Result Update
February 16, 2015
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Bhel (BHEL)
Buy
| 286
12 months
12%
Ordering activity to pick up in FY16E…
What’s Changed?
Target
EPS FY15E
EPS FY16E
Rating
Changed from | 239 to | 286
Changed from | 14.1 to |8.6
Changed from | 14.8 to |14.6
Changed from Hold to Buy
Quarterly Performance
Revenue
Q3FY15
6,198.0
EBITDA
EBITDA (%)
PAT
Q3FY14
8,634.9
293.8
4.7
212.6
YoY (%)
-28.2
985.9
-70.2
11.4 -668 bps
694.8
-69.4
Q2FY15 QoQ (%)
6,144.0
0.9
291.5
4.7
124.8
0.8
0 bps
70.3
Key Financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY14
39,108.8
4,520.2
3,650.1
14.9
FY15E
31,223.3
2,892.1
2,108.6
8.6
FY16E
38,857.3
4,896.0
3,563.6
14.6
FY17E
42,165.3
5,341.3
3,888.8
15.9
FY15E
29.8
33.2
16.5
1.8
6.1
5.1
FY16E
17.7
19.6
9.9
1.7
9.5
9.8
FY17E
16.2
18.0
7.5
1.6
9.6
9.9
Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)
FY14
17.2
19.2
12.2
1.9
10.9
10.3
Stock data
Particular
Market Capitalization
Total Debt (FY14)
Cash and Investments (FY14)
EV
52 week H/L
Equity capital
Face value
Amount
| 62903.3 Crore
| 2654.8 Crore
| 10464 Crore
| 55094.1 Crore
297 / 148
| 489.5 Crore
|2
Price performance (%)
Bharat Heavy Electrica
L&T
Thermax
BGR Energy
1M
0.7
9.4
17.2
(12.2)
3M
4.7
2.8
14.2
(13.6)
| 257
6M
23.7
14.3
45.2
(20.7)
12M
70.7
68.4
91.7
33.9
Research Analyst
Chirag Shah
[email protected]
ICICI Securities Ltd | Retail Equity Research
• Bhel (Bhel) disappointed in Q3FY15 as revenues at | 6198 crore were
down 28% YoY (I-direct estimate of | 7869 crore). Power segment
revenues at | 4862 crore (down ~34% YoY) were the key dragger
• Order inflows for Q3FY15 stood at | 5512 crore whereas the order
backlog stood at | 103984 crore, up 3.4% YoY and 0.3% QoQ
• EBITDA margins at 4.7% again disappointed due to lower execution
• Reported PAT for Q3FY15 stood at | 213 crore, down 69% YoY on
the back of lower execution and tepid margins
BTG ordering, though bottomed out, will take time to pick up steam
Though some green shoots are visible in the power equipment industry,
these are present in the form of UMPP equipment ordering, award of
private sector coal blocks, SEB bail outs, coal FSAs and pass through of
variable costs that may take time to convert into fresh capex and
ordering opportunity. Hence, with a stable government, expectations are
high that policy issues in power will start getting sorted aggressively.
This will be a strong impetus for commencement of ordering for the
Thirteenth Five Year Plan and active participation of private players in the
power sector. Bhel with the largest capacity of 20000 MW of BTG
manufacturing will stand to benefit the most as it (has always
commanded >50% market share in he BTG industry) will be in a sweet
spot to win orders. Even in FY15, wherein BTG ordering is likely to be
sedate, we expect Bhel to bag | 32855 crore of order in FY15E as
9MFY15 already saw inflows to the tune of | 20800 crore and Bhel is
looking to bag orders worth ~| 13000-15000 crore in Q4FY15.
Multiple sector exposure in industry segment may be big revenue
contributor in long run
We expect the share of industry segment revenues (sector comprises
transportation, renewable, captive power plants, defence and power
transmission) to have all the ingredients to inch up its share in overall, in
the long term, from the current average of 18-20%. Initiatives taken by
Bhel in the form of setting up of JVs/MoU for setting up a 4000 MW ultra
mega solar power project and adding capacity for manufacture of
locomotives and EMUs are a step in the right direction. Also, the
renewed focus of the new government on the renewable, water, defence
and railways space will act as strong catalyst for Bhel to significantly
raise the share of industry segment revenues.
