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April 30, 2015

Index
Stock Update >> Federal Bank
Stock Update >> Shree Cement
Stock Update >> Marico
Stock Update >> Century Plyboards (India)

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investors eye

stock update

Federal Bank

Reco: Buy

Stock Update

Outlook for earnings improving, maintain Buy

Company details

Key points

Price target:

Rs170

Market cap:

CMP: Rs131

Rs11,246 cr

52 week high/low:

Rs154/87

NSE volume:
(no. of shares)

31.1 lakh

BSE code:

500469

NSE code:

FEDERALBNK

Sharekhan code:

FEDERALBNK

Free float:
(no. of shares)

8.6 cr

Shareholding pattern

Earnings growth flattish, margins expand by 11BPS QoQ: In Q4FY2015 Federal

Banks earnings were flattish on a Y-o-Y basis due to a higher tax rate (35% vs 24%
in Q4FY2014), though at the PBT level the growth was 17.6% YoY. The net interest
income (NII) growth was also flattish (down 0.3% YoY) due to a one-off income in
Q4FY2014 (interest on income tax refund), though on a Q-o-Q basis the NII grew
by 6%. The net interest margin improved to 3.31% (up 11BPS QoQ).
Asset quality showing revival: The asset quality trend has remained favourable
as the reported NPAs declined on a Q-o-Q basis due to control on fresh NPA
additions (Rs180 crore in Q4FY2015) and lower incremental restructuring (Rs126
crore for Q4FY2015). The slippages in all the key segments (retail, SME and
corporate) were within the manageable limits. The provision coverage remained
strong at 84% vs 85% in Q3FY2015.
Focus turning on growth, maintain Buy: The advances of Federal Bank grew
by 18% YoY in FY2015 and the management expects to grow the advances by
18-20% in FY2016 as well with focus on the retail and SME sectors. The tier-1
CAR of the bank is the highest among its peers. Therefore, an increase in leverage
may result in improvement in return ratios. The asset quality is showing signs
of stabilising which is a key positive. Currently, the stock is trading at attractive
valuation of 1.2x FY2017E BV; hence, we maintain our Buy rating on the stock.
Results

Rs cr

Particulars

Price chart

Price performance
(%)

1m

3m

6m 12m

Absolute

-0.6

-9.4

-6.0

43.9

Relative
to Sensex

0.2

-1.3

-6.7

17.0

Interest income
Interest expense
Net interest income
Non-interest income
Net total income
Operating expenses
Employee expenses
Other operating expenses
Pre-provisioning profit
Provisions
Profit before tax
Tax
Profit after tax
Asset quality
Gross NPLs
Gross NPLs (%)
Net NPLs
Net NPLs (%)
Capital adequacy (%)
CAR
Tier-I
Key reported ratios (%)
NIM
CASA

Sharekhan

Q4FY15

Q4FY14

YoY %

Q3FY15

QoQ %

1,908.3
1,285.1
623.2
306.0
929.2
460.1
248.7
211.4
469.2
39.8
429.4
148.8
280.5

1,838.7
1,213.6
625.1
178.4
803.5
383.5
200.9
182.6
420.0
55.0
365.0
87.7
277.3

3.8
5.9
-0.3
71.5
15.6
20.0
23.8
15.8
11.7
-27.7
17.6
69.7
1.2

1,870.1
1,282.9
587.2
219.9
807.1
409.7
235.1
174.7
397.4
-0.8
398.2
133.5
264.7

2.0
0.2
6.1
39.1
15.1
12.3
5.8
21.1
18.1
-4,951.2
7.8
11.5
6.0

1,057.7
2.04
373.3
0.73

1,087.4
2.46
321.6
0.74

-2.7
-42 BPS
16.1
-1 BPS

1,066.6
2.19
332.9
0.69

-0.8
-15 BPS
12.1
4 BPS

15.46
14.81

15.14
14.59

32 BPS
22 BPS

14.51
13.97

95 BPS
84 BPS

3.31
30.43

3.59
30.81

-28 BPS
-38 BPS

3.20
30.49

11 BPS
-6 BPS

April 30, 2015

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NII growth remains flat

Growth in advances gathers momentum, non-resident

deposit growth remains strong

During the quarter the net interest income (NII) stood at

Rs623 crore, showing a flattish growth mainly due to a
higher base of Q4FY2014 as a result a one-off income
(interest on an income tax refund). The net interest
margin (NIM) increased by 11 basis points (BPS) quarter
on quarter (QoQ) driven by a reduction in the funding
cost as the bank focused on trimming high-cost bulk
deposits. The management has guided for an NIM range
of 3.20-3.25%.

During the quarter the advances grew at 18% year on year

(YoY) mainly driven by a 20% growth in the corporate loan
book (mostly working capital loans) and a 23% growth in
agricultural advances. The growth in retail advances
(excluding gold loans) stood at 21% YoY. The management
has guided that the advances in the agriculture, retail
and SME portfolios are likely to grow by +20% in FY2016.
The overall deposit growth for Q4FY2015 stood at 18%
while the non-resident external (NRE) deposits registered
a healthy growth of 28% YoY despite apprehensions in the
Middle-East, which is the key source of such deposits.

