cmc ltd - q2fy14 result update

7/27/2019 CMC Ltd - Q2FY14 Result Update

1/4

October 17, 2013 Apurva Shah (Research Analyst)(022) 6714 1449Milind Karmarkar (Head Research)

(022) 6630 8667

Nilay Dalal (Equity Sales)

(022) 2282 2992 Ext: 143

CMC Ltd.

1

.

.

.

.

.

.

.

.

.

.

Dalal & Broacha

Stock Broking Pvt. Ltd.

Result Update @ Dalal & Broacha

Dalal & Broacha Research is available on Bloomberg DBVS

CMC Q2FY14 revenue was in line with our expectations, but increase insubcontracting cost impacted the bottom line.

Net sales for the quarter increased by 15.4% qoq and 22.4% yoy to Rs. 5.6bn(vs. our expectations of Rs. 5.5bn). On yoy basis System integration (SI) andITES grew by 29.5% and 16.5% respectively. Customer service segment revenuealso went up by 14.6% yoy. Revenue from Education & training and SEZ

decreased by 16.1% and 11.7% on yoy basis respectively.

EBIDTA for the quarter increased by 14.8% qoq to Rs. 884.2 mn. Other incomefor the quarter came down by 79% qoq to Rs. 21.1 mn. Last quarter dividendfrom CMC America and profit from sale of asset significantly contributed toother income.

PAT for the quarter increased by 26.7% qoq and 36% yoy to Rs. 673 mn. EPSfor the quarter stood at Rs. 22.2

Other highlights:. 19 new clients were added, out of that 18 in India and one in America. International business grew by 23% qoq to Rs. 3.88 mn (~69.2% of therevenue)

. Tax rate for the quarter stood at 20% vs. 22.5% in Q1FY14. (After adjustingadditional tax burden on dividend distribution from CMC America)Conference call highlights:. Equipment business contributed 6.8% to the revenue vs. 10% in Q1FY14

and 5.2% in Q2FY13. TCS contribution (through go to market strategy) stood at 59% vs. 54% inQ1FY14 and 56% in Q2FY13. Company added 63 employees on net basis and total headcount duringthe quarter stood at 10818. Regular employees were 4542 and contractemployees stood at 6276. Total domestic business increased by 1% to Rs. 1.8 bn mainly on accountof de growth in Customer service business.

. Domestic revenue breakup: Customer service - Rs.772.7 mn, SystemIntegration - Rs. 369.2 mn, ITES - Rs. 450.2 mnValuation:At CMP the stock is trading at 16x FY14E earnings of Rs. 88.8 and 13.1xFY15E earnings of Rs. 108. We remain positive on the stock due to its distinctbusiness model and healthy client addition on quarterly basis. Werecommend to buy the stock around 1150-1250 level.

Buy on Decline

Curre nt Pri ce Rs 1417

Ta rge t Pri ce Rs 1475

Upside 4%

52 We e k Ra nge Rs 933 / Rs 1523

KEY SHARE DATA

Market Cap Rs 42.9 BN/$0.7BNEV / Sales 2.2

EV / EBIDTA 13.1

Volume (BSE + NSE) 6864

No of o/s share mn 30.3

Face Value 10

Book Value 312.3

BSE / NSE 517326 / CMC

Reuters CMC.BO

Bloomberg CMC IN Equity

Shareholding (%)

Period Jun-13 Mar-13Promote rs 51.1 51.1

MF / Ba nks / FI 17.8 19.0

FI I 23.3 21.8

Publ ic & Others 7.7 8.0

Total 100.0 100.0

40

50

60

70

80

90

100

110

120

130

140

CMC Sensex

Year Net Sales % Growth EBIDTA OPM % PAT % Growth EPS P/E (x) ROE % RoCE %

FY 12 14,693.4 36.0 2,243.2 15.3 1,518.1 (15.4) 50.1 28.3 21.3% 28.5%

FY 13 19,278.6 31.2 3,168.2 16.4 2,302.3 51.7 76.0 18.6 26.8% 34.2%

FY 14E 22,884.9 18.7 3,687.6 16.1 2,690.1 16.8 88.8 16.0 25.7% 32.4%

FY 15E 27,595.3 20.6 4,502.1 16.3 3,269.1 21.5 107.9 13.1 25.7% 32.6%


2/4

2

.