Rising share of EPC orders in backlog to lead to margin decline
The power equipment industry has turned towards EPC based ordering
activity over the last few years. This, we believe, will structurally impact
Bhel’s EBITDA margins as currently 25% of the backlog is EPC based.
Also, with increased competition from domestic and international
players, we expect Bhel’s margins to hover in the 11-13% range over
FY16E-17E (given optimum capacity utilisation).
Recovery expected over FY16E-FY17E; upgrade to BUY
We believe that a pick-up in industrial activity and key policy reforms will
see better awarding, especially in the power generation segment over
FY16E-17E, which will put Bhel in a sweet spot. Going ahead, we believe
the decline in performance will get arrested in H1FY16E as we expect
revenues to grow at a CAGR of 2.4% over FY14-17E. Hence, we value
Bhel at 18x FY17E EPS to arrive at a fair value of | 286/share and
upgrade to BUY rating.
Variance analysis
Revenue
Other Income
Q3FY15 Q3FY15E
6,198.0 7,869.4
274.1
228.6
Q3FY14oY (Chg %)
8,634.9
-28.2
290.8
-5.7
Q2FY15oQ (Chg %)
6,144.0
0.9
196.1
39.8
Employee Expenses
Raw Material Expenses
Provision For Bad Debt
Other Operating Expenses
1,362.2
3,329.2
0.0
1,212.8
1,523.9
4,419.3
0.0
1,219.1
1,525.6
4,880.1
0.0
1,243.2
-10.7
-31.8
-2.5
1,595.6
3,433.8
0.0
823.1
-14.6
-3.0
47.3
EBITDA
EBITDA Margin (%)
293.8
4.7
707.2
9.0
985.9
-70.2
11.4 -668 bps
291.5
4.7
0.8
0 bps
Depreciation
Interest
256.4
5.2
160.7
43.1
241.6
32.3
6.1
-83.8
266.2
12.6
-3.7
-58.6
PBT
Total Tax
PAT
306.2
93.6
212.6
75.0
241.5
490.4
1,002.8
308.0
694.8
-69.5
-69.6
-69.4
208.8
84.0
124.8
46.6
11.5
70.3
4,862.4
1,493.1
6,240.0
1,629.4
7,319.6
1,599.9
-33.6
-6.7
4,737.0
1,582.4
2.6
-5.6
Key Metrics
Power segment revenues
Industry segment revenues
Comments
37% YoY decline in power segment revenues lead to revenue miss in Q2FY15
Margins were lower by 30 bps owing to miss in execution and higher sticky
fixed costs
PAT missed mainly on the back of lower execution and margins
Source: Company, ICICIdirect.com Research
Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)
PAT
EPS (|)
Old
37,462.5
4,361.0
11.6
3,024.7
12.4
FY15E
New % Change
31,223.3
-16.7
2,892.1
9.3
2,108.6
8.6
-33.7
-238 bps
-30.3
-30.5
Old
39,041.1
5,022.7
12.9
3,558.7
14.5
FY16E
New % Change
38,857.3
-0.5
4,896.0
12.6
3,563.6
14.6
-2.5
-27 bps
0.1
0.2
Comments
We have revised down revenue estimate for FY15E on the back of weak 9MFY15
We expect the impact of negative operating leverage to recede by FY16E
Earnings have been revised downwards for FY15 given the lower execution in 9MFY15
Source: Company, ICICIdirect.com Research
Assumptions
Order Inflow growth
Order Backlog growth
Revenue growth
FY13
33.5
-14.5
1.3
FY14E
-11.5
-11.8
-19.6
EBITDA Margins
19.4
11.6
Current
FY15E
FY16E
17.3
40.1
-4.1
6.5
-20.9
24.0
9.3
12.6
Earlier
FY15E
FY16E
32.5
24.0
-4.1
6.5
-11.7
10.9
11.1
12.9
Comments
Ordering will pick up in FY16E
We have built in high execution rates in FY16E given improvement in economy
Increased execution and receding negative operating leverage will lead to better
margins
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 2
Company Analysis
Order inflows to recover on low base over FY14-17E
Given a weak capex cycle and operating environment, Bhel’s order
inflows peaked in FY11 (| 60500 crore) to only decline 61% YoY in FY12
to | 23700 crore. Since then, order inflows have ranged between | 25000
crore and | 31000 crore. This is quite reflected in the fact that BTG
ordering peaked from 25000 MW in FY11 to 6210 MW in FY14. The key
negative impact was felt by Bhel, which has always commanded a market
share of >50% in any year. However, with a new stable government
expectations have risen in term of aggressive policy reform in the power
sector, which will lead to a resumption of the capex cycle and, hence,
order inflows for power equipment players. Also, with the focus of the
new government on sectors like railways (modernisation programme),
promoting renewable (solar power) will help reviving order inflows for the
industry segment of Bhel.
