2-Stocks Emkay 140514

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Your success is our success

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Emkay Global Financial Services Ltd. 1

Financial Snapshot (Consolidated) (Rsmn)

YE- Net EBITDA EPS EPS RoE EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY13A 10,476 6,121 58.4 5,048 15.4 9.0 12.8 13.2 9.1 1.6FY14A 7,985 4,348 54.5 3,111 9.5 -38.4 7.3 21.4 14.2 1.5FY15E 14,093 8,125 57.7 5,597 17.1 79.9 12.1 11.9 9.4 1.4 FY16E 13,731 8,925 65.0 5,980 18.2 6.8 11.6 11.1 8.6 1.2

Oberoi RealtyHigher than expected performance

May 12, 2014

Rating

Buy

Previous Reco

Buy

CMPRs203

Target PriceRs270

EPS Chg FY15E/FY16E (%) NA

Target Price change (%) NA

Nifty 7,014

Sensex 23,551

Price Performance(%) 1M 3M 6M 12M

Absolute -10 10 9 -15

Rel. to Nifty -14 -5 -7 -28Source: Bloomberg

Relative price chart

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May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14

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Ob er oi Re alt y ( LHS ) Re l t o Nif ty (RHS ) Source: Bloomberg

Stock DetailsSector Real Estate

Bloomberg OBER IB

Equity Capital (Rs mn) 3,282

Face Value(Rs) 10

No of shares o/s (mn) 328

52 Week H/L 284/ 153

Market Cap (Rs bn/USD mn) 67/ 1,113

Daily Avg Volume (No of sh) 172,960

Daily Avg Turnover (US$mn) 0.6

Shareholding Pattern (%)Mar'14 Dec'13 Sep'13

Promoters 75.0 75.0 75.0

FII/NRI 13.6 13.6 12.4

Institutions 0.2 0.5 0.8

Private Corp 1.0 0.7 1.5

Public 10.3 10.2 10.3 Source: Bloomberg

OBRE sells 43,285 sf for Rs 1054mn, down 18% QoQ and 71%YoY on like-to-like basis. Company ended FY14 with salesbooking of 2,47,029 sf for Rs 6.1bn, down 29% YoY

FY15 to be year of launches with ~9 msf of saleable areaexpected to be launched across 4 projects. Sales booking isexpected to rise on back of launches and project completion

OBRE raises Rs 7.5bn capital through NCDs to finance landparcel acquired. Company also signs MoU for a land parcel inNCR with total SBA of 5msf

Maintain Buy rating with TP of Rs 270. OBRE remains ourpreferred pick in real estate space

Q4 FY14 performance much ahead of estimates

Oberoi Realty (OBRE) told 43,285 sf for Rs 1.1 bn, up 136% QoQ and reported basisand 61% on like-to-like comparison. Company reported sale of a unit at SplendorGrande and sold 2 units is a small project in Khar (W). Higher than expected operationalperformance led to higher than expected financials with reported revenue at Rs 2.1bn,up 29% QoQ. EBITDA stood at Rs 1.25bn, up 40% QoQ with EBITDA marginsexpanding by 421bps QoQ to 56.9%. PAT stood at Rs 770mn, up 13% QoQ. Companygenerated negative operating cashflows of Rs 857mn was down QoQ from negative Rs2.2bn. Cash balance stood at Rs 5.5bn with borrowing of Rs 760mn.

Launches to drive growth in FY15, complimented by completion of OberoiExquisite

OBRE is expected to launch 4 projects in FY15 with total saleable area (SBA) of more

than 9msf (Co.s share). Oberoi Exotica, Mulund with total SBA of 3.2msf is expected tobe launched in Q2FY15 with a luxury positioning having ticket size of Rs 30mn+. As RitzCarlton is signed as a hospitality partner, company expects to officially launch Oasis,Worli in FY15 with SBA of 0.9msf. Newly acquired land parcel at Borivali with SBA of4.5msf will be launched in Q4FY15 and will be positioned as a premium project, a levelbelow Garden City, Goregaon.

Prisma at JVLR too is expected to be launched in FY15 with total SBA of 0.4msf. Weexpected these launches to drive sales booking growth in FY15 on an much improvedeconomic environment. Exquisite, which is expected to be completed by Q2FY15, willadd to sales booking growth as it will be among few residential projects in Mumbaiwhere buyers can ready to move in.

Cashflows to remain under pressure, Gross Debt is expected to be ~Rs11bn in FY15

OBRE cashflows to remain under pressure despite of much higher sales bookingexpected in FY15. We expect collections of Rs 10.9bn in FY15E which would meet theconstruction cost of Rs 9.3bn. Land payments and higher tax outflow towards revenuerecognition of Esquire would lead to higher cash outflows. Gross debt is expected to beRs 11bn would remain at current level at cash inflows would balance out the cashoutflows in FY15.

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Oberoi Realty Result Update

Emkay Research May 12, 2014 2

Exhibit 1: Quarterly SummaryRs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY13 FY14 YoY (%)

Revenue 3,039 2,184 1,890 1,705 2,206 (27.4) 29.3 10,436 7,985 (23.5)

Expenditure 1,260 849 1,029 807 952 (24.5) 17.8 4,355 3,637 (16.5)

as % of sales 41.5 38.9 54.5 47.3 43.1 75.1 89.2

Cost of Sales 1,122 689 845 606 758 3,715 2,897 (22.0)

as % of sales 36.9 31.5 44.7 35.5 34.3 64.1 71.1Employee Cost 91 97 116 111 119 31.3 7.6 383 442 15.4

as % of sales 3.0 4.4 6.1 6.5 5.4 6.6 10.9

Other expenditure 48 63 69 91 75 57.7 (17.9) 257 298 16.1

as % of sales 1.6 2.9 3.6 5.3 3.4 4.4 7.3

EBITDA 1,779 1,335 861 898 1,254 (29.5) 39.7 6,081 4,348 (28.5)

Depreciation 72 69 68 68 67 (6.8) (1.2) 285 271 (4.8)EBIT 1,707 1,266 793 830 1,187 (30.5) 43.0 5,796 4,076 (29.7)

Other Income 221 210 127 154 79 (64.1) (48.6) 999 571 (42.9)

Interest 1 1 1 1 1 4 3

PBT 1,928 1,476 919 983 1,266 (34.3) 28.7 6,791 4,644 (31.6)

Total Tax 475 457 278 303 496 1,783 1,533Adjusted PAT 1,452 1,018 641 681 770 (47.0) 13.2 5,009 3,111 (37.9)

(Profit)/loss from JV's/Ass/MI 0 0 0 0 0 0 0

APAT after MI 1,452 1,018 641 681 770 (47.0) 13.2 5,009 3,111 (37.9)

Extra ordinary items 0 0 0 0 0 0 0

Reported PAT 1,452 1,018 641 681 770 (47.0) 13.2 5,009 3,111 (37.9)

Reported EPS 4.4 3.1 2.0 2.1 2.3 15.3 9.5

Margins (%) (bps) (bps) (bps)

EBIDTA 58.5 61.1 45.5 52.7 56.9 (168) 421 104.9 106.7 174

EBIT 56.2 58.0 42.0 48.7 53.8 (236) 515 100.0 100.0 -

EBT 63.4 67.6 48.6 57.7 57.4 (604) (27) 117.2 113.9 (326)

PAT 47.8 46.6 33.9 39.9 34.9 (1,286) (499) 86.4 76.3 (1,011)

Effective Tax rate 24.7 31.0 30.2 30.8 39.1 1,448 837 26.3 33.0 676

Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY13 FY14 YoY (%)

Segmental Revenue

Real Estate 2337 1446 1119 898 1406 (39.8) 56.6 7,813 4,869 (37.7)

Rent 365 410 428 422 414 13.4 (1.9) 1,398 1,674 19.7

Hospitality 264 259 266 299 301 13.8 0.7 916 1,125 22.8

Others 73 69 77 86 85 16.7 (1.9) 309 317 2.5

Total 3039 2184 1890 1705 2206 (27.4) 29.3 10436 7985 (23.5)

Segmental EBITDA

Real Estate 1339 862 373 409 786 (41.3) 92.4 4,482 2,430 (45.8)Rent 351 401 417 406 325 (7.4) (20.0) 1,358 1,549 14.1

Hospitality 91 80 76 85 101 11.6 19.2 282 342 21.0

Others -2 -8 -5 -2 42 -42 27

Total 1779 1335 861 898 1254 (29.5) 39.7 6081 4348 (28.5)

Segmental EBITDA Margin

Real Estate 57.3 59.6 33.3 45.5 55.9 (138) 1,042 57.4 49.9 (602)

Rent 96.1 97.9 97.5 96.2 78.5 (1,764) (1,774) 97.1 92.6 1,408

Hospitality 34.3 30.8 28.4 28.5 33.7 (67) 522 30.8 30.4 (330)

Others (2.1) (11.9) (6.1) (2.2) 49.2 5,130 5,143 (13.5) 8.5Total 58.5 61.1 45.5 52.7 56.9 (168) 421 58.3 54.5 (241)

Net Area Sold (Sq. Ft) 118355 48960 20640 19400 43285 (63.4) 123.1 496376 132285 (73.3)

Sales Vales (Rs mn) 2227 925 544 448 1054 (52.7) 135.5 8687 2971 (65.8) Source: Company, Emkay Research

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Oberoi Realty Result Update


Key Financials (Consolidated)

Income StatementY/E Mar (Rsmn) FY13A FY14A FY15E FY16E

Net Sales 10,476 7,985 14,093 13,731Growth (%) 27.0 -23.8 76.5 -2.6

Expenditure 4,355 3,637 5,968 4,806Employee Cost 383 442 507 583Other Exp 257 298 305 329SG&A 0 0 0 0EBITDA 6,121 4,348 8,125 8,925