.

.

.

.

.

.

.

.

.

Dalal & Broacha



Particula rs (R s . M n) Q 2F Y13 Q 3F Y13 Q 4F Y13 Q1F Y14 Q 2F Y14

Q OQ

change

YO Y

Change

N e t S a l e s 45 82.6 4926.8 5228.8 4860.4 5607.4 15 .4% 22.4%

O th e r o p e ra ti n g i n co m e 3 .8 2.9 10.9 5.7 0.1 -98 .1% -9 7.2 %

T o ta l S a l e s 45 86 .4 492 9.7 5239.7 4866.1 5607.6 1 5.2 % 2 2.3 %

M a te ri a l s (186.1) (270.8 ) (1035.4) (446.2) (380.6) -14 .7% 10 4.5 %

S ta f f co s t (13 09 .8) (133 0.7 ) (12 87.8) (1291.1) (1 410.1 ) 9 .2% 7.7 %

S u b co n tra cti n g a nd o u ts o u rci n g co s t (17 24 .0) (198 7.4 ) (15 53 .5) (184 5.7 ) (2 38 4.3 ) 29.2% 3 8.3 %

O th e r E xp e n d i tu re (600.5) (50 9.2 ) (544.7) (512.7 ) (548.3) 6 .9% -8.7 %

T otal Ex penditure (3820.5) (4098.0) (4421.4) (4095.8) (4723.4) 1 5.3 % 2 3.6 %

E B I D T A 7 65.9 831.7 818.2 770.4 884.2 14 .8% 15.4 %

I n te re s t (0.0) (0.1 ) (1.5) (0.0) (0.0) 5 70 0.0 %

D e p re ci a ti o n (55 .9) (5 3.7 ) (68.3) (61.6 ) (64.1) 4 .0% 1 4.6 %PB T (E xcl u d i n g O th e r I n co m e ) 7 10 .0 77 8.0 7 48.4 708.7 82 0.1 15 .7% 1 5.5 %

O th e r I n co m e 11.4 22.7 40.6 100.7 21.1 -79 .0% 86.0 %

PB T 721.4 800.7 788.9 809.4 841.2 3 .9% 16.6%

T a x (227.4) (190.0 ) (175.4) (278.1) (168.1) -39 .6% -2 6.1 %

PA T (B e fo re M I ) 4 94.0 610.6 613.5 531.3 673.1 26 .7% 36.3 %

M i n o r i ty I n te r e s t

PAT (After M I) 494.0 610.6 613.5 531.3 673.1 26.7% 36.3%

E PS 16.3 20.2 20.2 17.5 22.2

E q u i ty 3 03 .0 303.0 303.0 303.0 303.0

F a ce V a l u e 10.0 10.0 10.0 10.0 10.0

Margins

O PM 1 6.7% 16.9% 1 5.6 % 15.8% 15.8%

PB T 1 5.7% 16.3% 1 5.1 % 16.7% 15.0%

N PM 1 0.8% 12.4% 1 1.7 % 10.9% 12.0%

T a x R a te 3 1.5% 23.7% 2 2.2 % 34.4% 20.0%

Segm ent wise revenue breakup

Cu s to m e r S e rvi ce s 7 77.1 780.8 1560.8 966.8 890.5 -7 .9% 1 4.6 %

S ys te m I n te g ra ti o n 28 09.6 3157.1 2717.4 2929.6 3638.4 24 .2% 29.5 %

I T e n a b l e d s e rvi ce s 7 20.5 745.9 693.4 723.3 839.4 16 .1% 16.5 %

E d u ca ti o n a n d T ra i n i n g 1 62 .6 14 4.1 1 43 .6 14 4.2 13 6.4 -5.4% -1 6.1 %

S p e ci a l Eco n o m i c Z o n e (S E Z ) 1 16 .5 10 1.9 1 24 .4 10 2.3 10 2.8 0.5% -1 1.7 %

