october 4, 2019 s tock tales...-investment by green india -investment by ascent and exit to reliance...

Stock Tales are concise, holistic stock reports across wider spectrum of sectors. Updates will not be periodical but based on significant events or change in price.

Stock_____

TALES

October 4, 2019

ICIC

I S

ecurit

ies –

Retail E

quit

y R

esearch

Stock T

ale

s

October 4, 2019

CMP: | 878 Target: | 945 (8%) Target Period: 12 months

Amber Enterprises India (AMBEN)

HOLD

Strong backward integration key strength…

Amber Enterprises (India) (Amber) is mainly engaged in the designing and

manufacturing of room air conditioners (RAC) in India. The company is the

market leader in the RAC OEM/ODM industry (original equipment

manufacturer/original design manufacturer) with a volume market share of

~20% manufacturing for eight out of the top 10 RAC brands in India. Amber

raised ~| 475 crore through an IPO in 2018 and utilised the funds for debt

reduction, capacity expansion of RAC and to fund series of acquisition in

component business. It recorded a consolidated revenue, earning CAGR of

29%, 107% in FY17-19 supported by customer additions and reduction in

interest cost. We believe Amber is a play on strong demand prospect of

RACs in India (likely to grow at 18% CAGR in FY19-21E) and rising trend of

domestic manufacturing. Hence, its performance is likely to remain strong

with revenue, earning CAGR of ~20% and ~38% supported by stable

margin and reduction in corporate tax rate (saving of ~500 bps). We also

believe that higher asset turnover with stable margin would result in an

improvement in return ratios, going forward. We ascribe 16x FY21E earnings

with a HOLD rating on the stock and a target price of | 945/share.

OEM/ODM to benefit from rising localisation of RACs

The RAC market is expected to witness 18% CAGR reinforced by a surge in

rural consumption, shorter replacement cycles and government push of

energy-efficient RACs at affordable price points. RAC volumes are expected

to increase from 5.5 million units in FY19 to 8.2 million units by FY22E.

Further, contract manufacturing constitutes ~38% of total RAC market

volumes which is expected to reach 56% by FY22, highlighting the immense

potential of key players like Amber.

Strong customer base

Amber has developed strong relationships with its customers, which

includes eight out of the 10 top RAC brands in India. Key customers include

Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool. These customers

command around 75% share in the Indian RAC markets.

Valuation and outlook

We like Amber for its leadership position in the RAC OEM/ODM industry in

India with a strong customer base. Focus on component business provides

Amber an edge over the competition to acquire new customers and increase

the wallet share of existing customers. With strong revenue earnings

estimate of ~20%, 38%, we ascribe 16x FY21E earnings with a HOLD rating

on the stock and a target price of | 945/share.

Key Financial Summary ssf

(| crore) FY16 FY17 FY18 FY19 FY20E FY21E CAGR19-21E

Net Sales 1089.0 1651.9 2128.1 2752.0 3313.6 3937.3 19.6

EBITDA 113.7 130.5 183.5 212.9 265.1 326.8 23.9

EBITDA Margin (%) 10.4 7.9 8.6 7.7 8.0 8.3

Net Profit 24.1 22.2 62.3 94.8 139.6 181.3 38.3

EPS (|) 11.1 9.3 19.8 30.1 44.4 57.7

P/E (x) 81.8 97.6 45.8 30.1 20.5 15.7

RoE (%) 9.2 6.1 7.0 9.6 13.6 15.0

RoCE (%) 12.2 13.3 13.5 12.3 15.8 18.0

Source: Company, ICICI Direct Research

ff

Particulars

Particular Ammount

Market cap (| crore) 2761.0

Total Debt (| crore) 232.8

Cash & Inves (| crore) 44.7

EV (| crore) 2949.1

52 Week H/L 1021/621

Equity Capital (| crore) 31.4

Face Value(|) 10.0

Price Performance

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

0

200

400

600

800

1,000

1,200

1,400

Feb-18

May-18

Aug-18

Nov-18

Feb-19

May-19

Aug-19

Amber (LHS) Nifty 50 (RHS)

Research Analyst

Sanjay Manyal

[email protected]

Hitesh Taunk

[email protected]