As per the management commentary, firm ordering pipeline for EPC
orders stands at 15000-17000 MW plus 2x4000 MW UMPPs where we
expect Bhel to at least achieve 8000 MW orders, given these orders are
awarded in FY15E. Hence, we have built in order inflows of | 46042 crore
and | 55541 crore in FY15E and FY16E, respectively. The participation of
the private sector will be highly influenced by the steps taken by the
government to resolve the concerns plaguing the power sector.
Exhibit 1: Order inflows trend over FY07-17E
70000
59678 59031 60476
60000
55541
50270
46042
(| crore)
50000
40000
35643
31650
30000
23706
28007
32855
20000
10000
0
FY07
FY08
FY09
FY10
FY11
FY12
Order Inflows
FY13
100
80
60
40
20
0
-20
-40
-60
-80
FY14 FY15E FY16E FY17E
% Growth
Source: Company, ICICIdirect.com Research
Given the recovery in order inflows in FY14-17E (36% CAGR in FY14-17),
we expect the decline in order backlog to get arrested by FY16E. We
expect the order backlog at | 121181 crore in FY17 vs. FY14 backlog of
| 101566 crore. This will also lead to an improvement in order
replacement ratio to over 1.3x by FY17E from 0.6x in FY13 and 0.7x in
FY14.
ICICI Securities Ltd | Retail Equity Research
Page 3
(| crore)
Exhibit 2: Declining order backlog to get arrested by FY17E
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
164000
143800
117000
85200
55000
FY07
FY08
FY09
FY10
FY11
60
50
134681
121180 40
115160
30
101566 97400 103700
20
10
0
-10
-20
-30
FY12
FY13
Order Backlog
FY14 FY15E FY16E FY17E
% Growth
Source: Company, ICICIdirect.com Research
Exhibit 3: Order replacement ratio to improve over 1x by FY16E
2.5
2.0
(x)
1.5
1.0
0.5
0.0
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
Source: Company, ICICIdirect.com Research
Gradual pick up in order inflows and execution to arrest revenue decline
Having experienced 23% CAGR in revenues over FY08-12, Bhel started
facing execution issues in H2FY12-FY14 as many of its customers faced
issues ranging from regulatory clearances, financial closures and delayed
payments to Bhel. Consequently, the company reported flattish revenues
for FY13 and 20% revenue decline in FY14. However, these issues will
still persist in FY15E as we expect revenues to decline 20% YoY. With a
recovery in order inflows in FY16, we will see revenues stabilising as the
execution of these order will get reflected in revenue booking.
We expect Bhel to report revenues of | 31223 crore, | 38857 crore and |
42165 crore in FY15E, FY16E and FY17E, respectively. Out of these,
power segment revenues will account for 75-80% of revenues. We expect
power segment revenues to be at | 25881 crore, | 34998 crore and |
377910 crore in FY15E, FY16E and FY17E, respectively.