T o ta l 45 86.4 4929.7 5239.7 4866.1 5607.5 1 5.2 % 2 2.3 %

Segm ent result

Cu s to m e r S e rvi ce s 1 07.8 57.7 81.7 78.7 40.5 -48 .6% -6 2.5 %

S ys te m I n te g ra ti o n 5 33.7 663.5 626.3 616.1 708.6 15 .0% 32.8 %

I T e n a b l e d s e rvi ce s 1 96.3 233.6 168.4 187.1 250.4 33 .8% 27.5 %

E d u ca ti o n a n d T ra i n i n g 20 .4 1 6.2 25.7 20.8 1 3.4 -35 .5% -3 4.2 %

S p e ci a l Eco n o m i c Z o n e (S E Z ) 93 .1 7 3.7 1 00 .8 7 7.0 7 8.4 1.9% -1 5.8 %

T o ta l 9 51 .4 1044.8 1002.9 979.6 1091.3 1 1.4 % 1 4.7 %

Segment Margins

Cu s to m e r S e rvi ce s 1 3.9% 7.4% 5.2 % 8.1% 4.5%

S ys te m I n te g ra ti o n 1 9.0% 21.0% 2 3.0 % 21.0% 19.5%

I T e n a b l e d s e rvi ce s 2 7.2% 31.3% 2 4.3 % 25.9% 29.8%

E d u ca ti o n a n d T ra i n i n g 12.5% 11.3% 1 7.9% 14.4% 9.8 %

S p e ci a l Eco n o m i c Z o n e (S E Z ) 79.9% 72.3% 81.0% 75.2% 7 6.3 %

T o ta l 20.7% 21.2% 1 9.1 % 20.1% 19.5%

CMC Ltd - R esult update


3/4

3

.

.

.

.

.

.

.

.

.

.

Dalal & Broacha



Profit &Loss (Rs Mn) FY 12 FY 13 FY 14E FY 15E Cash Flow Statement (Rs Mn) FY 12 FY 13 FY 14E FY 15ENet Sales 14,693.4 19,278.6 22,884.9 27,595.3 Net Profit 1,518.1 2,302.3 2,690.1 3,269.1

Add: Dep. & Amortization 213.7 232.0 292.7 359.9

Software development expens (4,402.2) (5,216.4) (6,064.5) (7,312.7) Cash Profit 1,731.8 2,534.3 2,982.8 3,629.0

Equipment purchased for resal (1,450.6) (1,867.9) (2,148.1) (2,534.7)

General and admin. Expenses (6,597.4) (9,026.2) (10,984.7) (13,245.7) (Inc) / Dec in

Cost of Sales (12,450.2) (16,110.5) (19,197.3) (23,093.2) Sundry Debtors (1,299.9) (341.6) (576.0) (975.4)

Inventories 0.6 (9.0) (45.0) (38.7)

Operating Profit 2,243.2 3,168.2 3,687.6 4,502.1 Loans & Advances (1,022.8) (717.4) (412.2) (453.5)

Depreciation (213.7) (232.0) (292.7) (359.9) Sundry Creditors 835.6 294.9 325.3 566.7

PBIT 2,029.5 2,936.1 3,394.9 4,142.1 Others 483.7 (101.7) 204.9 183.1

Other Income 174.6 131.6 144.8 159.2 Change in Working Capital (1,002.8) (874.7) (503.0) (717.7)

Interest (0.2) (1.8) 0.0 0.0 CF fromOperating Activities 729.0 1,659.6 2,479.8 2,911.2

Profit Before Tax 2,204.0 3,065.9 3,539.6 4,301.4 CF from Investing Activities (346.8) (351.0) (766.9) (1,200.0)

Provision for Tax (685.9) (763.6) (849.5) (1,032.3)

PAT 1,518.1 2,302.3 2,690.1 3,269.1 CF from Financing Activities (359.3) (522.7) (674.7) (781.3)

Minority Interest 0.0 0.0 0.0 0.0 Cash Generated (Utilised) 22.9 785.9 1,038.2 930.0

Extraordinary Items 0.0 0.0 0.0 0.0 Cash at the start of year 565.3 588.2 1,374.2 2,412.4

Reported PAT 1,518.1 2,302.3 2,690.1 3,269.1 Cash at the end of year 588.2 1,374.2 2,412.4 3,342.3