ICICI Securities | Retail Research 2

ICICI Direct Research

Stock Tales | Amber Enterprises India

Company Background

Incorporated in 1990, Amber is the market leader in the OEM/ODM business

of room air conditioners in India as it manufactured ~20% of total RAC

volume sold in India during FY19. The company is a one-stop solutions

provider for the major brands in the RAC industry and currently serves eight

out of the 10 top RAC brands in India (such as Voltas, Daikin, Panasonic,

Whirlpool, etc). Over the last five years, the company has increased its focus

on backward integration of RAC manufacturing through acquisition of

component manufacturers ILJIN and EVER Electronics. Further, Amber also

entered the heat, ventilation and air conditioning (HVACs) segment by

acquiring Sidwal Refrigeration Industries Pvt Ltd (Sidwal) in May 2019.

Amber’s product range includes:

RAC: Contributing ~63% to revenue, Amber’s RAC segment includes

manufacturing of complete range of RACs including window air conditioners

(WACs) and indoor units (IDUs) and outdoor units (ODUs) of split air

conditioners (SACs) with specifications ranging from 1 tonne to 2 tonne

across energy ratings and types of refrigerant

RAC components: Contributing ~15% to revenues, Amber manufactures

functional components of RACs like heat exchangers, motors & multi-flow

condensers and inverter PCB boards. It also manufactures other RAC

components like sheet metal components, copper tubing and injection

moulding components.

Non-AC component: Contributing ~22% to revenue, Amber also

manufactures components for other consumer durables and automobiles

such as case liners for refrigerators, plastic extrusion sheets for consumer

durables and automobile industry, sheet metal components for microwave,

washing machine tub assemblies and for automobiles & metal ceiling

industries.

Exhibit 1: Key milestones

Company

was

incorporated

as a private

-Started manufacturing

microwave ovens for

LG

-Started manufacturing

heat exchangers

-Dehradun Factory Unit

– 5 was established

-Started its first factory at

Rajpura

-Started Dehradun Plant for RAC

manufacturing for LG

-Dehradun Factory Unit - 4

-Kasna Unit, Kala Amb Unit and

Pune Unit established

-Dehradun Factory Unit – 6 was

established

-Investment by Green India

-Investment by Ascent

and exit to Reliance

Alternative Investments

Fund

-Acquisition of PCB

manufacturer IL JIN for

the consideration of |

54 crore

1994-20041990 2005-2009 2010-2011 2012 2017

-Jhajjar Unit was

established

-Investment by

Reliance Alternative

Investments Fund

-Acquisition of PICL

- Initital Public offer

-Acquisition of EVER

- Acquisiton of Sidwal

- Joint PCB Development

Agreement with

Infineon Technologies,

Singapore

2018-2019





Exhibit 2: Product portfolio of Amber





Investment Rationale

Indian RAC industry at inflection point

The Indian RAC industry recorded a value CAGR of ~15% in the last 10 years

to reach | 16400 crore in FY19. Increasing urbanisation, innovative products,

affordable pricing and high disposable incomes have aided in the strong

growth in the RAC market in India. During 2018, the RAC industry de-grew

3% as it witnessed several headwinds, led by GST transition, change in

energy-efficiency ratings and unprecedented rains in quarter 1 (peak

season). Despite a periodic aberrations, we believe the industry is likely to

witness 18% CAGR in FY19-21E led by a surge in rural consumption, shorter

replacement cycles and government push of energy-efficient RACs at

affordable price points. RAC volumes are expected to increase from 5.5

million units in FY19 to 8.2 million units by FY22E. The Indian RAC market

presents a huge opportunity for players to garner a larger share of the

market due to low household penetration of cooling products in India

(~10%). Viewed as a luxury product in the recent past, the sweltering and

longer summers in the country have led to the creation of new demand for

RACs not only in larger cities but also in Tier II/III cities where heightened

economic activity has resulted in greater affordability. Additionally, new

product features and technological advancement in the RAC market have

added to the increase in replacement demand of the product.

Exhibit 3: Indian RAC industry growth trend

0.0

5000.0

10000.0

15000.0

20000.0

25000.0

30000.0

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20E

FY21E

FY22E

| crore)

CAGR ~15%

CAGR ~18%


Exhibit 4: India’s RAC penetration level

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

FY09 FY19 FY22E

(%

)


Contract manufacturing to gain market with rising localisation

Contract manufacturing of RAC constitutes around 38% of total RAC market

in India. By FY22, the volume share of contract manufacturing is expected

to reach 56% of the total RAC market volumes, highlighting the immense

potential for key players like Amber. Intense competition and growing

number of RAC brands in the market has forced RAC players to concentrate

on marketing and promoting their products to spread sales reach and

expand market share. RAC brands are adopting an asset light strategy.