ICICI Securities Ltd | Retail Equity Research
Page 4
Exhibit 4: Overall revenues to stagnate over FY15E-17E
61000
40
51000
30
20
(| crore)
41000
10
31000
0
21000
-10
11000
-20
1000
-30
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E
Revenues
% Growth
Source: Company, ICICIdirect.com Research
Exhibit 6: Industry segment revenues
20
10
0
-10
Power segment reveneus
FY16E
FY15E
FY14
FY13
FY12
FY11
FY10
-20
-30
% Growth
Source: Company, ICICIdirect.com, Research
(| crore)
40
30
46000
41000
36000
31000
26000
21000
16000
11000
6000
1000
FY09
(| crore)
Exhibit 5: Power segment revenues
14000
12000
10000
8000
6000
4000
2000
0
11658
7250 7879
9186
30
10604
20
7853
10
6034
4592 4630
0
-10
-20
-30
FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E
Industry segment revenues
% Growth
Source: Company, ICICIdirect.com, Research
Structural shift in margins to completely play out by FY15E-16E
Being almost a monopoly till 2009 in the Indian BTG industry helped Bhel
enjoy EBITDA margins in the range of 19-21% coupled with a higher
degree of indigenisation with BTG technology. However, the Eleventh
Plan saw the emergence of competition from Chinese and Korean players
as also from domestic players like L&T, Bharat Forge-Alstom, JSWToshiba and BGR-Hitachi. Rising competitive intensity led to a reduction
in capital costs of the equipment while the deteriorating capex scenario
further worsened the situation by FY12. Also, the trend shifted from single
package ordering to EPC ordering by FY12. All these factors have
impacted Bhel, which is sitting on the largest capacity of 20000 MW,
negatively. Hence, margins witnessed a cliff hanger in FY14 as they
crashed from 19% in FY13 to 11.6%. Currently, 25% of orders are EPC
based while incremental order wins will all be EPC based orders. This
trend coupled with competition albeit recovery in order inflows would
structurally shift the margins of Bhel.
Going ahead, with a pick-up in execution, we have built in EBITDA
margins of 9.3%, 12.6% and 12.7% in FY15E, FY16E and FY17E,
respectively.
ICICI Securities Ltd | Retail Equity Research
Page 5
Exhibit 7: Trend in EBITDA margins
25
20
(%)
15
20.5
10
19.0
15.8
17.8
20.3
20.6
19.4
11.6
5
9.3
12.6
12.7
FY16E
FY17E
0
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15E
Source: Company, ICICIdirect.com Research
FY15E-H1FY16E to mark bottom for profitability …
Bhel witnessed a massive decline in profitability in FY12-FY14, owing to
the reasons mentioned above. The PAT declined from a high of | 7040
crore in FY12 to | 3428 crore in FY14. This was mainly on the back of
lower order wins and execution, negative operating leverage of fixed
costs and dwindling margins. In FY15E, FY16E & FY17E, we expect Bhel
to report a PAT of | 2109 crore, | 3564 crore & |3889 crore, respectively.
Exhibit 8: Trend in profitability
8000
7000
60
6013.0
6000
(| crore)
80
7040.0 6767.0
40
4310.6
5000
4000
3000 2414.7
3650.1
2859.6 3138.2
3563.6
3888.8 20
0
2108.6
2000
-20
1000
-40
0
-60
FY07
FY08
FY09
FY10
FY11
PAT
FY12
FY13
FY14 FY15E FY16E FY17E
% Growth
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 6
Return ratios to remain low till strong recovery commences
We believe a strong recovery may not be in sight for Bhel in the medium
term. However, at the same time, we believe the worst, in terms of
financial performance, is over. Hence, in our view, RoEs of 6.1%, 9.5%
and 9.6% in FY15E, FY16E and FY17E, respectively, will mark the bottom
for Bhel.
(%)
Exhibit 9: Return ratios to trough over FY15E-FY16E
45
40
35
30
25
20
15
10
5
0
FY07
FY08
FY09
FY10
FY11
FY12
ROE
FY13
FY14
FY15E
FY16E
FY17E
ROCE
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 7
Outlook and valuation
We believe that a pick-up in industrial activity and key policy reforms will
see better awarding, especially in the power generation segment over
FY16E-17E, which will put Bhel in a sweet spot. Going ahead, we believe
the decline in performance will get arrested in H1FY16E as we expect
revenues to grow at a CAGR of 2.4% over FY14-17E. Hence, we value
Bhel at 18xFY17E EPS to arrive at a fair value of | 286/share and upgrade
the stock to BUY recommendation.