Balance Sheet (Rs Mn) FY 12 FY 13 FY 14E FY 15E Ratios FY 12 FY 13 FY 14E FY 15E

Equity Capital 303.0 303.0 303.0 303.0 OPM 15.3 16.4 16.1 16.3

Reserves 7,418.9 9,159.6 11,175.0 13,662.8 NPM 10.3 11.9 11.8 11.8

Net Worth 7,721.9 9,462.6 11,478.0 13,965.8 Tax Rate (31.1) (24.9) (24.0) (24.0)

Secured Loan 0.0 0.0 0.0 0.0 Growth Ratio

Unsecured Loan 0.0 0.0 0.0 0.0 Net Sales 36.0 31.2 18.7 20.6

Total Debt 0.0 0.0 0.0 0.0 Operating Profit 15.3 16.4 16.1 16.3

Capital Employed 7,721.9 9,462.6 11,478.0 13,965.8 PAT (15.4) 51.7 16.8 21.5

Gross Block 3,542.7 4,027.2 5,227.2 6,427.2 Per Share

Accumulated Depreciation (961.3) (1,163.6) (1,456.4) (1,816.3) Earning Per Share (EPS) 50.1 76.0 88.8 107.9

Net Block 2,581.4 2,863.6 3,770.8 4,610.9 Cash Earnings (CPS) 57.2 83.6 98.4 119.8

Capital WIP 333.9 833.1 400.0 400.0 Dividend 12.5 17.5 19.0 22.0

Total Fixed Assets 2,915.2 3,696.6 4,170.8 5,010.9 Book Value 254.8 312.3 378.8 460.9

Free Cash flow 12.6 43.2 56.5 56.5

Goodwill 3.4 3.4 3.4 3.4

Investments 1,515.8 853.3 853.3 853.3 Valuation Ratios

Inventory 134.1 143.1 188.1 226.8 P/E (x) 28.3 18.6 16.0 13.1

Sundry debtors 3,821.2 4,162.8 4,738.7 5,714.1 P/B (x) 5.6 4.5 3.7 3.1

Cash & bank 588.2 1,374.2 2,412.4 3,342.3 EV / Sales 2.9 2.2 1.8 1.5

Loans & advances and Other CA 3,405.0 4,122.4 4,534.6 4,988.1 EV / EBIDTA 18.9 13.4 11.3 9.0

Sundry creditors (2,619.8) (2,914.7) (3,239.9) (3,806.6) Div. Yield (%) 0.9 1.2 1.3 1.6

Other Liabi. (618.1) (769.5) (846.5) (888.8) FCF Yield (%) 0.9 3.0 4.0 4.0

Provisions (1,532.8) (1,279.7) (1,407.7) (1,548.5)

Working Capital 3,181.2 4,841.9 6,383.1 8,030.8 Return Ratios (%)

Deffered Tax 109.7 70.7 70.7 70.7 ROE 21.3% 26.8% 25.7% 25.7%

Misc. Expense 0.0 0.0 0.0 0.0 ROCE 28.5% 34.2% 32.4% 32.6%Capital Deployed 7,721.9 9,462.6 11,478.0 13,965.8

CMC Ltd - Financials


4/4

.

.

.

.

.

.

.

.

.

.

Dalal & Broacha


Disclaimer

This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are

accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be

responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment

referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document.

For Further details

Contact Email ID Contact No. Sector

Mr. Milind Karmarkar [email protected] 022 67141445 Head Research

Mr. Chirag Shah [email protected] 022 67141447 Head Equity Sales

Ms. Hiral Sanghvi [email protected] 022 67141444 Retail, Cement

Mr. Kunal Bhatia [email protected] 022 67141442 Auto, Auto Ancillary, FMCG

Mr. Lalitabh Shrivastawa [email protected] 022 67141450 Banking & NBFCs

Mr. Ashutosh Garud, CFA [email protected] 022 67141448 Capital goods

Ms. Purvi Shah [email protected] 022 67141446 Pharma

Mr. Apurva Shah [email protected] 022 67141449 IT, Agrochemicals, Fertilizers

Address :- 508, Maker Chambers V, 221 Nariman Point, Mumbai 400 021 Tel: 91-22- 2282 2992, 2287 6173, (D) 6630 8667 Fax: 91-22-2287 0092

E-mail: [email protected], [email protected]

cmc ltd - q2fy14 result update

Documents