Hence, they are choosing to outsource most manufacturing of RAC and RAC

components to contract manufacturers.

Contract manufacturer have also invested in expanding and building newer

capabilities to serve the overall white goods market in India. R&D, design

and engineering were substantially negligible revenue generating activities

in the overall portfolio of services offered to RAC brands five years back.

With increasing dependence of RAC brands on contract manufacturing,

priority has been given to strengthen R&D, design and engineering

capabilities that are high-value activities among all services.




Faster product development cycles to benefit contract

manufacturer with strong backward integration

As domestic demand of RAC has been continuously rising, the volume of

manufacturing that is outsourced by RAC brands is expected to grow at a

higher rate. Another key contributor towards growing contract

manufacturing market share is the entry of many new players in the RAC

markets (Including e-com players such as Flipkart, Amazon). These new but

relatively smaller players lack backward integration capabilities making them

entirely reliant on OEM/ODM companies to bring their products to the

market. The rate of change of technology and product features of consumer

durables, especially RACs, has undergone tremendous changes such that

RAC brands find it challenging to match the pace. This brings the contract

manufacturers to the forefront as they exhibit flexibility in a dynamic

environment through nimble manufacturing operations, shorter timelines

and attractive economics.

As the growing RAC market demand drives local manufacturing volumes, it

complements OEM/ODM companies’ investment in their facilities and

capabilities as they gain an edge over vendors on sourcing contracts,

thereby strengthening their supply chain. Improving economies of scale in

manufacturing has accelerated the shift in manufacturing locations shifting

from South East Asian countries to India in the overall consumer durables

market, which also includes RAC and RAC component manufacturing. Share

of imports would gradually decline in the next few years as domestic

production aims to substitute imports. The efficiency of contract

manufacturer to cater the requirements of RAC brands will define growth of

individual companies in the segment. The comparison of CAGR for the

overall RAC market vis-à-vis outsourced manufacturing clearly shows the

high growth expected in the OEM/ODM market, going ahead. In FY12, 16%

of the total value RAC market was catered to by OEM/ODM players, which

grew to 38% in FY19. Further, in FY22, this percentage is anticipated to grow

to 56% by volume. The trend is unequivocal evidence of the industry tilting

towards contract manufacturing. The company is the leading player with

55% share in volume terms in the overall OEM/ODM market in India.

Amber is one of the most prominent companies in RAC manufacturing such

that it serves 8 top RAC brands in India. In case of the overall RAC market, it

commands a volume share of 20% in FY19, which grew from 15% in FY15.

Exhibit 5: Amber volume share of total RAC volume in FY15

Amber

15%


Exhibit 6: Amber volume share of total RAC volume in FY19

Amber

20%





Continuous increasing proportion of components and other

business in Amber’s portfolio

Over the last three years, Amber has increased its component

manufacturing capability by acquiring component manufacturing facilities in

India. The company has acquired ILJIN and EVER Electronics, to strengthen

its component manufacturing capability. Both companies are into

manufacturing of PCBs for home appliances, automobile players and serving

major industry players like LG, Godrej, LS Automotive, etc. Amber has total

~8 million units PCB manufacturing capacity in India. Recently, the company

also entered the HVAC segment through the acquisition of Sidwal

Refrigeration Industries Ltd.

Sidwal is a quality-focused heating ventilation air conditioning solutions

provider that caters to Indian Railways, metros, bus air-conditioning,

defence, telecom and commercial refrigeration. It has an established market

leadership in supplying over 15,000 and 2,000 heating & ventilation air

conditioning units for mainline coaches (such as the recently introduced

Vande Bharat Express) and metro segments, respectively. The acquisition

provides following synergies to Amber: 1) direct entry to the product

segment which has high entry barrier of up to six to seven years. Besides

this, setting up a pan-India service network for maintenance of coaches

makes the entry of new players even more challenging, 2) Amber would

leverage Sidwal’s technical background to cater to its existing customers for

products like commercial air-conditioners, air-handling units and fan coil

units, 3) would help reduce seasonal dependency of RAC business, 4) better

bargaining power for Amber in terms of outsourcing raw materials, which is

same for both companies and 5) margin accretive for Amber as Sidwal’s

EBITDA margin much higher at ~19% compared to ~8% of Amber. Further,

Sidwal has an outstanding order book of | 200 crore. The management

guided that the revenue potential of Sidwal with current capacity would be

| 400 crore in the next two years.