Growth (%) 26.6 -29.0 86.9 9.8

EBITDA margin (%) 58.4 54.5 57.7 65.0Depreciation 285 272 358 419EBIT 5,836 4,076 7,767 8,506

EBIT margin (%) 55.7 51.1 55.1 61.9

Other Income 999 571 254 113Interest expenses 4 3 0 0

PBT 6,831 4,644 8,021 8,618Tax 1,783 1,533 2,424 2,639

Effective tax rate (%) 26.1 33.0 30.2 30.6Adjusted PAT 5,048 3,111 5,597 5,980

Growth (%) 9.0 -38.4 79.9 6.8Net Margin (%) 48.2 39.0 39.7 43.5

(Profit)/loss from JVs/Ass/MI 0 0 0 0Adj. PAT After JVs/Ass/MI 5,048 3,111 5,597 5,980

E/O items 0 0 0 0Reported PAT 5,048 3,111 5,597 5,980PAT after MI 5,048 3,111 5,597 5,980

Growth (%) 9.0 -38.4 79.9 6.8

Balance SheetY/E Mar (Rsmn) FY13A FY14A FY15E FY16E

Equity share capital 3,282 3,282 3,282 3,282Reserves & surplus 38,339 40,681 45,510 50,722

Net worth 41,621 43,964 48,792 54,004Minority Interest 0 0 0 0

Secured Loans 0 750 11,597 11,688Unsecured Loans 0 11 0 0Loan Funds 0 761 11,597 11,688

Net deferred tax liability 147 220 254 326Total Liabilities 41,768 44,944 60,644 66,018

Gross Block 10,450 10,691 13,991 13,991Less: Depreciation 929 1,201 1,559 1,979Net block 9,520 9,490 12,432 12,012

Capital work in progress 3,848 4,158 858 858Investment 0 496 496 496

Current Assets 39,522 40,725 56,546 67,846Inventories 12,448 16,491 36,031 47,663Sundry debtors 522 862 772 752Cash & bank balance 10,725 4,997 1,271 960Loans & advances 15,695 18,321 18,321 18,321Other current assets 132 54 150 150Current lia & Prov 11,122 9,926 9,689 15,195

Current liabilities 10,331 9,138 8,901 14,407Provisions 790 789 788 788Net current assets 28,400 30,799 46,857 52,651

Misc. exp 0 0 0 0Total Assets 41,768 44,944 60,644 66,018

Cash FlowY/E Mar (Rsmn) FY13A FY14A FY15E FY16EPBT (Ex-Other income) 5,832 4,073 7,767 8,506

Depreciation 285 272 358 419Interest Provided 4 3 0 0Other Non-Cash items 0 0 0 0Chg in working cap -5,625 -8,054 -19,749 -6,034Tax paid -1,783 -1,533 -2,424 -2,639Operating Cashflow -1,287 -5,239 -14,048 252

Capital expenditure -1,149 -552 0 0Free Cash Flow -2,436 -5,791 -14,048 252

Other income 999 571 254 113Investments 0 -496 0 0Investing Cashflow -150 -478 254 113

Equity Capital Raised 0 0 0 -768Loans Taken / (Repaid) 0 761 10,836 91Interest Paid -4 -3 0 0Dividend paid (incl tax) -768 -768 -768 0Income from investments 0 0 0 0Others 0 0 0 0Financing Cashflow -772 -11 10,068 -677

Net chg in cash -2,209 -5,727 -3,726 -311

Opening cash position 12,934 10,725 4,997 1,271

Closing cash position 10,725 4,997 1,272 960

Key RatiosY/E Mar FY13A FY14A FY15E FY16EProfitability (%)

EBITDA Margin 58.4 54.5 57.7 65.0Net Margin 48.2 39.0 39.7 43.5ROCE 17.3 10.7 15.2 13.6ROE 12.8 7.3 12.1 11.6RoIC 23.9 13.0 16.6 14.0Per Share Data (Rs)

EPS 15.4 9.5 17.1 18.2CEPS 16.2 10.3 18.1 19.5

BVPS 126.8 133.9 148.7 164.5DPS 2.0 2.0 2.0 2.0Valuations (x)

PER 13.2 21.4 11.9 11.1P/CEPS 12.5 19.7 11.2 10.4P/BV 1.6 1.5 1.4 1.2EV / Sales 5.3 7.8 5.4 5.6EV / EBITDA 9.1 14.2 9.4 8.6Dividend Yield (%) 1.0 1.0 1.0 1.0Gearing Ratio (x)

Net Debt/ Equity -0.3 -0.1 0.2 0.2Net Debt/EBIDTA -1.8 -1.1 1.2 1.1

Working Cap Cycle (days) 615.9 1,179.5 1,180.6 1,374.1

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FY13A 37,851 6,164 16.3 2,381 41.1 -37.9 12.9 9.5 5.7 1.2FY14A 40,181 5,225 13.0 1,625 28.0 -31.8 8.2 13.9 8.3 1.1FY15E 45,253 8,121 17.9 2,769 47.7 70.4 13.0 8.1 5.1 1.0FY16E 47,832 9,617 20.1 3,803 65.6 37.4 16.3 5.9 3.9 0.9

SRFRemain Positive

May 12, 2014

Rating

Buy

Previous Reco

Buy

CMPRs388

Target PriceRs475

EPS Chg FY15E/FY16E (%) -2 / -3

Target Price change (%) NA

Nifty 7,014

Sensex 23,551


Absolute -2 78 122 122

Rel. to Nifty -6 55 91 90Source: Bloomberg


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SRF Ltd ( LHS) Rel to Nif ty (RHS) Source: Bloomberg

Stock DetailsSector Diversified

Bloomberg SRF IB

Equity Capital (Rs mn) 574

Face Value(Rs) 10


52 Week H/L 423/ 126

Market Cap (Rs bn/USD mn) 22/ 373




Promoters 52.4 52.4 52.1

FII/NRI 8.0 6.8 6.7




Lower than expected revenue in Chemical business segmentled to miss on Q4 FY14 estimates, while one-time ramp-upcosts of Packaging Films expansion led to miss on FY14 nos

SRF generated Consolidated OCF of Rs 2.7bn & FCFF of -veRs 7.1bn in FY14. We expect OCF & FCFE to increase to Rs6.5bn / Rs 8.2bn & Rs 4.1bn / Rs 5.8bn for FY15E /16E

INR appreciation remains the biggest downside risk to ourview. Faster than expected turnaround in Packaging Filmsbusiness is risk to our upside estimates.

Maintain Buy rating with TP of Rs 475. We maintain positivestance on the company valuing it blended P/E 7x on FY16EEPS of Rs 66

Lower growth in Chemicals segment led to miss in Q4FY14 estimatesSRF reported Q4 FY14 Revenue of Rs 8.9bn, in-line with our estimates. EBITDA stoodat Rs 1.1bn, 27% below estimates. Miss on EBITDA was mainly due to lower thanexpected margins in Chemical business which in-turn was due to lower sales volume inR134a and lower margins in specialty chemical segment. There is seasonality factor inthe refrigerant part of business, but due to extended winter in Q4FY14, the volumes off-take was lower than expectations PAT stood at Rs 529mn, 27% below estimates.Performance of Technical Textiles and Packing Films segments was in-line withestimates.

FY14 Consolidated results have one-time ram-up & business set-up costs

SRF reported consolidated revenue of Rs 40.2bn in FY14, 8% above estimates. EBITDA

stood at Rs 5.2bn vs. estimate of Rs 6.1bn. Miss on EBITDA was mainly due to higherthan expected ramp-up costs of new packaging films capacity in Thailand and SouthAfrica. Consolidated PAT stood at Rs 1.65bn vs. our estimates of Rs 2.03bn and Rs2.17bn on standalone basis. Company generated Operating Cashflows (OCF) of Rs2.9bn on increased working capital of Rs 1.8bn. Free Cashflow to Firm stood at negativeRs 6.9bn.

Board approves Rs 1.4bn capex for Multi-purpose Specialty Chemicalplant at Dahej

SRF spent Rs 9.8bn towards capex in FY14, nearly completing and capitalizing the 1 st phase of its Dahej plant. Captive power plant of 15MW, HFC-134a plant with capacity of12,500 MTs and Specialty Chemical plants of 1,300 MTs were capitalize during theplant. The impact of these new capacities will be fully seen in FY15E.

SRF expects to produce 8,000 MTs of R134a from the Dahej capacity of 12,500 andmay convert the Bhiwadi capacity of 4,500 into development of new generation ofrefrigerant. We build-in utilisation of 7000 MTs in our estimation.

The company took board approval of Rs 1.4bn to set-up another multi-purpose specialtychemical plant at Dahej. We have built-in capex of Rs 2.5bn for FY15E and FY16E, in-line with management guidance.

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SRF Result Update


Ramp-up of Packaging Films business drags profitability

Packaging films business reported EBIT loss of Rs 50mn on consolidated basis in FY14against profits of Rs 242mn in FY14 standalone nos., leading to loss of Rs 292mnattributed to new plants in South Africa and Thailand. We understand the loss pertains tothe ramp-up cost of these two plants and hence would be one-time in nature. These plantswere EBIT positive exiting FY14 and hence would be profitability accretive in FY15E. Wecontinue to build in 4% EBIT margins from Packing Films business for FY15 and FY16,although believe the same could be higher for FY16 on back of potential turnaround in theglobal industry.

Exhibit 1: Segment-wise FY14 PerformanceFY14 Technical Textiles Chemicals Packaging Films

Rs. Mn. Standalone Consolidated Standalone Consolidated Standalone Consolidated

Revenue 18102 21856 9563 9563 6576 8830

EBIT 1675 1631 1913 1913 242 -50

EBIT Margin 9.3% 7.5% 20.0% 20.0% 3.7% -0.6%Source: Company, Emkay Research

At PAT level also the difference of Rs 0.52bn between consolidated & SA basis was mainlydue to losses of 0.22bn & 0.16bn seen in Thailand & South Africa Packaging Filmssubsidiaries and other Rs 0.14bn for set-up cost of its holding company subsidiary inNetherlands. Considering most of these costs are one-time in nature, the packaging filmsbusiness would be PAT accretive in FY15E against losses of Rs 50mn in FY14.