NIM (%)

Advances break-up (%)

Asset quality stabilising

The asset quality trend has remained favourable as the
reported non-performing assets (NPAs) declined QoQ due
to control on fresh NPA additions (Rs180 crore of NPAs
added in Q4FY2015) and lower incremental restructuring
(Rs126 crore of loans restructured in Q4FY2015). The
slippages in all the key segments (retail, small and medium
enterprise [SME] and corporate) were largely within the
manageable limits. The slippages from the restructured
book were quite nominal at Rs8 crore (against a total
restructured book of Rs2,880 crore of which Rs1,100 crore
is towards state electricity boards and Air India) compared
with the peers. The provision coverage ratio remained
strong at 84% vs 85% in Q3FY2015.

Non-interest income spikes by 71% led by treasury income

The non-interest income for Q4FY2015 jumped by 71%
YoY mainly driven by a 138% rise in the treasury profit to
Rs95 crore (versus Rs40 crore a year ago). The fee income
also showed a decent growth of 12% while the foreign
exchange income showed a decline of 3% mainly due to
one-off factors. The employee expenses during the quarter
increased by 24% due to additional pension related
provisions of Rs93 crore due to a decline in bond yields.
Non-interest income (Rs cr)

Asset quality

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April 30, 2015

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One-year forward P/BV SD band

Valuations and outlook

The advances of Federal Bank grew by 18% YoY in FY2015
and the management expects to grow the advances by
18-20% in FY2016 as well with focus on the retail and SME
sectors. The tier-1 capital adequacy ratio (CAR) of the
bank is perhaps the highest among its peers. Therefore,
an increase in leverage may result in better return ratios.
The asset quality is showing signs of stabilising which is a
key positive. Currently, the stock is trading at attractive
valuation of 1.2x FY2017E book value (BV); hence, we
maintain our Buy rating on the stock.

Profit and loss statement

Particulars

FY15

FY16E FY17E

Particulars

1,975 2,229 2,380

2,828 3,335

Per share data (Rs)

FY13

Net interest income

Non-interest income

FY14

664

694

878

997

2,639 2,922 3,259

3,826 4,520

Operating expenses

1,185

1,808

Pre-provisioning profit

1,455 1,480 1,628

Provisions

1,442

1,631

2,057

2,018 2,463

261

268

107

290

427

1,194

1,212

1,521

1,728

2,036

Tax

356

373

515

570

692

Profit after tax

838

839 1,006

Rs cr

Particulars

FY13

FY14

FY15

FY16E

FY17E

Networth

6,365

6,951

7,738

8,625

9,854

Deposits

57,615

59,731

70,825

83,573

98,617

5,187

5,688

2,308

5,413

6,019

1,866

2,224

1,979

2,354

71,033

74,594

82,850

2,742

3,104

3,380

4,012

4,734

977

1,425

1,400

1,449

1,500

Investments

21,155

24,118

24,409

29,578

33,563

Advances

44,097

43,436

51,285

61,542

74,466

400

425

467

513

565

2,872

2,973

Liabilities

Borrowings

Other liabilities & provisions

3,309
Total liabilities

Balances with banks

& money at call

Fixed assets
Other assets

1,662

2,086

1,910

Total assets

71,033

74,594

82,850

FY15

FY16E

FY17E

9.8
1.8

9.8
2.0

11.7
2.2

13.5
2.7

15.7
3.1

Book value
Adj book value

71.8
69.5

78.6
76.3

87.7
79.7

98.1
87.0

111.2
98.3

Spreads (%)
Yield on advances
Cost of deposits

11.3
7.2

11.4
7.2

11.5
7.0

11.2
6.8

11.1
6.7

3.2

3.3

3.3

3.3

3.3

Credit to deposit
Cost to income

76.5
44.9

72.7
49.3

72.4
50.0

73.6
47.3

75.5
45.5

CASA
Non-interest income/
total income

27.2

31.2

30.4

31.4

32.3

25.2

23.7

27.0

26.1

26.2

Assets/Equity (x)
Return ratios (%)

10.9

10.9

10.7

11.2

11.8

RoE
RoA

13.9
1.2

12.6
1.1

13.7
1.2

14.1
1.2

14.6
1.1

3.4

2.5

2.0

2.0

1.9

0.5

0.5

0.7

1.5

1.5

Net interest income

Pre-provisioning profit

1.1
-3.4

12.9
1.8

6.8
10.0

18.8
24.0

17.9
22.1

Profit after tax

Advances

7.9
16.8

0.1
-1.5

19.9
18.1

15.1
20.0

16.1
21.0

Deposits
Valuation ratios (%)

17.7

3.7

18.6

18.0

18.0

P/E
P/BV

13.4
1.8

13.4
1.7

11.2
1.5

9.7
1.3

8.4
1.2

P/ABV

1.9

1.7

1.7

1.5

1.3

Asset quality ratios (%)

Gross NPA

99,966 117,799

Net NPA
Growth ratios (%)

Assets
Cash & balances
with RBI

FY14

Net interest margins

Operating ratios (%)

1,158 1,344

Balance sheet

FY13

Earnings
Dividend

1,185

Net total income

Profit before tax

Key ratios

Rs cr

99,966 117,799

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

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April 30, 2015

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Shree Cement

Reco: Hold

Stock Update

Maintain Hold with revised PT of Rs10,900

Key points

Company details
Price target:

Rs10,900

Market cap:

Rs34,844 cr

52 week high/low: Rs11,755/5,675

NSE volume:
(no. of shares)

CMP: Rs10,002

0.2 lakh

BSE code:

500387

NSE code:

SHREECEM

Sharekhan code:

SHREECEM

Free float:
(no. of shares)

1.2 cr

Shareholding pattern

Lower cement realisation affect earnings negatively: Shree Cement reported

a revenue decline of 5.3% YoY to Rs1,576.4 crore largely on account of a decline
in realisation in the cement segment (down 8.6% YoY), although the volume
grew by 7.6% YoY (led by capacity addition). The company reported a net profit
decline of 46.2% to Rs119.7 crore (which includes an extraordinary cost of Rs4
crore) for Q3FY2015 on account of a lower operating margin (down 429BPS
YoY) and a higher depreciation charge (up 57.8% YoY).
Cement (lower realisation) and power divisions (lower volume) affect operating
performance: The performance of the cement division was affected by lower
realisation during the quarter leading to a decline of 27% YoY in EBIDTA per tonne,
which stood at Rs796 per tonne. On the power division side, a lower demand
affected the volume which declined by 38% YoY, however the realisation has seen
a marginal improvement of 2.7% and stood at Rs3.4 per unit. Consequently, the
operating profit for the quarter declined by 21% YoY to Rs340.6 crore.
Revised earnings estimate marginally down: We have marginally revised our
earnings estimate downward in order to factor in the lower volume in the cement
and power divisions, hence we have revised our price target downward to Rs10,900.
Currently, we see a limited upside from the current level and an unfavourable riskreward ratio, and thus maintain our Hold rating on the stock. At the current market
price the stock is trading at 13.4x EV/EBIDTA and P/E of 26.6x FY2017E.

Results

Price chart

Rs cr

Particulars

Q3FY2015

Absolute

1m

3m

6m 12m

-5.3

-5.2

19.2

81.7

Relative -4.5
to Sensex

3.2

18.3

47.7

Q2FY2015

QoQ %

1,576.4

1,664.9

-5.3

1,544.5

2.1

Total expenditure

1,235.8

1,233.9

0.2

1,238.4

-0.2

Operating profits

340.6

431.1

-21.0

306.1

11.3

50.4

49.6

1.6

20.1

150.6

EBIDTA

391.0

480.7

-18.7

326.2

19.9

Interest

27.0

36.3

-25.5

32.3

-16.2

PBDT

364.0

444.4

-18.1

294.0

23.8

Depreciation

262.9

166.7

57.8

200.9

30.9

PBT

101.0

277.7

-63.6

93.0

8.6

Tax

-22.6

-19.1

18.6

-1.5

4.0

74.3

-94.7

0.8

393.8

Reported PAT

119.7

222.5

-46.2

93.7

27.8

Adjusted PAT

123.7

228.4

-45.8

94.5

30.9

21.6

25.9

-429

19.82

179

7.8

13.7

-587

6.1

173

Extraordinary items
(%)

YoY %

Net sales

Other income

Price performance

Q3FY2014

Margins (%)
OPMs
PAT
*June year ending company

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Segmental analysis

Volume in power and realisation in cement remain

subdued affecting earnings: The cement business
reported a 7.6% year-on-year (Y-o-Y) volume growth
while its blended realisation declined by 8.6% year on
year (YoY), leading to a decline of 1.6% YoY in the
revenues to Rs1,463.3 crore. Shree Cement witnessed
a lacklustre demand in the power division, its volume
declined by 38% YoY, however, realisation has seen a
marginal improvement of 2.7% YoY to Rs3.4 per unit.
Hence, the revenues from the power division declined
by 36% YoY to Rs113 crore. At the profit after tax level
(including an extraordinary cost of Rs4 crore), the
decline was of 46.2% YoY due to a higher depreciation
charge.

(Rs cr)