Post acquisition of Sidwal, the contribution of components and other

business in Amber’s total topline has increased to 37% from 26% in FY17.

The management further believes that the revenue contribution of these two

segments may go up to 50% in the next five years supported by sustained

demand for consumer appliances in tier-II and tier-III cities. We model

component and other business would record revenue CAGR of 25% and

15%, respectively, in FY19-21E.

Exhibit 7: Major acquisitions to grow inorganically in component business

Acquired Entity

Year of

Acquisition

Stake

(%)Consideration Products manufactured Customer

Revenue, Profit/Loss

(FY19)

PICL (India) Pvt Ltd 2012 100% | 48.9 croreElectrical motors for RAC and

commercial AC

Home appliaces players | 137 crore/ | (1.61) crore

ILJIN 2017 70% | 54.4 crore

PCB for air conditioners & other

consumer durable proudcts like

washing machine, Microwave etc

Panasonic, Samsung, LG, IFB | 335 crore/ | 5.8 crore

Ever Electronics* 2018 19% | 5.7 crorePCB for home appliances and

automobile products

LG, Godrej, LS automotive,

Powercraft Electronics

| 272.2 crore/ | 3.1 crore

Sidwal Refrigeration 2019 80% | 202 croreManfaucturing Heating Ventilation Air

conditioning Solutions.

Indian Railways, Metros, Bus

Airconditioning, Defence, Telecom,

Commercial Refrigeration

| 180 crore/| 27 crore

Source: Company, ICICI Direct Research,* by securing the right to appoint majority of directors on the board of EVER




Focus to increase profitability of component business

The component business of Amber grew at 48% CAGR in FY17-19 post

acquisition of ILJIN and Ever Electronics. The company is focused on

increasing the revenue of the component business through addition of new

clients and increasing wallet share of revenue from existing clients. Before

the acquisition by Amber, ILJIN and Ever were largely serving LG. However,

post-acquisition, more companies like Panasonic and IFB were also added

in the customer list of ILJIN and EVER. We believe Amber will leverage its

existing client base to push the sales of components of ILJIN and EVER,

going forward. Further, the company has kept a strong focus on R&D to

develop new technologies and products to increase the customer base. In

this regard, Amber has entered into a joint agreement with Singapore based

Infineon Technologies Asia Pacific Pte Ltd to design and develop in-house

manufacturing of printed circuit board (PCB) (the designing part of PCBs is

still at a very nascent stage in India). Besides this, it is constantly focusing

on developing cutting edge solutions to improve operating efficiencies.

The component business has a high entry barrier and takes three to four

years to get final approval from clients and final order of products from the

same clients. Amber is aggressively expanding its customer base for the

component business but has still not achieved desired operating leverage in

the same business. The company’s components business EBITDA margin

increased ~200 bps YoY to 5% in FY19 but is still lower than consolidated

EBITDA margin of ~8% clocked in FY19. We believe strong traction of the

RAC business in India coupled with strong client relation would help drive

Amber’s component business revenue at CAGR of 25% in FY19-21E with an

improvement in EBITDA margin.

Exhibit 8: New business opportunities to drive component

business in FY19-21E

293.2

412.8

516.0

645.0

0

100

200

300

400

500

600

700

FY18 FY19 FY20E FY21E

(| crore)

CAGR ~25%

f


Exhibit 9: Other business growth largely to be driven by

execution of Sidwal’s order book

309.9

605.4 696.3 8

00.7

0

100

200

300

400

500

600

700

800

900


(| crore)

CAGR ~15%





Supplier to top eight brands in RAC segment

The company has strong and established relationships with customers,

which includes eight out of top 10 brands in India capturing 75% market

share. Out of these, five are MNC brands while the remaining three are

Indian companies. However, the major contribution to the topline comes

from the top three brands viz. Voltas, LG and Panasonic. Each customer

contributes ~16% to the consolidated topline of Amber. Most of these

customers have been associated with Amber for more than five years.

