the core business
where Cash & Equivalent of ~Rs 5.50 bn continue to generate interest income @8%
rate (10 years GOI bond yield) Or we remove other income from our Profit & Loss
account and value the cash at book value.
We analyzed that drag to stock valuations are OTC product supply to J&J Russia,
where visibility is only for next 5 years & cash of Rs 5.50 bn lying idle on the books.
Among the uncertainty of business to J&J, we believe that opportunity linked with
appropriate and effective utilization of cash cant be ruled out in the next five years,
which should over weigh the uncertainty of OTC products supply to J&J. Additionally;
we have faith in managements capabilities to utilize cash for appreciation of
shareholders value.
Recommendation:
At CMP of Rs 94, the stock is trading at P/E multiple of 7.6x of FY14E & 6.0x of
FY15E. We initiate coverage on the stock with BUY recommendation, valuing stock
on SOTP basis with the target price of Rs 149.
EPS FY15E (with out J&J CRAMS & Other Income from Cash) 7.8
PE multiple Assigned (x) 10.0
Valua per share (base business) 78
Cash per share 65
Value per share of CRAMS to J&J 6
SOTP (value per share) in Rs. 149
October 25, 2013 | 9
Income statement
Y E March (Rs m) FY12 FY13 FY14E FY15E FY16E
Net sales 8,019 8,661 9,880 11,196 12,644
Growth % -8.0% 8.0% 14.1% 13.3% 12.9%
Expenditure
Raw Material 3,164 3,685 4,199 4,646 5,209
Employee cost 1,127 1,300 1,467 1,651 1,855
Other expenses 2,725 2,620 2,879 3,256 3,659
EBITDA 1,003 1,056 1,336 1,643 1,921
Growth % -42.1% 5.3% 26.4% 23.0% 16.9%
EBITDA Margin % 12.5% 12.2% 13.5% 14.7% 15.2%
Deprecaition 224 247 288 317 350
EBIT 779 810 1,048 1,326 1,571
EBIT Margin % 9.7% 9.4% 10.6% 11.8% 12.4%
Other Income 290 279 400 480 560
Interest 240 53 45 45 45
PBT 828 1,036 1,403 1,762 2,087
Tax 1,655 241 351 440 522
Effective tax rate % 19.6% 23.3% 25.0% 25.0% 25.0%
Extraordinary items 7,606 - - - -
Adjusted PAT 666 795 1,053 1,321 1,565
Growth% -52.2% 19.3% 32.5% 25.5% 18.5%
PAT margin % 8.3% 9.2% 10.7% 11.8% 12.4%
Reported PAT 6,779 795 1,053 1,321 1,565
Growth% 386.6% -88.3% 32.5% 25.5% 18.5%
Balance sheet
Share Capital 169 169 169 169 169
Reserves & Surplus 9,530 10,033 10,954 12,104 13,465
Net Worth 9,700 10,203 11,124 12,273 13,635
Minority Interest - - - - -
Non Current Liabilities
Long term borrowing 125 77 77 77 77
Deferred Tax liabilities 187 250 250 250 250
Long term Provisions 83 82 82 82 82
395 410 410 410 410
Current Liabilities
Short term borrowings 552 368 368 368 368
Trade payables 371 605 690 764 856
Other current liabilities 787 1,012 1,447 1,836 2,175
Short term provisions 173 405 405 405 405
1,883 2,390 2,911 3,373 3,805
Total Liabilities 11,978 13,002 14,444 16,056 17,849
Assets
Net Block 3,153 3,392 3,500 3,631 3,786
Non Current Investments 30 30 30 30 30
Long term laons & Advances 133 143 143 143 143
Current Assets
Current Investments 2,989 3,947 3,947 3,947 3,947
Inventories 1,010 1,045 1,218 1,380 1,559
Sundry Debtors 1,361 1,913 2,301 2,669 2,944
Cash & Banak Balances 2,195 1,562 2,219 3,025 4,049
Loans & Advances 1,107 970 1,087 1,232 1,391
8,662 9,437 10,771 12,253 13,890
Total assets 11,978 13,002 14,444 16,056 17,849
Cash flow
PBT 8,434 1,036 1,403 1,762 2,087
Depreciation 224 247 288 317 350
Interest 127 43 45 45 45
Other non cash charges (20) (327) - - -
Changes in working capital 1,673 95 (157) (212) (182)
Tax (1,642) (244) (351) (440) (522)
Cash flow fromoperations 8,797 849 1,228 1,470 1,778
Capital expenditure (801) (492) (395) (448) (506)
Free Cash Flow 7,996 357 833 1,022 1,272
Other income 343 60 - - -
Investments (2,151) (728) - - -
Cash flow from investments (2,609) (1,160) (395) (448) (506)
Equity capital raised 15 - - - -
Loans availed or (repaid) (1,020) (177) - - -
Interest paid (136) (45) (45) (45) (45)
Dividend paid (incl tax) (4,122) (100) (132) (172) (203)
Cash flow from Financing (5,262) (322) (176) (216) (248)
Net change in cash 926 (633) 657 806 1,024
Cash at the beginning of the year 1,269 2,195 1,562 2,219 3,025
Cash at the end of the year 2,195 1,562 2,219 3,025 4,049
Key ratios
Y E March FY12 FY13 FY14E FY15E FY16E
EPS (Rs) Core 7.9 9.4 12.4 15.6 18.5
EPS Reported 80.0 9.4 12.4 15.6 18.5
Cash EPS (Rs) 10.5 12.3 15.8 19.3 22.6
DPS (Rs) 48.7 1.2 1.6 2.0 2.4
BVPS (Rs) 115 120 131 145 161
ROCE 9.2% 8.3% 9.5% 10.9% 12.0%
ROE 8.3% 11.0% 13.2% 15.9% 17.8%
Inventories Days 46 44 45 45 45
Sundry Debtors Days 62 81 85 87 85
Trades Payable Days 43 60 60 60 60
PER (x) 11.1 8.7 7.6 6.0 5.1
P/BV (x) 0.8 0.7 0.7 0.6 0.6
EV/EBITDA (x) 3.6 2.7 2.8 2.0 1.3
Dividend Yield % 55.9% 1.4% 1.7% 2.2% 2.6%
m cap/sales (x) 0.9 0.8 0.8 0.7 0.6
net debt/equity (x) (0.4) (0.4) (0.4) (0.4) (0.4)
net debt/ebitda (x) (3.7) (3.8) (3.2) (2.9) (2.8)
Consolidated Financial Statements
October 25, 2013 | 10
Disclaimer:
The projections and the forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant
uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which
the projections are forecasts were based will not materialize or will vary significantly from actual results and such variations will likely increase over the period of
time. All the projections and forecasts described in this report have been prepared solely by authors of this report independently. All the forecasts were not
prepared with a view towards compliance with published guidelines or generally accepted accounting principles.
This report is for information purpose only and this document / material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or
subscribe to any securities, and neither this document nor anything contained therein shall form the basis of or be relied upon in connection with any contract or
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the merits and risks involved in securities forming the subject matter of this document. The price and value of the investment referred to in this document / material
and income from them may go up as well as down, and investors may realize profit / loss on their investments. Past performance is not a guide for future performance.
Actual results may differ materially from those set forth in the projection. Forward-looking statements are not predictions and may be subjected to change without
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Disclosure of Interest Statement
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