Exhibit 10: Trend in one year forward P/E band
30
25
20
15
10
5
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 8
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
Nov-10
0
Company snapshot
600
500
400
Target Price: |286
300
200
100
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
0
Source: Bloomberg, Company, ICICIdirect.com Research
Key events
Date
Mar-10
Mar-11
May-11
Mar-12
Mar-12
Jul-12
Event
Enters into MoU with TNEB for constructing a 2x800 MW thermal power plant. On the results front, the stellar run for Bhel continued as revenues and PAT grew 23%
and 92%, respectively. Pricing of the BTG package was stable at | 3-3.5/MW
Bhel witnesses a peak performance as revenues at | 43380 crore surpass MoU target of | 38000 crore. FY11 also records peak order inflows of | 60476 crore and
PAT of | 7040 crore (up 17% YoY). Order backlog also peaked out at | 164000 crore
Ministry of Heavy Industries decides to pare down the government stake via a FPO for Bhel amid expectations to raise procceds to the tune of | 4000 crore to meet
disinvestment targets
Over September 2011 - February 2012, Bhel bags LoAs for NTPC bulk tender 1&2 (11 BTG Setsx660 MW : Tender 1) and (nine setsx800 MW: tender 2). The tenders
marked a high degree of competition as pricing touched new lows in this tender (~| 2.3 crore/MW for the BTG package)
FY12 was the beginning of challenging times. Post eight years of robust performance, FY12 saw order inflows and backlog decline 61% YoY and 18% YoY,
respectively. Even profitability declined 6% YoY coupled with a fall in revenue visibility as the book to biil ratio deteriorated to 4.2x in FY10
The government imposes a duty of 21% on imported power equipment, helping domestic manufacturers to withstand competition from Chinese rivals
Sep-13
H1FY14 was a disaster as a weak environment/low backlog and sticky fixed costs (on an expanded capacity of 20000 MW) manifested itself in the form of muted
inflows of | 6000 crore, record low margins of 6.3% and five year order backlog at | 108000 crore
Source: Company, ICICIdirect.com Research
Top 10 Shareholders
Shareholding Pattern
Rank
1
2
3
4
5
6
7
8
9
10
(in %)
Promoter
FII
DII
Others
Name
Latest Filing Date % O/S Position (m) Change (m)
Government of India
31-Dec-14 63.1
1,543.5
0.0
Life Insurance Corporation of India
31-Dec-14
9.4
230.5
-12.4
Comgest S.A.
31-Dec-14
2.3
55.6
-4.5
Lazard Asset Management, L.L.C.
31-Dec-14
1.5
37.1
8.7
31-Dec-14
1.0
24.9
0.0
LIC Nomura Mutual Fund Asset Management Company Ltd
Fidelity Management & Research Company
30-Nov-14
0.9
22.0
0.0
Reliance Capital Asset Management Ltd.
31-Dec-14
0.8
19.0
15.6
The Vanguard Group, Inc.
31-Jan-15
0.7
16.0
-1.2
Dimensional Fund Advisors, L.P.
31-Dec-14
0.6
13.9
1.1
BlackRock Institutional Trust Company, N.A.
31-Jan-15
0.6
13.8
1.2
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
67.72 63.06 63.06 63.06 63.06
15.63 16.14 15.90 15.71 15.95
11.96 16.47 16.62 16.91 17.32
4.69
4.33
4.42
4.32
3.67
Source: Reuters, ICICIdirect.com Research
Recent Activity
Buys
Investor name
Reliance Capital Asset Management Ltd.
Lazard Asset Management, L.L.C.
Norges Bank Investment Management (NBIM)
Standard Life Investments Ltd.
HDFC Asset Management Co., Ltd.