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Net Sales 35,063 39,927 45,003 47,582Growth (%) -1.0 13.9 12.7 5.7

Expenditure 31,687 34,956 37,132 38,214Employee Cost 2,664 3,110 3,224 3,546Other Exp 0 0 0 0SG&A 7,460 7,873 9,194 9,721EBITDA 6,164 5,225 8,121 9,617

Growth (%) -26.2 -15.2 55.4 18.4

EBITDA margin (%) 16.3 13.0 17.9 20.1Depreciation 2,089 2,248 3,115 3,277EBIT 4,076 2,977 5,007 6,340

EBIT margin (%) 10.8 7.4 11.1 13.3

Other Income 398 64 120 120Interest expenses 998 961 1,171 1,027

PBT 3,476 2,080 3,955 5,433Tax 1,094 455 1,187 1,630


Growth (%) -37.9 -31.8 70.4 37.4Net Margin (%) 6.3 4.0 6.1 8.0


E/O items 148 0 0 0Reported PAT 2,529 1,625 2,769 3,803PAT after MI 2,381 1,625 2,769 3,803

Growth (%) -37.9 -31.8 70.4 37.4


Equity share capital 584 584 584 584Reserves & surplus 19,105 20,059 21,805 24,244


Secured Loans 7,179 20,325 20,325 20,325Unsecured Loans 8,708 1,750 195 -3,503Loan Funds 15,887 22,075 20,520 16,823

Net deferred tax liability 2,503 2,752 3,780 4,861Total Liabilities 38,079 45,471 46,689 46,513

Gross Block 47,595 60,573 64,073 67,073Less: Depreciation 24,197 26,445 29,559 32,836Net block 23,398 34,129 34,514 34,237

Capital work in progress 5,654 2,500 1,500 1,000Investment 1,512 366 351 351

Current Assets 15,181 17,693 20,419 21,373Inventories 5,632 7,464 7,787 8,202Sundry debtors 5,087 6,915 8,618 9,111Cash & bank balance 1,910 825 1,526 1,570Loans & advances 2,447 2,325 2,325 2,325Other current assets 105 164 164 164Current lia & Prov 7,666 9,194 10,095 10,448



Cash FlowY/E Mar (Rsmn) FY13A FY14A FY15E FY16EPBT (Ex-Other income) 437 1,762 3,585 5,063

Depreciation 2,089 2,248 3,115 3,277Interest Provided 998 961 1,171 1,027Other Non-Cash items 0 0 0 0Chg in working cap -51 -1,820 -96 526Tax paid -1,094 -455 -1,187 -1,630Operating Cashflow 2,378 2,695 6,589 8,263

Capital expenditure -6,908 -9,824 -2,500 -2,500Free Cash Flow -4,529 -7,129 4,089 5,763

Other income 3,187 318 370 370Investments -107 1,146 15 0Investing Cashflow -3,828 -8,360 -2,115 -2,130

Equity Capital Raised 43 0 0 0Loans Taken / (Repaid) 3,591 6,188 -1,555 -3,697Interest Paid -998 -961 -1,171 -1,027Dividend paid (incl tax) -678 -670 -1,023 -1,364Income from investments 0 0 0 0Others 0 0 0 0Financing Cashflow 1,959 4,557 -3,750 -6,088

Net chg in cash 509 -1,108 724 44

Opening cash position 1,401 1,910 825 1,526

Closing cash position 1,910 802 1,549 1,570



EPS 41.1 28.0 47.7 65.6CEPS 77.1 66.8 101.4 122.1



Net Debt/ Equity 0.6 1.0 0.8 0.6Net Debt/EBIDTA 2.0 4.0 2.3 1.6

Working Cap Cycle (days) 54.0 69.7 71.0 71.4

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FY13A 10,808 1,743 16.1 1,132 12.5 58.7 16.3 16.6 11.0 2.6FY14E 11,334 1,778 15.7 1,202 13.3 6.3 15.6 15.6 10.8 2.3

FY15E 12,911 2,216 17.2 1,375 15.2 14.3 16.9 13.7 7.8 2.3FY16E 14,854 2,642 17.8 1,663 18.4 20.9 19.7 11.3 6.6 2.1

Unichem LabsResult below expectations; Maintain HOLD

May 12, 2014

Rating

Hold

Previous Reco

Hold

CMPRs208

Target PriceRs221

EPS Chg FY15E/FY16E (%) 2.0/5.17

Target Price change (%) 5.1

Nifty 7,014

Sensex 23,551


Absolute -8 1 15 13



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Un ic he m L ab s ( LHS ) Re l t o Ni ft y ( RHS) Source: Bloomberg

Stock DetailsSector Pharmaceuticals

Bloomberg UL IB


Face Value(Rs) 2


52 Week H/L 238/ 137





Promoters 50.2 50.2 50.2

FII/NRI 4.1 3.8 3.7




Unichem Q4FY14 results (vs. expectations)- Revenue atR2.4sbn (vs. Rs2.4bn), EBITDA at Rs317mn (vs. Rs506mn) andAdjusted PAT at Rs307mn (vs. Rs324mn)

Weak sales growth in domestic formulation due to new pricingpolicy and inventory rationalization; Muted growth in exportformulations on account of de-growth in CMO business

The domestic/export formulations business is expected togrow at a CAGR of 11.8%/14.7% in FY14-16E. EBITDA margin isexpected to be in the vicinity 17% over the same period

Expect revenue growth at a CAGR of 14.5% with strong salesin US and improvement in domestic business. Maintain HOLDwith a target price of Rs 221 based on FY16E EPS of Rs 18.4

Flat top-line growth; weak growth in domestic & export formulationUnichem reported a flat sales growth yoy. It reported decline of 2% yoy in domesticformulations due to new pricing policy (primarily affected by chronic business) andinventory rationalization. NLEM had an impact of ~Rs 165mn and inventory rationalizationof ~Rs 45mn. Currently company has total of 2,700 Medical Representatives (MRs) inIndia including the addition of 300 MRs in FY14. It plans to add 100 more MRs in FY15E.Overall API business declined by 18% yoy & 32% qoq due to high base effect in Q4FY13.The company has acquired an API facility in Maharashtra (expenditure spent- Rs 200mn,involves paying off the lender & incidental charges). Amount Rs 200mn more would beneeded for modernization of the plant. Export formulations business delivered mutedgrowth of 6.4% yoy due to slower growth in contractual business. Management expectsimprovement only post new order from H2FY15E. Brazil continues to remain a challenging

market for Unichem. EBITDA margins were down 418bps yoy to 13.0% due to lowergrowth from high margin domestic business. Management expects R&D expenses to be~5% of sales.

Expect improvement in domestic formulations business

We expect improvement in domestic formulations business to 8% in FY15E led byincreased sales from newly added MRs, low base in FY14 and price increase in its NLEMportfolio. We believe US business can deliver strong growth in the next 2 years driven bynew product launches on a low FY14 base. Management expects to launch 3 productsand file 8-10 ANDAs (including 2-3 are complex products; GI, Pain Management &Musculoskeletal) in FY15E. Till date, the company has filed 31 ANDAs and has 17approvals (tentative approvals- 2) of which 10 ANDAs are launched in US.

ValuationWe expect Unichem to report sales growth at a CAGR of 14.5% in FY14-16E driven byimprovement in domestic business and higher product approvals in export business.EBIDTA margins are expected to remain in the vicinity of 17%. Earnings will grow by17.6% CAGR over FY14-16E. We maintain a Hold rating on the stock with a revised targetprice of Rs 221.

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Unichem Labs Result Update


Exhibit 1: Quarterly financials

Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 yoy (%) qoq (%) FY14 FY13 yoy (%)

Revenue 2,435 2,656 2,696 2,649 2,441 0.2 -7.9 10,441 10,052 3.9

Expenditure 2,017 2,147 2,194 2,168 2,124 5.3 -2.0 8,633 8,223 5.0

as % of sales 83% 81% 81% 82% 87% 83% 82%

Consumption of RM 961 960 942 911 898 -6.5 -1.4 3,710 3,792 -2.2

as % of sales 39% 36% 35% 34% 37% 36% 38%

Employee Cost 347 413 414 400 394 13.4 -1.5 1,621 1,411 14.8

as % of sales 14% 16% 15% 15% 16% 16% 14%

Other expenditure 709 775 837 858 832 17.4 -2.9 3,302 3,020 9.3

as % of sales 29% 29% 31% 32% 34% 32% 30%

EBITDA 418 509 502 481 317 -24.2 -34.1 1,809 1,829 -1.1

Depreciation 98 107 110 101 109 427 348

EBIT 320 402 392 380 208 -35.0 -45.2 1,382 1,481 -6.7

Other Income 32 76 77 33 245 431 168

Interest 4 6 6 6 6 25 25

PBT 348 472 463 407 447 28.5 9.8 1,788 1,625 10.1

Total Tax 37 111 101 94 140 445 329PAT before MI 310 361 362 313 307 -1.2 -2.2 1,343 1,296 3.6

Minority interest (MI) - - - - - - -

Adj. PAT before extraordinary 310 361 362 313 307 -1.2 -2.2 1,343 1,296 3.6

Extraordinary expenses/(income) - - - -428 2 -427 -

Reported PAT 310 361 362 742 305 -1.7 -58.9 1,770 1,296 36.5

AEPS (Rs) 3.4 4.0 4.0 3.5 3.4 -1.2 -2.2 14.8 14.3 3.6


EBIDTA 17.2 19.1 18.6 18.2 13.0 -418 -517 17.3 18.2 -87

EBIT 13.2 15.1 14.6 14.3 8.5 -462 -581 13.2 14.7 -149

PBT 14.3 17.8 17.2 15.4 18.3 403 294 17.1 16.2 97

Adj. PAT 12.7 13.6 13.4 11.8 12.6 -19 73 12.9 12.9 -3

Effective Tax rate 10.7 23.5 21.8 23.0 31.4 2065 838 24.9 20.2 468Source: Company, Emkay Research

Exhibit 2: Quarterly revenue breakup

(Rs mn) Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 yoy (%) qoq (%) FY14 FY13 yoy (%)

Domestic 1,468 1,796 1,805 1,757 1,437 -2.1 -18.2 6,795 6,567 3.5

Formulations 1,422 1,756 1,739 1,664 1,391 -2.2 -16.4 6,551 6,349 3.2

API 46 40 66 92 46 -0.4 -50.2 244 219 11.6

Exports 945 827 857 874 938 -0.7 7.4 3,496 3,401 2.8

Formulations 699 563 634 611 744 6.4 21.7 2,552 2,536 0.6

API 246 264 223 262 194 -21.1 -26.0 944 865 9.1Source: Company, Emkay Research

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Conference Call Highlights

Domestic formulations

De-growth in domestic formulations due to new pricing policy (primarily affected bychronic business) and inventory rationalization.