Particulars

Q3
FY15

Q3
FY14

Cement

1,463.3

1,487.4

296.5

338.8

1,759.7

1,826.2

183.3

161.3

1,576.4

1,664.9

Power
Total
Less: Inter
segmental revenues
Net segment
revenues

FY17E

Net sales

5,590

5,887

6,817

8,229

9,795

Growth

-4

16

21

19

EBIDTA

1,561

1,427

1,504

1,930

2,478

28

24

22

23

25

1,005

905

544

952

1,308

59

-10

-40

75

37

288.4

248.3

156.2

273.2

375.4

34.7

40.3

64.0

36.6

26.6

9.1

7.4

6.7

5.8

4.8

21.6

24.4

22.9

17.7

13.4

6.0

5.8

5.0

4.1

3.4

RoE

31

20

11

17

20

RoCE

26

21

13

17

19

EBIDTA margin
Adjusted PAT
Growth
EPS diluted
PE
P/BV
EV/EBIDTA
EV/sales

-3.6 1,695.0

3.8

13.7

150.5

21.8

-5.3 1,544.5

2.1

-36.7

217.7

-116.8

118.6

62.5

89.7

Total

81.9

280.2

-70.8

Cement

-2.5%

14.6%

-1,714

Power

40.0%

18.5%

2,155

18.3 -300.5
87.9

35.0

106.2 -22.8
1.4%

-386

25.6% 1,442

The volume (cement and clinker) increased by 7.6% YoY

to 4.13 million tonne. On the realisation front, the average
blended realisation of the company declined by 8.6% YoY
to Rs3,543 per tonne.
On the cost front, there was a rise in the cost of inputs
like limestone whose price increased on a per-tonne basis
due to an increase in royalty and cost of power & fuel.
However, the freight cost has declined by 4.6% YoY which
has negated the effect of a high-cost input and power.
But lower realisation during the quarter negatively
affected the earnings before interest, depreciation, tax
and amortisation (EBIDTA)-per-tonne which declined by
27% YoY to Rs796.
Power divisions performance
During the quarter, the performance of the power division
was subdued in terms of volume. The company sold
33.3-crore units as compared with 53.6-crore units sold
in the corresponding quarter of the previous year. The
decline in the volume was on account of a lower demand
for merchant power. The average realisation for the
quarter stood at Rs3.4 per unit. The revenues from the
power division came in at around Rs113.2 crore, which
was down by 36.3% YoY.
On the cost front, the cost of generation worked out to
Rs3.0 per unit in Q3FY2015 as against Rs3.1 per unit in
Q3FY2014 and the EBIDTA per unit worked out to Rs0.36
in Q3FY2015 (as against 0.24 per unit in Q3FY2014).

*June year ending company

Sharekhan

-13.7

*June year ending company

Valuations
FY16E

8.3

343.4

Power

Cement divisions performance

FY15E

-1.6 1,351.6
-12.5

Cement

Maintain Hold with a revised price target of

Rs10,900: We have marginally revised our earnings
estimate downward in order to factor in the lower
volume in the cement and power divisions, hence we
have revised our price target downward to Rs10,900.
Currently, we see a limited upside from the current
level and an unfavourable risk-reward ratio, and thus
maintain our Hold rating on the stock. At the current
market price the stock is trading at 13.4x EV/EBIDTA
and P/E of 26.6x FY2017E.

FY14

QoQ
%

Segment-wise results

PBIT margins (%)

FY13

Q2
FY15

Segment-wise revenues

OPM affected due to lower realisation: The operating

profit margin (OPM) declined by 429 basis points (BPS)
YoY to 21.6% during the quarter owing to a decline in
cement realisation (down 8.6%).

Particulars

YoY
%

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Per-tonne analysis of cement business

Particulars
Volume
Realisation

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

YoY %

QoQ %

3,838,000

3,864,000

3,800,000

3,800,000

4,130,000

7.6

8.7

3,876

3,855

3,729

3,557

3,543

-8.6

-0.4

Cost break-up
RM cost

280

386

344

327

294

5.0

-9.8

Employee expenses

238

262

297

288

276

15.6

-4.3

Power & fuel

566

557

641

614

615

8.7

0.2

Transportation & handling

893

822

834

857

851

-4.6

-0.6

Other expenses

808

687

773

747

711

-12.1

-4.9

Total expenditure per tonne

2,786

2,715

2,889

2,832

2,747

-1.4

-3.0

EBIDTA per tonne

1,090

1,140

841

725

796

-27.0

9.8

Q3FY14

Q4FY14

Q1FY15

Q2FY15

Q3FY15

YoY %

QoQ %

53.6

49.8

48.8

49.0

33.3

-37.9

-32.1

3.3

3.4

3.9

3.9

3.4

2.7

-13.6

177.5

167.4

191.0

192.9

113.2

-36.3

-41.3

Per-unit analysis of power business

Particulars
Volume (cr units)
Realisation Rs/unit
Revenue Rs cr
Cost per unit

3.1

3.4

3.5

3.3

3.0

-1.0

-8.1

164.6

168.9

170.0

162.1

101.2

-38.5

-37.6

EBIDTA Rs cr

12.9

(1.5)

21.0

30.7

12.0

-6.9

-61.0

EBIDTA per unit

0.24

(0.03)

0.43

0.63

0.36

50.0

-42.6

Cost of generation Rs cr

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Marico

Reco: Buy

Stock Update

Maintain Buy with a revised PT of Rs435

Key points

Company details
Price target:

Rs435

Market cap:

Rs25,864 cr

52 week high/low:

Rs429/200

NSE volume:
(no. of shares)

10.1 lakh

BSE code:

531642

NSE code:

MARICO

Sharekhan code:

MARICO

Free float:
(no. of shares)