Source: Reuters, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Value
65.69m
36.50m
22.59m
22.50m
19.02m
Shares
15.61m
8.67m
7.86m
5.37m
4.52m
Sells
Investor name
Life Insurance Corporation of India
Comgest S.A.
Eastspring Investments (Singapore) Limited
Baring Asset Management Ltd.
China International Fund Management Co., Ltd.
Value
-52.07m
-18.98m
-9.84m
-7.98m
-4.30m
Shares
-12.37m
-4.51m
-2.47m
-2.37m
-2.36m
Page 9
Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Raw Material Expenses
Employee Expenses
Other Operating Expenses
Provision For Bad Debt
Other expenses
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Others
Total Tax
PAT
Growth (%)
EPS (|)
| Crore
FY14
39,108.8
-19.2
22,518.8
5,933.8
6,136.0
0.0
0.0
34,588.6
4,520.2
-51.8
800.0
132.6
1,616.0
5,203.6
0.0
1,553.5
3,650.1
-46.1
14.9
FY15E
31,223.3
-20.2
17,117.9
6,006.3
5,207.0
0.0
0.0
28,331.2
2,892.1
-36.0
1,020.4
108.8
1,353.1
3,115.9
0.0
1,007.4
2,108.6
-42.2
8.6
FY16E
38,857.3
24.4
21,958.3
6,065.0
5,937.9
0.0
0.0
33,961.3
4,896.0
69.3
1,100.4
80.8
1,563.1
5,277.9
0.0
1,714.3
3,563.6
69.0
14.6
FY17E
42,165.3
8.5
24,208.4
6,350.8
6,264.7
0.0
0.0
36,824.0
5,341.3
9.1
1,199.3
80.8
1,695.3
5,756.4
0.0
1,867.7
3,888.8
9.1
15.9
Source: Company, ICICIdirect.com Research
Cash flow statement
(Year-end March)
Profit after Tax
Add: Depreciation
(Inc)/dec in Current Assets
Inc/(dec) in CL and Provisions
Others
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Inc/(dec) in Sec. premium
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash
| Crore
FY14
3,650.1
800.0
1,368.0
-1,179.8
3.3
4,638.3
9.0
-937.0
0.0
-1,346.3
0.0
1,239.6
-810.4
0.0
0.0
429.2
3,721.2
6,742.8
10,464.0
FY15E
2,108.6
1,020.4
11,791.7
-5,835.4
3.0
9,085.3
-50.0
-908.1
0.0
-958.1
0.0
-500.0
-810.4
0.0
7.6
-1,310.4
6,816.7
10,464.0
17,280.7
FY16E
3,563.6
1,100.4
-20,356.4
16,664.4
5.0
972.0
0.0
-1,000.0
0.0
-1,000.0
0.0
-1,000.0
-810.4
0.0
0.0
-1,810.4
-1,838.5
17,280.7
15,442.2
FY17E
3,888.8
1,199.3
11,746.9
-7,455.2
5.0
9,379.8
0.0
0.0
0.0
0.0
0.0
0.0
-859.1
0.0
0.0
-859.1
8,520.7
15,442.2
23,962.9
FY14
FY15E
FY16E
FY17E
14.9
18.2
136.6
2.8
42.8
8.6
12.8
141.9
2.8
70.6
14.6
19.1
153.2
2.8
63.1
15.9
20.8
165.5
3.0
97.9
11.6
13.6
9.3
102.5
278.2
82.9
9.3
10.2
6.8
103.0
279.0
75.0
12.6
13.9
9.2
105.0
240.0
75.0
12.7
14.0
9.2
105.0
240.0
75.0
10.9
10.3
15.3
6.1
5.1
10.2
9.5
9.8
17.4
9.6
9.9
23.4
17.2
12.2
1.4
1.6
1.9
29.8
16.5
1.6
2.1
1.8
17.7
9.9
1.3
1.7
1.7
16.2
7.5
1.0
1.5
1.6
0.6
0.1
1.7
1.5
0.7
0.1
1.9
1.4
0.2
0.0
1.6
1.3
0.2
0.0
1.9
1.3
Source: Company, ICICIdirect.com Research
Balance sheet
| Crore
(Year-end March)
Liabilities
Equity Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest / Others
Total Liabilities