The company has doing distribution restructuring to focus more on C&F agents (55%of overall sales). Field force strength stood at 2,700 in India. It plans to add 100 more MRs in FY15E.

Newly added 300 MRs in FY14 would be focusing on marketing Losartan and Trikaacross India.

Management expects recovery from Q2FY15E onwards in its domestic business led bylow base and price increase on its NLEM portfolio.

US

The company has filed 31 ANDAs till date and has 17 approvals (tentative - 2), ofwhich 10 are launched in the US.

Management expects to launch 3 products and file 8-10 ANDAs (including 2-3 arecomplex products; GI, Pain Management & Musculoskeletal) in FY15E.

Management expect 40-45% growth in US businessExport formulation delivered muted growth due to slower growth in contractual business.Management expects improvement only post new order from H2FY15E.

Brazilian business continues to remain a challenging market. Unichem has launched twoproducts and is on the verge of launching another product in the country.

Niche Generic: management indicated for more focus on top-line growth

Tax Rate: guided for a 23-24% tax rate for FY15E.

Other highlights

Guided for Rs 3.0bn capex for the next 2 years The Board has declared total dividend of 400% (Rs 8 per equity share) in FY14

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Income StatementY/E Mar (Rsmn) FY13A FY14E FY15E FY16E

Net Sales 10,808 11,334 12,911 14,854

Growth (%) 23.5 4.9 13.9 15.0

Expenditure 9,065 9,556 10,695 12,212Raw Materials 3,949 3,875 4,436 5,064Employee Cost 1,780 2,023 2,602 2,983Other Exp 3,336 3,658 3,657 4,166EBITDA 1,743 1,778 2,216 2,642

Growth (%) 47.3 2.0 24.6 19.2


EBIT margin (%) 12.6 11.7 13.1 13.7


PBT 1,460 1,562 1,791 2,134Tax 328 359 416 471


Growth (%) 58.9 6.3 14.3 20.9

Net Margin (%) 10.5 10.6 10.6 11.2


E/O items 0 491 0 0Reported PAT 1,132 1,693 1,375 1,663

PAT after MI 1,132 1,202 1,375 1,663Growth (%) 58.9 6.3 14.3 20.9

Balance SheetY/E Mar (Rsmn) FY13A FY14E FY15E FY16E



Long Term Debt 943 977 944 944Short Term Debt 62 10 60 60Loan Funds 1,005 987 1,005 1,005

Other Liabilities 0 0 0 0Total Liabilities 8,275 9,155 9,152 9,757


Capital work in progress 1,322 905 905 905Other Assets 57 57 442 442

Current Assets 4,868 6,291 6,570 6,857Inventories 1,430 2,035 1,415 1,628Sundry debtors 2,070 1,965 2,122 2,442Cash & Cash Equivalents 577 578 2,493 2,175Loans & advances 750 1,596 531 610Other current assets 41 117 9 2Current liabilities 2,449 2,292 3,931 4,505

Accounts Payable 1,566 1,505 1,944 2,220Other Current Liabilities 883 787 1,986 2,285Net current assets 2,419 3,999 2,640 2,352


Cash FlowY/E Mar (Rsmn) FY13A FY14E FY15E FY16EPBT (Ex-Other income) 1,326 1,289 1,646 1,990

Depreciation 384 457 528 607Interest Provided 33 32 42 45Other Non-Cash items 0 0 0 0Chg in working cap 356 -1,579 3,275 -31Tax paid 0 -359 -416 -471Operating Cashflow 1,681 803 4,527 2,140

Capital expenditure -972 244 -1,500 -1,500Free Cash Flow 708 1,048 3,027 640

Other income 134 273 145 145Investments -57 0 -385 0Investing Cashflow -895 517 -1,740 -1,355

Equity Capital Raised 0 0 0 0Loans Taken / (Repaid) -176 -17 17 0Interest Paid -33 -32 -42 -45Dividend paid (incl tax) 0 -1,270 -847 -1,058Income from investments 0 0 0 0Others 0 0 0 0Financing Cashflow -209 -1,319 -871 -1,103Net chg in cash 577 1 1,915 -319

Opening cash position 377 577 578 2,493Closing cash position 577 578 2,493 2,175

Key RatiosY/E Mar FY13A FY14E FY15E FY16EProfitability (%)


EPS 12.5 13.3 15.2 18.4CEPS 16.8 18.3 21.0 25.1BVPS 80.4 90.3 90.1 96.8DPS 5.3 14.0 9.4 11.7Valuations (x)


Net Debt/ Equity 0.1 0.0 -0.2 -0.1Net Debt/EBIDTA 0.2 0.2 -0.7 -0.5Working Cap Cycle (days) 62.2 110.2 4.1 4.3

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Financial Snapshot (Standalone) (Rsmn)



FY13A 73,379 7,230 9.9 2,830 6.8 -25.9 15.0 5.9 9.0 0.8FY14A 79,819 6,294 7.9 2,545 6.1 -9.6 12.2 6.5 9.5 0.8FY15E 72,288 6,132 8.5 2,430 5.9 -4.5 10.8 6.8 7.7 0.7FY16E 72,288 6,196 8.6 2,475 6.0 1.8 10.3 6.7 6.4 0.7

Chambal FertilisersClarity on IPP linked production a key overhang

May 12, 2014

Rating

Hold

Previous Reco

Accumulate

CMPRs40

Target PriceRs45

EPS Chg FY15E/FY16E (%) (36)/NA

Target Price change (%) (29)

Nifty 7,014

Sensex 23,551


Absolute -9 7 7 -17



30

34

38

42

46

50


Rs

-30

-22

-14

-6

2

10%

Chambal Fertilisers (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock DetailsSector Agri Input & Chemicals

Bloomberg CHMB IB


Face Value(Rs) 10


52 Week H/L 50/ 31





Promoters 56.8 56.8 56.8

FII/NRI 5.5 5.5 5.5




Production shutdown at urea plant affected Q4FY14 results.Standalone revenues at Rs 14.4bn were down 6.6%yoy whilePAT dropped by 76% to mere Rs 56mn

Unfavourable global urea prices affected IPP linked ureaproduction while fertiliser trading also remained subduedand margin were under pressure

Management confident about improved profitability intrading business while urea production under IPP to dependon new government polices

We await for clarity on urea policy and downgrade our FY15earnings and target price to Rs 45 (from Rs 56) based on20% discount to book value consequently downgrading ourrecommendation from Accumulate to Hold

Plant shut down and lower trading revenues impact growth

Standalone revenues for the quarter at Rs 14.4bn were down 6.6%yoy and lower thanour estimates of Rs 18.1bn on the back of lower own manufactured fertilizer revenuesand lower than estimated fertilizer trading revenues. Own manufactured fertilizerrevenues at Rs 8.1bn were up 5.6%yoy though lower than our estimates of Rs 10.4bndue to the month long maintenance shut down at its plants. The maintenance shut downwas brought forward due to lack of clarity on above cut off-IPP linked production onaccount of lower international urea prices. Trading revenues at Rs 3.7bn were down37%yoy and lower than our estimates of Rs 6bn. Standalone revenues for FY14 stood atRs 79.8bn up 8.8%yoy on the back of 21%yoy growth in own fertilizer segment revenuesfor the year.

Fertiliser business profitability wipped off due to plant closure

Standalone EBITDA at Rs 577mn was down 54%yoy and lower than our estimates dueto significantly lower than estimated EBIT margins for the own manufactured fertilizersegment. Own manufactured fertilizer segment EBIT for the quarter stood at Rs 128mndown 88%yoy. Trading segment EBIT at Rs 251mn was higher than our estimates withEBIT margin at 6.7% vs our estimates of 3% margin. Shipping business reported healthyrevenue growth; however, it reported an EBIT loss of Rs 51mn as against our estimatesof EBIT profit of Rs 20mn.

Clarity on IPP linked policy to act as near term catalyst

Production above cut off remains non-remunerative due to weak global urea prices.

Industry is expecting government to move to fixed subsidy regime. We await for betterclarity on the issue and have downgraded our FY15E EPS by 36% to Rs 5.9. We alsoreduce our target price to Rs 45 (20% discount to book value) and downgrade stockfrom Accumulate to Hold. Though dividend yield remains attractive at 5% we believe thatfertiliser trading and shipping business to remain under pressure. Higher working capitalhas increased interest cost and also adversely affected return ratios (ROCE droppedfrom 15% to 10%).