Further, acquisition of customers in the RAC industry requires persistent and

continued investment of time, effort and capital. Amber has gained the

confidence of customers by initially supplying certain components and then

moving to reliability functional components and eventually to complete

RACs. Hence, its takes three to four years for any new player to acquire

customer in India. In FY19, Amber added new customers in the portfolio,

which includes e-commerce players like Flipkart, Amazon and MNCs brands

Toshiba and Midea.

Besides, Amber also acquired new customers through Sidwal into HVAC

segments, which is Indian Railways and Metro Rail. Sidwal earns ~70% of

its revenue from HVAC works on the coaches of Indian railways and metro

trains.

Exhibit 10: List of marquee clients





RAC segment to grow higher than industry trend

Amber has increased its RAC manufacturing capacity by 37% in FY17-19 to

4.8 million units. The capacity addition was on the back of rising demand of

IDUs/ODUs (Indoor units/Outdoor units) from existing customers as well as

addition of new customers during the same period. We believe despite

rising contribution of component and other business, Amber’s RAC

division’s contribution to topline would remain high at almost 65%. Large

scale of production and proximity of manufacturing plants to its clients gives

Amber an edge over its competitors (includes import of RACs) to deliver

required demand within a stipulated time frame. We believe strong demand

for RACs in the domestic market coupled with government intervention to

increase the custom duty on import of complete built units (CBUs) (from

10% to 20%) and compressor (from 7.5% to 10%) would benefit domestic

manufacturers like Amber in the long term. Hence, we believe RAC segment

of Amber would grow at a CAGR of 20% in FY19-21E (against ~18% of

industry growth).

Exhibit 11: RAC segment revenue to record strong revenue growth in FY19-21E

1524.9

1733.8

2101.3 2491.6

0

500

1000

1500

2000

2500

3000


(| crore)

CAGR ~20%





Reduction in working capital days with recovery in sales

Amber’s cash conversion cycle was around 30 days during FY17 and FY18.

The cash conversion cycle saw a sudden jump of ~55 days mainly due to a

sharp increase in debtors and inventory days in FY19. It was largely owing

to bad weather conditions wherein the RAC industry, as a whole, recorded

a volume decline of ~3%. Lower offtake by customers during the bad

weather resulted in high working capital days during FY19. We believe the

working capital days would remain higher for FY20E owing to recent

acquisition of Sidwal that has higher working capital days (of ~180 days).

The management is confident that the working capital cycle would start

improving from FY20 onwards with an improvement in both inventory and

debtor days. We believe a reduction in working capital requirement would

boost the quality of the balance sheet and lower interest outgo, thus aiding

earnings growth, going forward.

Exhibit 12: Working capital cycle to improve, going forward

6965

104

90 90

59

6874

65 65

98 98

125

115110

0

20

40

60

80

100

120

140

FY17 FY18 FY19 FY20E FY21E

Days

Debtors Inventory Creditors





Key risks and concerns

High dependence on top 8 customers for substantial portion of

revenues

A majority of the company’s revenue is derived from its top 8 customers.

Amber’s customers often undertake vendor rationalisation to reduce costs

related to procurement from multiple vendors. Since the company is largely

dependent on certain key customers for a significant portion of its sales, the

loss of any key customer or a significant reduction in demand from such

customers could have a material adverse effect on business, financial

condition, results of operations and future prospects.

Seasonality factor may adversely impact performance

Sales of AC and AC components are highly dependent on summer due to

heat, warm weather and are lower during monsoons and winter. Extended

winter (like in FY19) or untimely rains during the peak sales season, may

adversely affect sales volume (of key customers).

Pricing pressure from customers may adversely affect gross

margin, profitability

Customers of the company may seek for price reduction initiatives. Adopting

cost cutting measures while maintaining stringent quality standards or

inability to pass on the higher raw material price may put pressure on

EBITDA margins. As a result, there could be a substantial drop in the

profitability of Amber.

Inability to identify, understand evolving industry trends,

technological advancements may adversely affect business

The RAC and other consumer durables market in India is characterised by

technological advancements, introduction of innovative products, price

fluctuations and intense competition. Changes in consumer preferences,

regulatory or industry requirements may render certain products of Amber

less attractive or obsolete. The company’s competitive strength is in its

ability to adopt high technology (with required regulatory standards) and

develop new products to address unidentified needs among its potential

customers in a timely manner. However, inability to obtain such knowledge

in a timely manner may result in higher capex and can adversely impact the

bottomline and return ratios of the company.