CMP: Rs401

26.0 cr

Shareholding pattern

In Q4FY2015, Maricos sales were affected by de-stocking at the distributor level

due to the execution of automated sales order management and distributor
replenishment system by the company. The revenues of the Indian business grew
by 17% with the primary volume growth standing at 3% (the secondary sales
volume growth stood at 8%). The international business revenues grew by just
6% affected by political unrest in Bangladesh and distribution transition in Egypt.
The GPM stood almost flat at 48.0% while the OPM declined by 42BPS to 14.0%
due to higher other expenses. The adjusted PAT before minority interest grew
by above 20% due to a higher other income and a lower interest cost.
Maricos management has maintained its target of achieving a 6-8% volume
growth in the domestic consumer business. The growth would be driven by
implementation of new supply and distribution projects, targeting a strong
growth in the youth brands and a steady volume growth in the focus portfolio.
The international business is expected to perform well in the coming years.
The copra prices are expected to remain range-bound and hence the gross
margins are expected to be better on a Y-o-Y basis in FY2016.
We have fine-tuned our earnings estimates for FY2016 and FY2017 to factor in
expectations of a better revenue growth in the coming years. Marico is well
poised to achieve about a 15% compounded annual growth in revenues and
over a 20% growth in the PAT over the next two years. We maintain our Buy
recommendation on the stock with a revised price target of Rs435 (valuing the
stock at 31x its FY2017E earnings).
Key risk: A surge in copra prices in the coming quarters or a slow growth in any
of the key segments would act as a key risk to our earnings estimates.

Price chart

Results (consolidated)

Rs cr

Particulars

Q4FY15

Q4FY14

YoY %

Q3FY15

Net sales

1,226.3

1,072.1

14.4

1,452.4

-15.6

Expenditure

1,055.0

917.8

14.9

1,215.5

-13.2

171.3

154.3

11.0

236.9

-27.7

18.8

12.8

46.1

10.1

85.7

5.6

6.8

-16.9

5.2

8.8

20.0

21.5

-7.0

23.5

-14.5

PBT

164.4

138.8

18.4

218.4

-24.7

Tax

52.8

47.3

11.7

56.2

-6.2

111.6

91.6

21.9

162.2

-31.2

Operating profit
Other income
Interest expenses
Depreciation
Price performance
(%)

1m

3m

Absolute

3.4

14.1

Relative
4.3
to Sensex

24.2

6m 12m
30.0
29.0

98.5
61.3

Adjusted PAT (before MI)

Minority interest (MI)

QoQ %

1.6

2.8

2.3

110.0

88.8

24.0

159.9

1.7

1.4

24.0

2.5

-31.2

GPM (%)

48.0

47.8

17BPS

45.5

251BPS

OPM (%)

14.0

14.4

-42BPS

16.3

-234BPS

Reported PAT
Adjusted EPS

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Domestic businessrevenues grew in mid teens, change

in distribution system affected primary sales

alternative steps such as introducing new stock keeping

unit (SKU) of 500ml to encourage trials, increasing
distribution and driving one of the variants through
focused market actions. The company has also initiated
new media campaign for Saffola Total.

Maricos fast moving consumer goods (FMCG) business in

India grew by 17% to Rs949 crore in Q4FY2015. Due to a
change in the distribution system there was a one-time
reduction of around Rs35 crore in the distribution stock
in Q4FY2015. The primary sales volume growth stood at
3% while the secondary sales growth was much better at
7% during the quarter. The company expects the new
distribution system to improve the productivity in sales
and volume growth to stand in the range of 6-8% in the
near to medium term. The operating profit margin (OPM)
of the domestic business stood at 18.0% in Q4FY2015 and
the company expects it to sustain in the range of 17-18%
in the coming quarters due to stable copra prices and
lower prices of the other inputs.

These initiatives should help Saffola edible oil to

improve its volume growth in the range of 8-10% in
the near to medium term. However in long run, we
expect Saffolas edible oil volume growth to be in the
range of 11-13%.
Saffola Oatsreached revenues of Rs80 crore in FY2015
Saffola Oats has maintained its no. 2 position in the oats
category with a value market share of 21% and exit market
share of 24%. Saffola flavoured oats are available in eight
flavours and are gaining good acceptance in the domestic
market. The portfolio has achieved revenues of Rs80 crore
in FY2015 and is well poised to achieve revenues of over
Rs125 crore in FY2016.

Parachute coconut oilsecondary volume growth stood at 9%

In Q4FY2015, the primary volume growth of Parachutes
rigid pack stood at 3% while the secondary volume
growth stood at 9%. Parachute coupled with Nihar
increased the companys market share to 57% which is
an indication of the strong pricing power Marico enjoys
in the domestic branded coconut oil market.

Value-added hair oilsecondary volume growth stood at 10%

The secondary sales volume growth of Maricos valueadded hair oil portfolio (Parachute Advansed, Nihar
Naturals and Hair & Care) stood at 10% (the primary
volume growth stood at 5%) in Q4FY2015.

We expect Parachutes (rigid pack) volume growth to

remain in the range of 6-8% in the near to medium term.
This will be driven by the conversion from loose to
branded coconut oil and share gains in the rural market.

Marico continues to grow strongly in Rs5,800-crore

value-added hair oil market and has strengthened its
volume market share by 88BPS to 29% (for 12 months
ended March 2015).

On an average, copra prices were up by 16% year on

year (YoY) and stood flat on a sequential basis in
Q4FY2015. The company has indicated that the copra
prices may remain range-bound in the near future.

The company is prototyping Nihar Natural Shanti

Sarson Kesh Tel in the domestic market (especially in
rural India). It expects this product to gain good
acceptance due to conversion from loose sarson oil to
branded sarson oil.

In February 2015, the company offered price-discount

of Rs3 on packs of 100ml and price-discount of Rs7 on
packs of 250ml to pass on the benefits of the recent
correction in the copra prices.