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Chambal Fertilisers Result Update


Exhibit 1: Quarterly Summary (Standalone)Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY14 FY13 YoY (%)

Revenue 15,442 16,896 24,903 23,599 14,421 (6.6) (38.9) 79,819 73,379 8.8 Expenditure 14,184 15,457 22,957 21,267 13,844 (2.4) (34.9) 73,525 66,149 11.2 as % of sales 91.9 91.5 92.2 90.1 96.0 92.1 90.1 Consumption of RM 7,924 9,646 15,471 14,019 7,460 (5.8) (46.8) 46,597 43,611 6.8

as % of sales 51.3 57.1 62.1 59.4 51.7 58.4 59.4Power & Fuel 3,095 2,646 3,794 3,718 2,758 (10.9) (25.8) 12,915 11,046 16.9 as % of sales 20.0 15.7 15.2 15.8 19.1 16.2 15.1Employee Cost 372 359 369 365 394 6.0 8.1 1,487 1,419 4.8 as % of sales 2.4 2.1 1.5 1.5 2.7 1.9 1.9Other expenditure 2,794 2,807 3,323 3,165 3,231 15.7 2.1 12,526 10,073 24.3as % of sales 18.1 16.6 13.3 13.4 22.4 15.7 13.7 EBITDA 1,257 1,439 1,946 2,332 577 (54.1) (75.3) 6,294 7,230 (12.9) Depreciation 538 569 602 583 549 2.2 (5.7) 2,303 2,220 3.7 EBIT 720 870 1,344 1,750 28 (96.2) (98.4) 3,991 5,009 (20.3) Other Income 199 471 408 209 484 143.5 131.4 1,573 673 133.6Interest 411 494 435 593 467 13.7 (21.3) 1990 1345 47.9 PBT 508 847 1,317 1,365 45 (91.2) (96.7) 3,575 4,338 (17.6) Total Tax 278 203 375 463 (12) (104.2) (102.5) 1,029 1,511 (31.9) Adjusted PAT 229 645 942 903 56 (75.5) (93.8) 2,545 2,827 (9.9)(Profit)/loss from JV's/Ass/MI 0 0 0 0 0 0 0APAT after MI 229 645 942 903 56 (75.5) (93.8) 2,545 2,827 (9.9)Extra ordinary items 0 -486 0 0 0 -486 -230Reported PAT 229 1,130 942 903 56 (75.5) (93.8) 3,031 3,056 (0.8)Reported EPS 0.6 2.7 2.3 2.2 0.1 (75.5) (93.8) 7.3 7.3 (0.8)


EBIDTA 8.1 8.5 7.8 9.9 4.0 (414) (588) 7.9 9.9 (197)EBIT 4.7 5.1 5.4 7.4 0.2 (447) (722) 5.0 6.8 (183)EBT 2.0 2.2 3.6 4.9 (3.0) (505) (795) 2.5 5.0 (249)PAT 1.5 3.8 3.8 3.8 0.4 (110) (344) 3.2 3.9 (66)Effective Tax rate 54.8 23.9 28.5 33.9 (26.2) (8,100) (6,008) 28.8 34.8 (605)

Source: Company, Emkay Research

Exhibit 2: Segment Summary (Standalone)Rs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY14 FY13 YoY (%)

RevenuesFertilisers 7673 11226 12478 11837 8102 5.6 (31.6) 43644 36048 21.1 Trading 5963 3557 9639 9358 3734 (37.4) (60.1) 26288 30409 (13.6)Shipping 885 1107 1662 1467 1656 87.1 12.9 5893 3097 90.3Textiles 920 1006 1123 937 928 0.9 (0.9) 3994 3825 4.4Total 15442 16896 24903 23599 14421 (6.6) (38.9) 79819 73379 8.8

EarningsFertilisers 1057 1306 1320 1187 128 (87.9) (89.2) 3942 4774 (17.4)Trading 229 220 249 882 251 9.8 (71.5) 1603 2255 (28.9)Shipping -88 -138 51 119 -51 (41.5) (143.2) -20 -183 (89.1)Textiles 91 38 118 54 52 (42.9) (3.1) 262 201 30.2 Total 1290 1426 1738 2242 380 (70.5) (83.0) 5787 7047 (17.9)

Segment marginsFertilisers 13.8 11.6 10.6 10.0 1.6 (1,220) (845) 9.0 13.2 (421)Trading 3.8 6.2 2.6 9.4 6.7 289 (269) 6.1 7.4 (132)Shipping -9.9 -12.5 3.0 8.1 -3.1 682 (1,122) -0.3 -5.9 558

Textiles 9.9 3.8 10.5 5.8 5.6 (431) (13) 6.6 5.3 130Total 8.4 8.4 7.0 9.5 2.6 (572) (686) 7.2 9.6 (235)


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Conference call highlights

Revenue and margins impacted by maintenance shutdown

Revenues at Rs 14.4bn were down 6.6%yoy on the back of lower volumes due to themaintenance shutdown which was brought forward in the month of March as against earlierguidance of April. Lack of clarity on IPP linked-above cut off production impacted volumesduring the quarter. Revenues from own manufactured fertilizer segment for the quarter stoodat Rs 8.1bn up 5.6%yoy though lower than our estimates of Rs 10.4bn. Trading segmentrevenues at Rs 3.7bn were down 37%yoy and lower than our estimates of Rs 6bn. Shippingsegment revenues at Rs 1.6bn were up 87%yoy and higher than our estimates of Rs 10bn.

Concerns on above cut off production continue to linger

Concerns on above cut off production continue to linger due to non-remunerative IPP linkedvolumes and lack of clarity on the policy going forward. The Fertiliser Ministry is currentlydeliberating on moving away from the IPP linked policy to a fixed rate per ton policy,however, progress on the same is expected after the elections. Lack of clarity is currentlyweighing down on the production guidance as the management highlighted that if the policyis not adequately addressed, the company will be forced to restrict its production to cut off

levels i.e. ~1.7-1.8mn tons in FY15.

Shipping business likely to remain under pressure going forward

The shipping business revenues during the quarter stood at Rs 1.6bn up 87%yoy and aheadof our estimates. However, the company reported an EBIT loss for the segment at Rs 51mn.The management expects the shipping business environment to remain challenging goingforward and has guided for sub-dued H1FY15 with gradual recovery in H2FY15.

Net debt continues to remain elevated due subsidy delays

Net debt for FY14 stood at Rs 43bn vs Rs 48bn at the end of FY13. Net debt continued toremain elevated on the back of lower provisioning of subsidies by the GoI. Subsidyreceivables at the end of FY14 stood at Rs 21.6bn adjusted for Rs 800mn on account ofmoney received under the Special Banking Arrangement.

Clarity on above cut off volumes to act as near term catalyst

Clarity on the IPP linked production will act as the near term catalyst. Owing to the lowerinternational urea prices, the domestic manufacturers do not have an incentive to increaseproduction beyond cut off currently. The Fertiliser Ministry has been deliberating on tweakingthe policy from IPP linkage to fixed per ton incentive. Clarity on the same is expected toemerge post the elections. Further, under provisioning of subsidy continues to impactworking capital requirement. Thus, clarity on the same to act as a near term catalyst.

Downgrade FY15E due to lack of clarity on above cut off production,downgrade to Hold

On the back of lingering concerns on above cut off production, we have revised our FY15E

downwards. We have revised our FY15E revenues lower by 12.5% from Rs 82.6bn to Rs72.3bn along with reduction in EBITDA from Rs 7.8bn to Rs 6.1bn. Consequently, we haverevised our APAT estimates lower by 36% from Rs 3.8bn to Rs 2.4bn. We have furtherintroduced our FY16E. We are consequently revising our price target lower to Rs 45 valuingthe stock at 0.8x FY15E book value. We have hence downgraded our rating fromAccumulate to Hold.

Exhibit 3: Revision in estimatesFY15E FY16E

Rs mnOld Estimates New Estimates % Change Introducing

Net sales 82,654 72,288 -12.5% 72,288 EBITDA 7,807 6,132 -21.5% 6,196

EBITDA % 9.4% 8.5% 900 bps 8.6% APAT 3,813 2,430 -36.3% 2,475 EPS 9.2 5.9 -35.9% 6.0


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Key Financials (Standalone)


Net Sales 73,379 79,819 72,288 72,288Growth (%) 13.1 8.8 -9.4 0.0


Growth (%) -14.2 -12.9 -2.6 1.0

EBITDA margin (%) 9.9 7.9 8.5 8.6Depreciation 2,220 2,303 2,160 2,160EBIT 5,009 3,991 3,972 4,036

EBIT margin (%) 6.8 5.0 5.5 5.6

Other Income 673 1,573 700 700Interest expenses 1,345 1,990 1,200 1,200

PBT 4,338 3,575 3,472 3,536Tax 1,508 1,029 1,041 1,061


Growth (%) -25.9 -10.0 -4.5 1.8Net Margin (%) 3.9 3.2 3.4 3.4


E/O items -230 -486 0 0Reported PAT 3,059 3,031 2,430 2,475PAT after MI 2,830 2,545 2,430 2,475

Growth (%) -25.9 -10.0 -4.5 1.8




Secured Loans 11,773 10,481 10,481 10,481Unsecured Loans 37,518 33,010 28,010 23,010Loan Funds 49,291 43,491 38,491 33,491

Net deferred tax liability 3,861 4,188 4,188 4,188Total Liabilities 73,073 69,541 66,002 62,508


Capital work in progress 700 700 700 700Investment 6,444 5,775 6,604 6,604

Current Assets 52,395 45,240 44,068 42,395Inventories 12,678 6,421 9,233 9,902Sundry debtors 34,336 34,405 24,208 19,805Cash & bank balance 919 237 8,163 10,223Loans & advances 2,490 3,520 1,807 1,807Other current assets 1,972 657 657 657Current lia & Prov 11,147 8,220 9,956 10,317

Current liabilities 9,440 7,012 8,748 9,108Provisions 1,707 1,208 1,208 1,208Net current assets 41,248 37,019 34,112 32,078