Valuation and outlook

We believe the RAC industry is likely to grow at CAGR of 18% in FY19-21E

backed by rising income, urbanisation and consumer finance in India. Amber

being one of the largest contract manufacturer of RACs in India will be the

biggest beneficiary of rising outsourcing demand from branded players. We

believe the company is likely to record revenue CAGR of ~20% led by both

RAC and component business. We model a slight improvement in EBITDA

margin in FY19-21E supported by strong volume growth and further

reduction in corporate tax rate to result earning CAGR of 38%. On the

balance sheet front, a reduction in working capital coupled with improved

asset turnover would help drive return ratios, going forward. We value the

stock at 16x FY21E (~45% discount to branded RAC players) and ascribe a

Hold rating on the stock with a target price of | 945/share.

Exhibit 13: Strong revenue growth in RAC segment

2128.1 2752.0 3313.6 3937.3

0

500

1000

1500

2000

2500

3000

3500

4000

4500


(| crore)

CAGR ~20%


Exhibit 14: EBITDA margin to remain stable

183.5

212.9

265.1

326.8

8.6

7.7

8.0

8.3

7.2

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

0

50

100

150

200

250

300

350


(%

)

(| crore)

EBITDA EBITDA Margin (%)


Exhibit 15: PAT growth supported by sales growth and tax cut

22

62

95

140

181

0

20

40

60

80

100

120

140

160

180

200


(| crore)

CAGR ~38%


Exhibit 16: Improvement in profitability to trigger return ratio

6.17.0

9.6

13.6

15.0

13.3 13.5

12.3

15.8

18.0

0.0

5.0

10.0

15.0

20.0


(%

)

RoE RoCE


Exhibit 17: Valuation matrix

FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19FY20EFY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19FY20EFY21E

Amber Ent 2,761 2752 3314 3937 7.7 8.0 8.3 94.8 139.6 181.3 0.2 0.2 0.1 12.3 15.8 18.0 9.6 13.6 15.0 29.1 19.8 15.2

Dixon Tec 3398 2984 4133 4772.1 4.5 4.6 4.6 63.3 94.9 114.9 0.4 0.2 0.2 19.921.21.3 20.1 18.3 21 19.8 53.7 35.8 29.6

PEMcap

Rs cr

Revenue EBITDA margin PAT D/E RoCE RoE

Source: Company, Bloomberg, ICICI Direct Research




Financial Summary

Exhibit 18: Profit & Loss statement (| crore)

(Year-end March) FY18 FY19 FY20E FY21E

Revenue 2,128.1 2,752.0 3,313.6 3,937.3

Growth (%) 28.8 29.3 20.4 18.8

Raw material expense 1,768.8 2,313.2 2,776.8 3,287.7

Employee expenses 46.8 58.8 72.9 82.7

Power & Fuel cost 0.0 0.0 0.0 0.0

Packing, frieght, & forwarding charges 0.0 0.0 0.0 0.0

Other expenses 128.9 167.2 198.8 240.2

Total Operating Exp 1,944.5 2,539.1 3,048.5 3,610.5

EBITDA 183.5 212.9 265.1 326.8

Growth (%) 40.6 16.0 24.5 23.3

Depreciation 49.0 62.3 76.2 90.6

Interest 53.8 24.6 18.8 13.5

Other Income 8.7 9.9 16.6 19.7

PBT 89.4 135.9 186.6 242.4

Total Tax 27.1 41.2 47.0 61.1

PAT 62.3 94.8 139.6 181.3


Exhibit 19: Cashflow statement (| crore)