FY14
FY15E
FY16E
FY17E
489.5
32,947.5
33,437.0
2,654.8
0.0
0.0
36,091.8
489.5
34,245.6
34,735.2
2,154.8
0.0
0.0
36,889.9
489.5
36,998.8
37,488.3
1,154.8
0.0
0.0
38,643.1
489.5
40,028.4
40,518.0
1,154.8
0.0
0.0
41,672.7
Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Creditors
Provisions
Total Current Liabilities
Net Current Assets
Others Assets
Application of Funds
11,517.5
7,087.8
4,429.7
1,324.6
5,754.4
420.2
9,797.6
29,263.7
3,224.4
12,133.6
10,464.0
64,883.2
8,719.0
10,326.0
37,089.4
27,793.9
0.0
36,091.8
12,425.6
8,108.2
4,317.5
1,324.6
5,642.1
470.2
7,444.3
23,351.8
2,580.1
9,251.3
17,280.7
59,908.2
6,277.4
9,416.1
31,253.9
28,654.3
0.0
36,889.9
13,425.6
9,208.6
4,217.1
1,324.6
5,541.7
470.2
14,376.9
24,938.5
4,853.6
18,814.9
15,442.2
78,426.1
7,793.3
11,689.9
47,918.3
30,507.8
0.0
38,643.1
14,750.3
10,407.9
4,342.4
0.0
4,342.4
470.2
9,307.2
27,067.6
3,214.8
11,647.4
23,962.9
75,199.9
8,458.6
12,687.9
40,463.1
34,736.8
0.0
41,672.7
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March)
Per share data (|)
EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)
EBITDA Margin
PBT / Total Operating income
PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
RoE
RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio
Source: Company, ICICIdirect.com Research
.
ICICI Securities Ltd | Retail Equity Research
Page 10
ICICIdirect.com coverage universe (Capital Goods)
CMP
M Cap
AIA Engineering
(|)
TP(|)
1034 1154
Thermax (THERMA)
1188 1183
KEC International (KECIN)
Kalpataru Power(KPP)
L&T (LARTOU)
EPS (|)
P/E (x)
Rating
Buy
(| Cr)
9513
FY14 FY15E FY16E
34.5
43.7
44.0
RoCE (%)
FY14 FY15E FY16E FY14 FY15E
30.3
23.9
23.7 24.8 22.8
RoE (%)
FY16E FY14 FY15E
21.6 18.7 19.8
FY16E
17.4
Hold
14202
25.5
26.6
32.3
44.8
42.9
35.4
17.7
16.7
17.7
15.0
13.6
14.7
85
89
Hold
1285
3.5
5.1
7.4
24.3
16.7
11.4
13.1
11.2
15.2
7.1
9.5
12.5
237
253
Buy
3633
10.9
11.8
15.6
21.7
20.1
15.2
12.7
12.1
13.5
8.6
8.5
10.3
16.0
Buy
151616
56.7
58.1
69.9
29.0
28.4
23.6
15.1
14.8
16.2
16.2
14.9
Bhel (BHEL)
1648 2206
257
286
Hold
41608
14.9
8.6
14.6
17.2
29.9
17.6
10.3
5.1
9.8
10.9
6.1
9.5
Greaves Cotton (GREAVE)
145
175
Buy
3538
4.6
4.0
7.9
31.5
36.3
18.4
22.9
18.0
12.6
13.8
11.9
21.3
SKF
1414 1568
VaTech Wabag
1634 1724
Source: Company, ICICIdirect.com Research
Buy
Buy
7767
3979
31.6
40.3
42.4
56.6
50.0
65.2
46.6
40.5
34.8
28.9
29.5
25.1
16.6
17.8
18.9
18.5
20.2
18.7
13.1
12.7
15.9
16.7
16.7
16.8
ICICI Securities Ltd | Retail Equity Research
Page 11
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]
ICICI Securities Ltd | Retail Equity Research
Page 12
ANALYST CERTIFICATION
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ICICI Securities Ltd | Retail Equity Research
Page 13