Cash FlowY/E Mar (Rsmn) FY13A FY14A FY15E FY16EPBT (Ex-Other income) 3,664 2,001 2,772 2,836

Depreciation 2,220 2,303 2,160 2,160Interest Provided 1,345 1,990 1,200 1,200Other Non-Cash items -4,049 -4,048 -4,047 -4,047Chg in working cap -19,803 3,874 10,833 4,094Tax paid -1,508 -1,029 -1,041 -1,061Operating Cashflow -13,986 9,384 15,782 9,087

Capital expenditure -700 -3,669 -700 -700Free Cash Flow -14,686 5,716 15,082 8,387

Other income 673 1,573 700 700Investments -818 669 -829 0Investing Cashflow -844 -1,426 -829 0

Equity Capital Raised 0 -23 0 0Loans Taken / (Repaid) 15,150 -5,801 -5,000 -5,000Interest Paid -1,345 -1,990 -1,200 -1,200Dividend paid (incl tax) -791 -828 -828 -828Income from investments 0 0 0 0Others 0 0 0 0Financing Cashflow 13,014 -8,641 -7,028 -7,028

Net chg in cash -1,816 -683 7,925 2,059

Opening cash position 2,735 919 237 8,163

Closing cash position 919 237 8,163 10,223



EPS 6.8 6.1 5.9 6.0CEPS 12.1 11.7 11.1 11.2





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Financial Snapshot (Consolidated) (Rsmn) YE- Net EBITDA EPS EPS RoE EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BVFY13A 20,484 2,826 13.8 1,677 7.2 1.4 11.0 12.9 8.7 1.4

FY14E 22,014 3,132 14.2 1,615 6.9 -3.7 12.3 13.4 8.0 1.2

FY15E 23,626 3,495 14.8 2,139 9.1 32.5 11.3 10.1 6.9 1.1

FY16E 25,841 4,038 15.6 2,549 10.9 19.1 12.0 8.5 5.7 1.0

HT MediaOperationally in-line, Maintain HOLD

May 12, 2014

Rating

Hold

Previous Reco

Hold

CMPRs92

Target PriceRs100

EPS Chg FY14E/FY15E (%) NA

Target Price change (%) 11

Nifty 7,014

Sensex 23,551


Absolute 4 27 14 -18

Rel. to Nifty 0 11 -2 -30Source: Bloomberg


70

81

92

103

114

125


Rs

-40

-30

-20

-10

0

10%

HT Me dia ( LHS) Rel to Nif ty (RHS) Source: Bloomberg

Stock DetailsSector Media & Entertainment

Bloomberg HTML IB


Face Value(Rs) 2


52 Week H/L 119/ 70





Promoters 69.5 69.0 69.0

FII/NRI 9.7 13.2 15.8




Revenue at Rs5.4bn (+8.7% yoy), EBITDA at Rs754mn (+5%yoy). EBITDA margins at 13.9% contracted 47bps yoy. PAT atRs348mn was down 13% yoy due to deferred tax reversal

Print advt. revenue grew 10.4% yoy to Rs4.2bn. English /Hindi advt. revenue grew 6.4% / 20% yoy. Circulation revenuegrowth of 14% yoy was driven by improved realization

Going forward, we expect English and Hindi ad growth of 8%yoy and 13% yoy, respectively, in FY15E

Low payout despite net cash of Rs9bn and weak marginprofile (compared to peers) will continue to weigh onvaluations. Maintain HOLD with target price of Rs100

Operational performance in-line, PAT impacted by deferred tax reversal

Consolidated revenue at Rs5.4bn was in line with expectations. Revenue growth of8.7% yoy was driven by 10.4% yoy increase in print ad revenue. English and Hindiad revenues grew 6.4% yoy and 20.3% yoy to Rs2.8bn and Rs1.3bn, resp. Adrevenue growth was driven by an improvement in both yield and volumes.Circulation revenue grew 14% yoy to Rs655mn led by improved realization/ copy.

EBITDA grew 5% yoy to Rs754mn, with an EBITDA margin of 13.9%, whichcontracted 47bps yoy. Raw material cost (+7.5% yoy due to increase in newsprintprices) and higher other operating expenses (12.6% yoy) restricted EBITDA growth.PAT declined 13% yoy to Rs348mn, due to reversal of deferred tax asset forprevious periods which led to a higher ETR of 46.2% in Q4FY14.

Hindi business: Better-than-expected ad growth Revenues grew 18.3% YoY to Rs 1.8bn, driven by ad revenue growth of 20.3% yoy.

Ad revenue growth was driven by both yield improvement and volume growth.Circulation revenue grew 14% yoy to 455mn, driven by improving realization/copy.

EBITDA at Rs335mn grew 14% yoy with EBITDA margin at 18.2% (-68bps yoy).Raw material cost increase of 28% yoy restricted EBITDA growth.

Radio revenue growth remain strong, Digital losses to continue Radio revenues grew 24% yoy to Rs228mn with EBIT of Rs48mn vs. Rs10mn in

Q4FY13. The digital business reported revenue of Rs218mn (+49% yoy), with anEBIT loss of Rs76mn vis--vis Rs81mn in Q4FY13.

Outlook and valuationsEnglish ad revenue growth is expected to sustain at current levels in anticipation of

improving macro environment with stable political scenario. Our estimates are alreadyfactoring English ad revenue growth of 8.1%/8.8% for FY15/16E. We have factored INRat Rs62/60 for FY15/16E; appreciation in INR would drive upgrades in our estimates.However, The company has highlighted its interest to launch additional web portals(Auto, Real Estate and Education) going forward. Its digital segment has reported EBITloss of Rs425mn in FY14, launch of new websites will further accelerate losses.

Reasons for HT Media to trade at steep discount to DB Corp and Jagran are 1)concerns over capital allocation in ancillary businesses, 2) low payout despite net cashof Rs9bn and 3) weak margin profile.

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HT Media Result Update


Exhibit 1: Quarterly financialsRs mn Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 YoY (%) QoQ (%) FY 14 FY 13 YoY (%)

Sales 5,005 5,409 5,347 5,813 5,438 8.7 (6.4) 22,007 20,483 7.4

Raw Material 1706.5 1715.3 1894.0 1908.4 1835.0 7.5 (3.8) 7,353 7,268 1.2

as % of sales 34.1 31.7 35.4 32.8 33.7 33.4 35.5

Employee Cost 990.2 1055.2 1064.7 1059.4 1057.6 6.8 (0.2) 4,237 3,921 8.0

as % of sales 19.8 19.5 19.9 18.2 19.4 19.3 19.1Other Operating Expenses 1591.1 1859.0 1744.3 1897.3 1791.9 12.6 (5.6) 7,293 6,469 12.7

as % of sales 31.8 34.4 32.6 32.6 32.9 33.1 31.6

Total Expenditure 4287.8 4629.5 4703.0 4865.1 4684.5 9.3 (3.7) 18882 17657 6.9

EBITDA 717.5 779.8 644 948 754 5.1 (20.5) 3124.9 2825.6 10.6

Depreciation 232.1 218.6 223.1 200.2 216.1 (6.9) 7.9 858 914.4 (6.2)

EBIT 485.4 561.2 420.4 747.5 537.8 10.8 (28.1) 2267 1911 18.6

Other Income 246.8 275.6 569.5 357.3 420.7 70.5 17.7 1,623 938.3 73.0

Interest 135.4 137.5 174.1 164.3 173.5 28.1 5.6 649 446.0 45.6

PBT 596.8 699.3 815.8 940.5 785.0 31.5 (16.5) 3240.6 2403.5 34 .8

Tax 166.6 183.5 177.3 193.2 362.9 117.8 87.8 917 623.4 47.1

PAT before MI 430.2 515.8 638.5 747.3 422.1 (1.9) (43.5) 2323.7 1780.1 30.5

Minority interest 29.4 40.9 56.7 77.1 73.7 150.7 (4.4) 248 103.6 139.8

PAT 400.8 474.9 581.8 670.2 348.4 (13.1) (48.0) 2075.3 1676.5 23.8


EBIDTA 14.3 14.4 12.0 16.3 13.9 (47) (244) 14.2 13.8 40

EBIT 9.7 10.4 7.9 12.9 9.9 19 (297) 10.3 9.3 97

EBT 11.9 12.9 15.3 16.2 14.4 251 (175) 14.7 11.7 299

PAT 8.0 8.8 10.9 11.5 6.4 (160) (512) 9.4 8.2 125

Effective Tax rate 27.9 26.2 21.7 20.5 46.2 1,831 2,569 28.3 25.9 236Source: Company, Emkay Research

Exhibit 2: Revenue break-upRs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

English Ad 3,049 2,600 2,559 2,493 2,960 2,673 2,769 2,598 3,141 2,843

% growth YoY 11.1 -3.6 -6.5 -2.8 -2.9 2.8 8.2 4.2 6.1 6.4

Hindi ad revenue 1,024 1,136 1,166 1,147 1,182 1,105 1,326 1,270 1,375 1,329

% growth YoY 8.7 21.8 5.6 1.7 15.4 -2.7 13.7 10.7 16.3 20.3

Total Print ad revenue 4,073 3,736 3,725 3,640 4,142 3,778 4,095 3,868 4,516 4,172

% growth YoY 10.5 2.9 -3.0 -1.4 1.7 1.1 9.9 6.3 9.0 10.4

Circulation 503 483 525 564 565 574 608 642 665 655

% growth YoY 6.8 3.0 8.2 11.1 12.3 18.8 15.8 14.0 17.7 14.1 Source: Company, Emkay Research

Exhibit 3: Ancillary business performanceRs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14

Radio sales 173.5 196.2 186.0 199.2 218.0 184.3 214.1 221.6 267.0 228.8

EBIT -9.3 -14.6 14.5 23.8 25.2 10.5 36.7 46.9 77.9 48.1

Digital revenue 116.7 134.0 120.6 133.1 138.0 146.1 170.5 178.1 195.4 218.2

EBIT -93 -81 -117 -100 -89 -81 -171 -103 -76 -76Source: Company, Emkay Research

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Concall highlights

The management expects Ad yields to improve in Delhi, Mumbai especially for Englishprint segment. It has not given guidance on the Ad growth but it expects to do betterthan 8.6% recorded in FY14. We are projecting ad revenue growth of 9.7%/10% forFY15/16E. As per management, Mint is poised to gain significant advantage if financial

markets recover with improving macro environment. EBITDA margins in 4Q were impacted on account of 1) increase in RM cost due to

exchange rate fluctuation which led to 16% increase in Newsprint prices atRs39,500/MT (international newsprint prices were stable at ~$625-630/tonne) ascompared to Rs34500/MT in Q4FY14, 2) increase in cost for HMVL and 3) higherprovisions for Ad:Equity treaties.