Profit after Tax 62.3 93.7 139.6 181.3

Add: Depreciation 49.0 62.3 76.2 90.6

(Inc)/dec in Current Assets -212.1 -600.5 -80.2 -288.0

Inc/(dec) in CL and Provisions 165.6 394.5 102.5 165.4

Others 53.8 24.6 18.8 13.5

CF from operating activities 118.7 -25.5 256.9 162.8

(Inc)/dec in Investments -5.7 5.7 0.0 0.0

(Inc)/dec in Fixed Assets -179.4 -164.2 -80.0 -80.0

Others 19.7 -7.6 0.0 -0.4

CF from investing activities -165.4 -166.1 -80.0 -80.4

Issue/(Buy back) of Equity 7.6 0.0 0.0 0.0

Inc/(dec) in loan funds -268.6 127.3 -55.0 -50.0

Dividend paid & dividend tax 0.0 0.0 -3.8 -3.8

Others 406.3 -24.8 -112.2 -13.5

CF from financing activities 145.3 102.5 -171.0 -67.3

Net Cash flow 98.6 -89.1 5.9 15.1

Opening Cash 35.2 133.8 44.7 50.6

Closing Cash 133.8 44.7 50.6 65.7


Exhibit 20: Balance Sheet Statement (| crore)


Liabilities

Equity Capital 31.4 31.4 31.4 31.4

Reserve and Surplus 861.3 954.7 997.1 1,174.6

Total Shareholders funds 892.8 986.1 1,028.6 1,206.1

Total Debt 105.5 232.8 177.8 127.8

Other non current liabilities 60.3 90.5 90.5 90.5

Total Liabilities 1,058.6 1,309.5 1,296.9 1,424.4

Assets

Gross Block 866.0 1,022.8 1,102.8 1,182.8

Less: Acc Depreciation 221.4 280.3 356.5 447.0

Total Fixed Assets 674.4 776.2 780.0 769.5

Investments 5.7 0.0 0.0 0.0

Inventory 395.6 560.6 590.1 701.2

Debtors 378.6 787.2 817.0 970.8

Loans and Advances 19.7 24.7 29.8 35.4

Other CA 55.3 77.3 93.0 110.6

Cash 133.8 44.7 50.6 65.7

Total Current Assets 983.1 1,494.5 1,580.6 1,883.6

Creditors 572.0 940.7 1,044.0 1,186.6

Provisions 5.0 6.2 6.9 7.9

Other CL 92.9 117.5 116.0 137.8

Total Current Liabilities 669.9 1,064.4 1,166.9 1,332.2

Net current assets 313.1 430.1 413.7 551.4

Other non current assets 65.4 103.2 103.2 103.6

Total Assets 1,058.6 1,309.5 1,296.9 1,424.4


Exhibit 21: Key Ratios


Per share data (|)

EPS 19.8 30.1 44.4 57.7

Cash EPS 35.4 50.0 68.6 86.5

BV 283.9 313.6 327.1 383.5

DPS 0.0 0.0 1.2 1.2

Operating Ratios (%)

EBITDA Margin 8.6 7.7 8.0 8.3

PAT Margin 2.9 3.4 4.2 4.6

Asset Turnover 2.5 2.7 3.0 3.3

Inventory Days 67.9 74.4 65.0 65.0

Debtor Days 64.9 104.4 90.0 90.0

Creditor Days 98.1 124.8 115.0 110.0

Return Ratios (%)

RoE 7.0 9.6 13.6 15.0

RoCE 13.5 12.3 15.8 18.0

RoIC 14.6 12.1 15.4 17.4

Valuation Ratios (x)

P/E 44.3 29.1 19.8 15.2

EV / EBITDA 14.9 13.9 10.9 8.6

EV / Net Sales 1.3 1.1 0.9 0.7

Market Cap / Sales 1.3 1.0 0.8 0.7

Price to Book Value 3.1 2.8 2.7 2.3

Solvency Ratios

Debt / Equity 0.1 0.2 0.2 0.1

Current Ratio 1.5 1.5 1.5 1.5

Quick Ratio 0.8 0.9 0.9 0.9





RATING RATIONALE

ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold,

Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined

as the analysts' valuation for a stock

Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]




ANALYST CERTIFICATION

I/We, Sanjay Manyal, MBA (Finance) and Hitesh Taunk, MBA (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this

research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the

specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in

the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI

Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI

Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance,

general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment

banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons

reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing

on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical

Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions

expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly

confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or

reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no

obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate

that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where

ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness

guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe

for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat

recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy

is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own

investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent

judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign

exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily

a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ

materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other

assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report

for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or

specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did

not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI

Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day

of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject

company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

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 law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such

jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come

are required to inform themselves of and to observe such restriction

october 4, 2019 s tock tales...-investment by green india -investment by ascent and exit to reliance...

Documents