The volume growth of the value-added hair oil segment

will sustain in the range of 10-13% in the near term.
However, in the long run it should exceed 15-17% on
the back of a strong portfolio of value-added products.

Saffola edible oilmuted performance sustains

The Saffola edible oils secondary sales volume growth
stood at 3% in Q4FY2015 affected by an increase in
the pricing premium over loose edible oil due to the
recent fall in the edible oil prices. The brand has gained
a market share of 268 basis points (BPS) to 58% in the
super premium edible oil segment during the 12 months
ended March 2015.

Youth brandrevenue growth improved to double digits

The youth brand portfolio (Set Wet, Zatak and Livon)
registered a 10% sales growth at the primary sales level
(the secondary sales growth stood at 14%) during the
quarter. The recovery in the revenue growth was
achieved on the back of a revamped strategy.

Marico has started undertaking corrective measures

to bring back the volume growth on the double-digit
track. The company has started offering extra one litre
on the five-litre packs of both Saffola Gold and Saffola
Total in Q4FY2015. The company has also initiated
Sharekhan

After a base correction in deodorants in Q1FY2016, the

portfolio is expected to get back to the 15-20% revenue
growth rate level in the subsequent quarters of FY2016.

April 30, 2015

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and is the number two player in the male deodorant

space. The food business registered a double-digit
growth in Q4Y2015. The company continues to scale up
its presence in the neighbouring countries like Malaysia,
Myanmar and Cambodia.

International business performancerevenue growth

remained in single digits, margins remained close to 17%
The revenues of Maricos international business grew by
6% (with constant-currency sales growing at 8%) in
Q4FY2015 to Rs277 crore. The Bangladeshi business
registered a dismal sales performance as its revenues were
affected by political unrest while sales in Egypt were
affected by distribution transition. The revenues of SouthEast Asia got back in double digits. The OPM of the
international business stood lower YoY at 16.5% on account
of increased investment in brand building in the MiddleEast, Vietnam and Myanmar. The management expects
the OPM of Maricos international business to stay at
around 16-17% in the coming years.

South Africaconstant-currency revenue growth of

5%: The revenues of the companys South African
business grew by 5% in constant-currency terms. The
South African economy is expected to remain below
potential on higher inflation and interest rates. We
dont expect the business to see any substantial
improvement in the sales growth in the near term.
Outlook and valuation
Maricos management has maintained its target of
achieving a 6-8% volume growth in the domestic consumer
business, driven by implementation of new supply and
distribution projects, targeting strong growth in the youth
brands and steady volume growth in the focus portfolio.
The international business is expected to perform well in
the coming years. The copra prices are expected to remain
range-bound and hence gross margins are expected to be
better on Y-o-Y basis in FY2016.

Bangladeshperformance was affected by political

unrest: The revenue growth of the Bangladeshi
business (which accounts for about 45% of the
international business) was affected by political
unrest. At the constant-currency level, the revenues
declined by 1% while at the reported level, the
revenues saw a fall in double digits. The Parachute
coconut oil portfolio declined by 9% during the quarter.
On the positive side, the companys value-added
portfolio grew by 38% (in constant-currency terms) in
Q4FY2015. In the last couple of years the company
has made significant investments in expanding its noncoconut oil portfolio. It expects to reap the benefits
of same in the long run.

We have fine-tuned our earnings estimates for FY2016

and FY2017 to factor in expectations of a better revenue
growth in the coming years. Marico is well poised to
achieve about a 15% compounded annual growth in
revenues and over a 20% growth in the PAT over the next
two years. We maintain our Buy recommendation on the
stock with a revised price target of Rs435 (valuing the
stock at 31x its FY2017E earnings).

MENArevenues grew by 3% in constant-currency

terms: The Middle-East and North Africa (MENA)
regions revenues grew by 3% (in constant-currency
terms) in Q4FY2015 affected by the distribution
transition in Egypt (where the revenues declined by
30%). The transition will help in increasing the direct
distribution which will improve the retail sales and
reduce the working capital requirement in the coming
years. On the other hand, the business in the MiddleEast continued the positive momentum and grew by
55% in constant-currency terms.

Valuations (consolidated)
Particulars
Net sales (Rs cr)
Adj net profit (Rs cr)
EPS (Rs)

FY14

FY15

FY16E

FY17E

370.3

485.4

573.5

715.0

899.6

5.7

7.5

8.9

11.1

13.9

Growth YoY %

10.8

31.1

18.1

24.7

25.8

PER (x)

36.7

53.3

45.1

36.2

28.7

P/BV (x)

South-East Asiarevenues grew in strong double digits:

The Vietnamese business posted a strong double-digit
revenue growth of 25% in Q4FY2015. X-Men maintained
its leadership in male shampoos with a 39% market share

FY13

4,596.2 4,686.5 5,733.0 6,560.4 7,708.0

6.9

19.0

14.2

10.7

8.1

EV/EBIDTA (x)

22.3

34.3

29.5

23.4

18.8

RoCE (%)

24.3

30.7

41.1

43.1

42.7

RoNW (%)

23.7

29.0

36.0

33.6

32.1

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

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Century Plyboards (India)

Reco: Buy

Stock Update

Q4FY2015 performance robust, maintain Buy

Key points

Company details
Price target:

Rs290

Market cap:

Rs4,543 cr

52-week high/low:

Rs262/35

NSE volume:
(No of shares)

CMP: Rs205

5.8 lakh

BSE code:

532548

NSE code:

CENTURYPLY

Sharekhan code:

CENTURYPLY

Free float:
(No of shares)

5.9 cr

Shareholding pattern

Century Plyboards Q4FY2015 performance was strong with the overall top line
growing by 19.3% YoY aided by a robust 30.5% Y-o-Y growth in the laminate
business even as the plyboard business posted a muted growth of 10.6% YoY. A
healthy top line performance aided by soft raw material prices (the raw material
cost to sales ratio fell by 853BPS YoY during the year) led to an expansion of
663BPS in the OPM from 10.7% in Q4FY2014 to 17.4% in Q4FY2015. The strong
operational performance coupled with a low interest cost were reflected in
the earnings, which grew at 63.2% on a Y-o-Y basis. The reported earnings for
both the quarters included an element of forex gain adjusting for which the
earnings showed a growth of 278% YoY.
The management remains confident of the growth momentum and continues
to guide for a 22-25% top line growth for the company on the back of a strong
volume growth in the plyboard and laminate businesses. Further, the benefits
of soft raw material prices and of exploration of newer strategic locations like
Laos and Africa for raw material sources would enable the company to clock
margins in the range of 16.5-16.8%.
We believe that Century Plyboards with its top-of-the-mind brand recall is well
positioned to ride the economic revival-driven recovery in demand and increase
its market dominance in the plywood and laminate segments. The robust revenue
growth and the margin expansion play would enable the company to deliver a
strong growth ahead. We expect it to post a 31.3% earnings CAGR over FY201517. The implementation of GST would provide a fillip to the revenue and earnings
performance. In view of these positives, we maintain our Buy rating on the
stock with an unchanged price target of Rs290 (valued at 25x FY2017E).
Results

Price chart

Price performance
(%)

1m

3m

6m 12m

-8.7

10.7

65.6 427.5

Relative -7.9
to Sensex

20.5

64.4 328.7

Absolute

Rs cr

Particulars

Q4FY15

Q4FY14

YoY %

Income from operations

409.2
COGS
210.3
Gross profit
198.9
Gross margin (%)
48.6
Employee cost
52.4
Other expenditure
75.4
Adjusted operating profit
71.0
Adjusted operating profit margin (%) 17.4
Forex loss/(gain)
(8.3)
Operating profit
79.3
Operating profit margin (%)
19.4
Finance cost
9.0
Depreciation
11.9
Non operating income
0.9
PBT
59.3
Tax
11.4
Reported PAT
48.0
Tax adjusted forex
(6.6)
Adjusted PAT
41.3

342.9
205.5
137.4
40.1
39.4
61.2
36.8
10.7
(23.1)
59.9
17.5
20.6
8.9
0.7
31.2
1.8
29.4
(18.5)
10.9

19.3
2.4
44.8
853BPS
33.0
23.3
93.0
663BPS
-64.0
32.5
192BPS
-56.1
33.8
20.2
90.2
532.9
63.2
-64.0
278.5

Sharekhan

11

April 30, 2015

Q3FY15

QoQ %

385.8
6.1
194.7
8.0
191.2
4.0
49.5 (94.5)BPS
49.4
6.0
70.7
6.6
71.0
0.1
18.4 (103.8)BPS
(2.0)
321.5
73.0
8.8
18.9
48.1BPS
14.5
(37.7)
11.6
2.2
0.9
(7.6)
47.8
24.1
6.4
76.2
41.4
16.0
(1.6)
321.5
39.8
3.9

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Valuations (consolidated)

Q4FY2015 PBIT break-up

Particulars

FY13

FY14

FY15

FY16E

FY17E

Net sales (Rs cr)

1,182

1,348

1,588

1,957

2,384

(29)

14

18

23

22

Growth (%)
Adj EBITDA (Rs cr)

128

179

274

324

401

EBITDA margin (%)

10.8

13.3

17.2

16.6

16.8

53

77

149

194

257

Adjusted PAT (Rs cr)

Growth (%)

(57)

47

94

30

32

2.4

3.5

6.7

8.7

11.5

83

76

30.6

23.5

17.8

RoCE (%)

7.1

15.4

23.5

25.4

25.8

RoE (%)

11.7

23.1

40.8

36.2

33.7

Adjusted EPS (Rs)

PER (x)

Result highlights

Plyboard

Laminate business led the top line growth: In Q4FY2015

the top line of Century Plyboards grew by 19.6% year on
year (YoY), led by a strong 30.5% growth in the laminate
business. Over the last three quarters, the laminate
business has been growing rapidly averaging a growth of
30% YoY, led by improved capacity utilisation. For the
quarter, the plyboard business posted a muted 10.6% yearon-year (Y-o-Y) growth, which was lower than expected.
This moderation in growth of the plyboard business is on
account of weak consumer demand and lack of offtake at
the ground level. With an improvement in the consumer
sentiment and uptake in the end-users, we expect the
demand revival to get reflected in the results.