The company has provided for Ad for Equity provisions to the tune of Rs140mn inQ4FY14 (gross Ad for Equity assets at Rs3bn, 60% property & balance in equity, totalprovisions at Rs90cr). During the quarter it sold assets worth Rs190mn.

Capital allocation would be towards 3 key areas i.e.

Education- planning to increase number of coaching centers (currently 12), focus onHigher education & specialized management & technical courses (announced a tie upwith northwestern university this quarter)

Radio- Participation in Phase III auctions Digital- management expects revenue of Rs1bn in FY15. However, the management

doesnt expect losses to decline as investments in sales & marketing would be neededto support the growth trajectory. Investment in its job portal is seeing good tractionespecially on the social recruitment side. Further, management is looking to startcouple of new portals in segments like auto, real estate and education

The management did not have any conclusive answer for rewarding shareholders withhigher dividend pay-out going forward. No specific guidance on increase in dividendpayout. The Management might consider buyback after FY15 due to a SEBI directive

which bars a company from doing a buyback within one year in case of an earlierbuyback. The company had done a buyback of mere Rs250mn in FY14.

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Income StatementY/E Mar (Rsmn) FY13A FY14E FY15E FY16E

Net Sales 20,484 22,014 23,626 25,841Growth (%) 2.3 7.5 7.3 9.4


Growth (%) -1.5 10.8 11.6 15.6


EBIT margin (%) 9.3 10.3 11.2 12.2

Other Income 938 1,623 1,020 1,190Interest expenses 446 649 403 419

PBT 2,404 3,248 3,256 3,933Tax 623 917 879 1,101


Growth (%) 3.8 30.9 2.0 19.1Net Margin (%) 8.7 10.6 10.1 11.0

(Profit)/loss from JVs/Ass/MI 104 248 238 283Adjusted PAT After 1,677 2,083 2,139 2,549

E/O items 0 -468 0 0Reported PAT 1,677 1,615 2,139 2,549PAT after MI 1,677 2,083 2,139 2,549

Growth (%) 1.4 24.2 2.7 19.1

Balance SheetY/E Mar (Rsmn) FY13A FY14E FY15E FY16E


Net worth 15,976 17,943 19,969 22,404Minority Interest 1,438 1,534 1,764 1,994

Secured Loans 4,341 4,526 3,826 3,526Unsecured Loans 0 0 0 0Loan Funds 4,341 4,526 3,826 3,526

Net deferred tax liability -31 -31 -31 -31Total Liabilities 21,723 23,972 25,528 27,893


Capital work in progress 1,143 1,143 1,143 1,143Investment 9,731 12,831 13,831 15,331

Current Assets 9,913 10,771 12,256 14,355Inventories 1,631 2,219 2,500 2,864Sundry debtors 2,712 2,837 3,248 3,549Cash & bank balance 1,569 1,177 1,401 2,099Loans & advances 3,097 3,540 4,036 4,672Other current assets 904 998 1,071 1,172Current lia & Prov 6,348 8,082 8,756 9,714



CashflowY/E Mar (Rsmn) FY13A FY14E FY15E FY16EPBT (Ex-Other income) 1,466 1,625 2,236 2,743

Depreciation 914 858 856 876Interest Provided 446 649 403 419Other Non-Cash items 0 0 0 0Chg in working cap -273 484 -586 -443Tax paid -623 -917 -879 -1,101Operating Cashflow 1,930 2,700 2,029 2,494

Capital expenditure -1,279 -884 -600 -600Free Cash Flow 651 1,816 1,429 1,894

Other income 938 1,623 1,020 1,190Investments -1,411 -3,100 -1,000 -1,500Investing Cashflow -1,752 -2,361 -580 -910

Equity Capital Raised 0 -1 0 0Loans Taken / (Repaid) 466 185 -700 -300Interest Paid -446 -649 -403 -419Dividend paid (incl tax) -110 -110 -110 -110Income from investments 0 0 0 0Others -104 -156 -12 -57Financing Cashflow -193 -731 -1,225 -886

Net chg in cash -15 -392 224 697

Opening cash position 1,584 1,569 1,177 1,401

Closing cash position 1,569 1,177 1,401 2,099

Key RatiosY/E Mar FY13A FY14E FY15E FY16EProfitability (%)


EPS 7.2 6.9 9.1 10.9CEPS 11.1 12.5 12.8 14.6





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Emkay

R e s u

l t U p

d a

t e


Financial Snapshot (Standalone) (Rsmn)


Dec Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

CY12A 4,160 1,819 43.7 740 1.5 29.8 7.4 69.3 29.7 4.2CY13A 5,179 2,558 49.4 1,744 3.6 135.8 13.3 29.4 20.4 3.7CY14E 6,232 3,437 55.2 2,676 5.5 53.5 17.8 19.2 14.7 3.2CY15E 7,057 4,062 57.6 3,224 6.7 20.5 18.6 15.9 12.7 2.7

Gujarat PipavavMargin surprise but in price

May 12, 2014

Rating

Hold

Previous Reco

Hold

CMPRs106

Target PriceRs88

EPS Chg CY14E/CY15E (%) 24/21

Target Price change (%) 18

Nifty 7,014

Sensex 23,551


Absolute 23 68 97 122

Rel. to Nifty 19 46 70 89Source: Bloomberg


40

57

74

91

108

125


Rs

-10

12

34

56

78

100%

Gu ja ra t Pi pa va v (L HS ) Re l t o Ni ft y (RHS) Source: Bloomberg

Stock DetailsSector Construction

Bloomberg GPPV IB


Face Value(Rs) 10


52 Week H/L 113/ 42


Daily Avg Volume (No of sh) 1,588,199



Promoters 43.0 43.0 43.0

FII/NRI 32.7 33.8 33.5




Q1CY14 Reported Revenue at Rs1562 mn (versus ourexpectation of Rs1384 mn) +25% YoY on higher thanexpected volumes, includes take or pay income of Rs146 mn

Adjusted EBITDA at Rs770 mn (versus our expectation ofRs712 mn) +35% YoY, -7% QoQ as operating leverage kicksin, favorable cargo mix (Higher proportion of coal)

Volumes grew by 18% at 2.93 mt, Container volumes edgedhigher +16%YoY, realizations remained flat on lower reeferincome, Bulk Volumes grew by 23% YoY

Revised FY14E/15E EPS by 24%/21%, stock pricing the bestcase scenario of Earnings dont fortify further upside, willlack scalability issues post new expansion revised targetprice to Rs88 Maintain Hold

Adjusted Revenue edged higher +18% YoY on strong volumes

The revenue edged higher by 25% at Rs1.56 bn includes one time take or pay income ofRs146 mn (rebates are offered in the container business as a discount to the rack ratesin lieu of certain guaranteed volumes), adjusted revenue came in at Rs1416 mn 2.3%higher than our estimate of Rs1384 mn. The revenue growth was driven mainly bystrong volumes in the container segment up 16% YoY and bulk volumes grew 23% YoYbusinesses. The profit excluding take or pay income of Rs146 mn came in at Rs550which is 8% than our estimate of Rs510 mn, including the take or pay income adjustedprofit stands at Rs710 mn. The company charged off mobilization advance for dredgingof Rs102m. Post the recent downward revision in the companys capex plans, thedredging capex has substantially come down (by almost 90% from the Rs2.1bn

originally envisaged). This led to write-off of the mobilization advance paid to thecontractor.

Margins surprised on operational efficiencies, favorable cargo mix

The company reported strong EBITDA margins of 58.6%, adjusted for take or payincome of Rs146 mn EBITDA margin expands to Rs54.3 % against our estimate of51.4%. The sharp improvement in EBITDA margin attributes a) lower than expectedoperating expenditure which kicked in on higher container volumes +16% YoY, (thecontainer business has a high fixed-cost component of 70-75% and hence the companywould benefit from operating leverage as business scales up b) management statedfavorable mix of cargo (handled higher proportion of coal) also led to lower operatingexpense. Adjusted EBITDA came in at Rs770 mn versus our expectation of Rs710 mn.

Container Volumes remained strong +16% YoY, realisations flat

The container volumes grew by 16% to 187000 teu versus our expectation of 170000teu and bulk volumes grew by 23% at 0.694 MT however remain below our estimate of0.75 MT. Growth in Bulk majorly led by coal volumes. The scale up in the containervolumes led by addition of new lines like NMG which holds the capacity to give 50,000-60,000teu of annual volumes. The realisations remained flat at Rs441 mt adjusted fortake or pay income of Rs146 mn.