Particulars

Q4
FY15

Q4
FY14

Top line

YoY
%

Q3
FY15

QoQ
%
3.8

291.8

263.8

10.6

281.0

EBIT

57.6

43.6

32.1

54.0

6.7

EBIT margin (%)

19.8

16.5

321BPS

19.2

(53)BPS

559.8

470.1

19.1

479.8

16.7

41.2

37.1

405BPS

45.0

385BPS

Q4
FY15

Q4
FY14

YoY
%

Q3
FY15

QoQ
%

Capital employed
RoCE (%)

Laminate
Particulars
Top line

Q4FY2015 revenue break-up (%)

80.5

61.7

30.5

71.6

12.4

EBIT

6.5

3.3

94.7

5.1

26.9

EBIT margin (%)

8.0

5.4

265.0BPS

170.5

162.2

5.1

181.0

(5.8)

15.2

8.2

698BPS

11.2

34.8BPS

Q4
FY15

Q4
FY14

YoY
%

Q3
FY15

QoQ
%

17.4

12.0

45.0

18.6

(6.2)

Capital employed
RoCE (%)

7.1 (91.8)BPS

CFS
Particulars
Top line
EBIT

Margins expanded led by soft raw material prices: The

core operating profit margin (OPM; excluding the impact
of the foreign exchange [forex] gain) expanded by 663
basis points (BPS) YoY from 10.7% in Q4FY2014 to 17.4%
in Q4FY2015. This strong improvement was mainly on
account of savings on the raw material cost front. The
raw material cost to sales ratio was down 853BPS YoY,
resulting in an equal expansion in the gross profit margin.
Consequently, a strong sales performance and a robust
margin expansion together resulted in a 93% Y-o-Y growth
in the core operating profit of the company.
Sharekhan

6.0

2.8

112.9

6.0

(0.8)

EBIT margin (%)

34.2

23.3

1,092BPS

32.3

(187)BPS

Capital employed

60.0

62.0

(3.3)

60.2

(0.3)

RoCE (%)

39.8

18.1

2,171BPS

40.0

(0.4)BPS

Reported earnings grew by 63.2% YoY: The strong

operational performance coupled with a low interest cost
(down 56.1% YoY and 37.7% QoQ) was reflected in the
earnings, which grew at 63.2% YoY. The reported earnings
for both the quarters included an element of forex gain
adjusting for which the earnings grew 278% YoY.
Key management takeaways
Particle board unit to be set up in Chennai: A particle
board plant will be set up at the companys Chennai
factory with a capacity of 180 tonne cubic metre per
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Laminate capacity expansion on anvil: The company

is planning to expand its current laminate capacity
and add another two lines in the current year
increasing the capacity by 50%. It is also looking at
the other locations, such as the western areas. Maybe
it will put up one unit in the western region in the
next financial year. Gujarat is the hub of the laminate
industry. The laminate business is running at 100%
capacity and the company is running short of capacity
due to excessive demand.

day. The plant will be commissioned within the next year.

There will be a minimal capital expenditure (capex;
around Rs60 crore) for the same. The proposed plant
will use wastage from the other plants to make particle
board. The company expects sales of Rs125 crore from
the plant going forward. The particle board business will
lead to an overall margin increase of half a percent and
the produce would be sold to furniture factories.
On ground demand still muted: There is not much
demand at the ground level according to the
management but the demand for Century Plyboards
products is very good. Key reforms by the government
like the implementation of the Goods and Services Tax
(GST) and housing reforms will have a major impact
on the demand going forward.

Continue to enjoy MAT rate: The company would

continue to pay the minimum alternate tax (MAT) owing
to the taxation benefits enjoyed by its plant at Guwahati
along with all the plants at Myanmar and Laos. It has
also availed of MAT credit which is likely to bring down
the effective tax rate to 15-16% over the next two years.

EBITDA margin guidance: Crude oil related raw materials

constitute around 12% of the raw material cost for the
company and their prices have fallen by 50% which has
led to an expansion in the margins. Further, the earnings
before interest, tax, depreciation and amortisation
(EBITDA) margin is likely to expand and the management
has guided for a sustainable 16-17% margin.

Volume guidance: The volume guidance for the

plywood and laminate businesses is 15% each and the
realisation growth guidance for both is 10%. This results
in a revenue growth guidance of 25% for the company.

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

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This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to
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in whose possession this document may come are required to inform themselves of and to observe such restriction. Either SHAREKHAN or its affiliates or its directors or employees/representatives/clients or their relatives may have position(s), make market, act
as principal or engage in transactions of purchase or sell of securities, from time to time or may be materially interested in any of the securities or related securities referred to in this report and they may have used the information set forth herein before
publication. SHAREKHAN may from time to time solicit from, or perform investment banking, or other services for, any company mentioned herein. Without limiting any of the foregoing, in no event shall SHAREKHAN, any of its affiliates or any third party involved
in, or related to, computing or compiling the information have any liability for any damages of any kind. The analyst certifies that all of the views expressed in this document accurately reflect his or her personal views about the subject company or companies
and its or their securities and do not necessarily reflect those of SHAREKHAN. Further, no part of the analysts compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this document.

Sharekhan

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April 30, 2015

Compliance Officer: Ms. Namita Amod Godbole; Tel: 022-6115000; e-mail: compliance@sharekhan.com Contact: myaccount@sharekhan.com

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