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Gujarat Pipavav Result Update


Exhibit 1: Quarterly standalone performance

Rs mn Q1CY13 Q2CY13 Q3CY13 Q4CY13 Q1CY14 YoY (%) QoQ (%) YTDCY14 YTDCY13 YoY (%)

Revenue 1,245 1,220 1,262 1,452 1,562 25 8 1,562 1,245 25

Expenditure 675 670 648 627 646 (4) 3 646 675 (4)

as % of sales - -

Consumption of RM 374 334 302 310 294 (21) (5) 294 374 (21)

as % of sales - -Employee Cost 101 109 112 108 131 30 21 131 101 30

as % of sales - -

Other expenditure 199 228 234 209 221 11 6 221 199 11

as % of sales - -

EBITDA 570 549 614 825 916 61 11 916 570 61

Depreciation 140 151 149 168 174 24 4 174 140 24

EBIT 430 399 465 657 742 72 13 742 430 72

Other Income 19 49 74 27 55 194 106 55 19 194

Interest 95 95 98 87 84 (11) (3) 84 95 (11)

PBT 354 352 441 597 712 101 19 712 354 101

Total Tax 0 0 0 0 - - -

Adjusted PAT 354 352 441 597 712 101 19 712 354 101

(Profit)/loss from JV's/Ass/MI - -

APAT after MI 354 352 441 597 712 101 19 712 354 101

Extra ordinary items -41 0 0 -173.82 102 (159) 102 (41)

Reported PAT 395 352 441 771 610 55 (21) 610 395 55

Reported EPS 0.73 0.73 0.91 1.23 1.47 101 19 1 1 101


EBITDA 46 45 49 57 59 238 145 59 46 238

EBIT 35 33 37 45 47 284 171 47 35 284

EBT 28 29 35 41 46 398 257 46 28 398

PAT 32 29 35 53 39 214 (276) 39 32 214

Effective Tax rate - - - - - - - - - -Source: Company, Emkay Research

Exhibit 2: Volume trends

Volumes Q1CY13 Q2CY13 Q3CY13 Q4CY13 Q1CY14 YoY (%) QoQ (%) YTDCY14 YTDCY13 YoY (%)Bulk(000)Tons 564 1,018 986 538 694 23 29 694 564 23

Container(000)Teus 161 143 163 194 187 16 (3) 187 161 16

Total Cargo 2,496 2,734 2,942 2,863 2,938 18 3 2,938 2,496 18

Realisation/t(ex otheroperating income) 441 414 401 449 441 (0.0) (2) 441 441 (0)Source: Company, Emkay Research

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Revised FY14E/15E Earnings upwards by 24%/21% to Rs5.5/6.7 per share

We have revised Earnings upwards by 28% for FY14E/15E on account of

Increase in the container volumes estimate to 750,000 TEU (earlier estimate ofRs733, 000)

Lowered the operational cost on account of synergies that the company is witnessingin its container segment (70% of the cost is fixed). The company expects EBITDAmargin 56-58% going forward.

However our target price gets revised by 18% only due to the tax outgo which the companywould start incurring from CY14 onwards (will get reflected in the cash flow statement) asprevious losses gets offset at CY13 end.

Exhibit 3: Earnings revision tableCY14E CY15E

Earlier Revised Change Earlier Revised Change

Sales 5,927 6,232 5% 6,842 7,057 3%EBIDTA 2,964 3,437 16% 3,500 4,062 16%EBIDTA (%) 50.0 55.2 51.2 57.6

Net Profit 2,153 2,676 24% 2,656 3,224 21%EPS 4.5 5.5 24% 5.5 6.7 21% Source: Emkay Research

Retain Hold with a target price of Rs88

The company has surprised on margins over the last two consecutive quarters on accountof operational synergies clocked due to the improvement in the container volumes. Wehave maintained that the company will lack scalability in terms of growth going forward andthe first signal came when the company revised the capex downwards. We believe that themanagement changed the expansion plan due to the following reasons:

Under-utilisation of container capacities

Reason 1: The Management made a conscious decision to increase the capacity bystrengthening the existing berth -3 rather than putting up a new container berth (Berth -5)which would have taken the container capacity at 2mnteu plus will reach a) 50% of Mundracapacity, b) 1.3x Hazira Container capacity c) 1.1x GTI (owned by APM terminals) containercapacity at JNPT. The creation of a new container berth would have left the current berth 3under-utilised, given that poor visibility of garnering bulk volumes in near future.

Given that normally an expansion is required once a container port reaches 85% utilisation(1.1-1.2 mnteu) and we highlight that Pipavav port will hitting this volume by CY-17E/18Eassuming a 12% container volume growth for the from CY14-CY17 and given that any furtherexpansion in container division after CY17E will take at least at least 2-3 years as it willinvolve construction of a new berth with channel dredging which constraints the volumegrowth in range of 1.1-1.2 mnteu atleast by CY19E/20E.

Reason 2: As we highlighted earlier that 80-85% of volumes generated at Gujarat Pipavavport comes from the same shipping liners calling at GTI at JNPT , it will not expand untilunless GTI expands at JNPT which itself facing issues like lower tariff , infrastructurebottlenecks. We believe that

JNPT 4th container terminal (4.8 mn teu) will get commissioned by CY17E/18E(atleast First phase of 2.4 mnteu) which likely to break the link /offer Japanese shippingliners to call at JNPT without doing force call at Gujarat Pipavav port

Incremental capacity of 0.8mnteu to com at Nhava sheva at JNPT by CY17E,currently dredging is going on however facing clearance issues to expand yardcapacity.

Post the commissioning of railway line at Hazira by FY16E/1HFY17E which will startcompeting with Pipavav port for the northern cargo. Hazira Port is strategically betterlocated to Pipavav port and connect to DFC from Gothangam which is 45 km awayfrom the port and can deliver cargo within 22 hours to the northern hinterland Thecommissioning of DFC (dedicated freight corridor) by FY17E or IHFY18E will addmore competition for Gujarat Pipavav port as well as from both JNPT and Hazira.

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The stock trades at 14.7x/12.3x FY14E/15E EV/EBITDA, trades at premium 40% to globalwhich runs on the business model of perpetuity where Gujarat Pipavav port has limited lifetill FY28E.

Exhibit 4: SOTP Fair Value at Rs88/share

Particulars

Valuation

Rs bn

Stake

(%)

Value of GPPL

stake Rs bn

Per share

(Rs) Method of valuationPipavav port 34,872 100.0 34,872 72 12-month forward FCFE valuationPipavav Rail Corporation Ltd (PRCL) 5,976 38.8 2,319 5 10x FY15E earningsDRV or option to extend concession agreement 5,562 100.0 5,562 12 50% of calculated DRV/ agreement extensionTotal value for GPPL 46,319 42,662 88

Source: Emkay Research

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Key Financials (Standalone)

Income StatementY/E Dec (Rsmn) CY12A CY13A CY14E CY15E

Net Sales 4,160 5,179 6,232 7,057Growth (%) 4.8 24.5 20.3 13.2

Expenditure 2,342 2,621 2,795 2,995Operational Cost 1,181 1,320 1,467 1,596Employee Cost 361 431 443 466SG&A 800 870 884 934EBITDA 1,819 2,558 3,437 4,062

Growth (%) -0.6 40.7 34.4 18.2


EBIT margin (%) 30.5 37.7 44.5 46.6


PBT 740 1,744 2,676 3,224Tax 0 0 0 0

Effective tax rate (%) 0.0 0.0 0.0 0.0Adjusted PAT 740 1,744 2,676 3,224

Growth (%) 29.8 135.8 53.5 20.5Net Margin (%) 17.8 33.7 42.9 45.7

(Profit)/loss from JVs/Ass/MI 0 0 0 0Adj. PAT After JVs/Ass/MI 740 1,744 2,676 3,224

E/O items 0 -174 102 0Reported PAT 740 1,570 2,778 3,224PAT after MI 740 1,744 2,676 3,224

Growth (%) 29.8 135.8 53.5 20.5

Balance SheetY/E Dec (Rsmn) CY12A CY13A CY14E CY15E



Secured Loans 3,207 2,819 2,819 2,819Unsecured Loans 0 0 0 0Loan Funds 3,207 2,819 2,819 2,819

Net deferred tax liability 0 0 0 0Total Liabilities 15,324 16,854 18,893 21,473


Capital work in progress 1,577 1,577 1,209 1,577Investment 830 830 830 830

Current Assets 1,765 3,197 5,175 4,619Inventories 115 120 188 232Sundry debtors 418 344 512 677Cash & bank balance 511 2,023 3,536 2,550Loans & advances 550 658 854 1,063Other current assets 172 52 85 97Current lia & Prov 1,310 1,812 2,220 2,320

Current liabilities 909 1,405 1,707 1,740Provisions 400 406 512 580Net current assets 455 1,385 2,955 2,299


Cash FlowY/E Dec (Rsmn) CY12A CY13A CY14E CY15EPBT (Ex-Other income) 585 1,402 2,577 3,024

Depreciation 549 608 664 775Interest Provided 684 374 298 263Other Non-Cash items 5 347 0 0Chg in working cap 849 582 -57 -329Tax paid -83 0 -535 -645Operating Cashflow 2,590 3,314 2,947 3,088

Capital expenditure -1,751 -1,208 -1,235 -4,011Free Cash Flow 839 2,106 1,712 -922

Other income 154 168 201 200Investments 0 0 0 0Investing Cashflow -1,596 -1,040 -1,034 -3,811

Equity Capital Raised 3,448 0 0 0Loans Taken / (Repaid) -3,669 -387 0 0Interest Paid -667 -374 -298 -263Dividend paid (incl tax) 0 0 0 0Income from investments 0 0 0 0Others 0 0 0 0Financing Cashflow -888 -762 -298 -263

Net chg in cash 105 1,512 1,615 -986

Opening cash position 406 512 2,024 3,639

Closing cash position 512 2,024 3,639 2,653

Key RatiosY/E Dec CY12A CY13A CY14E CY15EProfitability (%)


EPS 1.5 3.6 5.5 6.7CEPS 2.7 4.9 6.9 8.3



Net Debt/ Equity 0.2 0.1 0.0 0.0Net Debt/EBIDTA 1.5 0.3 -0.2 0.1

Working Cap Cycle (days) -4.9 -44.9 -34.0 -13.0

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