Pokarna Ltd. Absolute : LONG ), TP · Pokarna Ltd Absolute –LONG Relative – Overweight 26% ATR in 17 Months August 16, 2018 Analyst: Pranav Mehta (+91-7574885494)/Dhaval Dama

August 16, 2018 Analyst: Pranav Mehta (+91-7574885494)/Dhaval Dama (+91-8128694102) Page 1 of 12

Before reading this report, you must refer to the disclaimer on the last page.

Pokarna Ltd. Absolute : LONG

Relative : Overweight

1QFY19 Result: Estimate (), TP (), Rating () Regular Coverage 26% ATR in 17 Months

Revenue ramp-up likely from 2HFY20 post new Quartz plant commissioning — retain LONG Building Material

© 2018 Equirus All rights reserved

Rating Information

Price (Rs) 141

Target Price (Rs) 193

Target Date 31st Dec'19

Target Set On 15th Aug'18

Implied yrs of growth (DCF) 15

Fair Value (DCF) 129

Fair Value (DDM) 82

Ind Benchmark BSETCD

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 4,497

Free Float (%) 43.34 %

52 Wk H/L (Rs) 275.25/140.2

Avg Daily Volume (1yr) 58,820

Avg Daily Value (Rs Mn) 12

Equity Cap (Rs Mn) 62

Face Value (Rs) 2

Bloomberg Code POKR IN

12M Recent 3M 3M

Promoters 56.7 % 0.0 % 0.0 %

DII 4.3 % 1.0 % 0.9 %

FII 0.6 % 0.2 % 0.1 %

Public 38.4 % -1.2 % -1.0 %

Price % 1M 3M 12M

Absolute -5.5 % -19.8 % -40.9 %

Vs Industry -10.7 % -20.1 % -48.6 %

Vs Aro Granite 0.6 % -10.4 % -7.3 %

Vs Asian

Granito -23.9 % -48.6 % -42.3 %

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (18A) 1.8 4.2 4.7 4.3

EPS (19E) 3.0 2.3 2.9 2.9

POKR’s 1Q consolidated revenue/EBITDA were up 23%/21% yoy to Rs 308mn/Rs 45mn

off a low base of 1QFY18 which saw a planned shutdown. While revenues came in line

with EE, EBITDAM was way below our estimates due to higher input prices in quartz,

quartz product mix changes and a continued decline in the granite business. Granite

revenue growth continues to face challenges amid competitive pressures in POKR’s key

markets. We expect (a) continued headwinds for the granite segment over the next

few quarters and (b) capacity constraints for the quartz division till the new facility

comes on line, likely by early-2HFY20. We cut FY19E/FY20E EBITDA by 24%/10% to

factor in margin pressures which should persist over the next few quarters. Maintain

LONG with a Dec’19 TP of Rs 193 (Jun’19: Rs 266) at 13x TTM EPS of Rs 15.

Quartz capacity nearing full utilization; new plant expected by early 2HFY20:

Quartz revenues grew 55% yoy off a low base of 1QFY18 (planned 45-day shutdown).

While EBITDAM expanded 339bps yoy, we expect quartz margins to remain under

pressure on higher RM input costs (derivatives linked with crude) for next 1-2 quarters.

For the new quartz plant, POKR has finally bought a land parcel and is awaiting state-

govt. approval for commencement of construction work. We expect the plant to

commence operations by early 2HFY20 only, as it would take another 15-18 months to

install the machinery post land acquisition. Revenue ramp-up would happen once the

new capacity comes on stream as the current line will be operating at near-optimum

utilization levels by FY19-end. We expect the company to post quartz revenue/EBITDA

CAGR of 20%/25% over FY18-FY21E but believe EBITDAM improvement would hinge on

the following: (a) Any tariff imposed by US on Chinese quartz imports could enhance

margins for all players in that market. (b) Movement in input costs.

Stiff competition for granite division overseas: During 1Q, granite revenues slid 8%

yoy on the back of stiff competition in POKR’s key markets. The cut-to-size market

is also seeing high competition from Chinese players. We expect growth challenges

in the near-to-mid-term with revenue/EBITDA CAGR of 1%/-3% over FY18-FY21E.

Valuations & view: POKR continues to disappoint on granite division recovery and

margin improvement in both divisions for last few quarters. While US continues to see

strong growth in the quartz segment (Exhibit 3-5), POKR will be able to capitalize on

this only after its new capacity comes on stream, as its existing capacity is already

at optimum levels. We expect consolidated sales/EBITDA CAGR of 13%/16% over FY18-

FY21E but believe earnings would be lumpy with majority coming in FY21E. Valuations

remain cheap (7.8x/6.8x FY20E/21E EPS of Rs 18/22 per share). Retain LONG.

Change in Estimates:

Rs. Mn FY19E Chg (%) FY20E Chg (%)

Sales 3,360 -1% 3,859 2%

EBITDA 858 -24% 1,219 -10%

PAT 346 -38% 560 -17%

Consolidated Financials

Rs. Mn YE Mar FY18A FY19E FY20E FY21E

Sales 3,282 3,360 3,859 4,690

EBITDA 972 858 1,219 1,531

Depreciation 199 214 244 332

Interest Expense 279 274 294 312

Other Income 57 44 25 25

Reported PAT 464 346 560 696

Recurring PAT 464 346 560 696

Total Equity 1,913 2,237 2,753 3,404

Gross Debt 2,200 4,151 4,754 4,423

Cash 209 499 536 508

Rs Per Share FY18A FY19E FY20E FY21E

Earnings 15.0 11.2 18.1 22.4

Book Value 62 72 89 110

Dividends 0.6 0.6 1.2 1.2

FCFF 12.6 -40.4 -10.5 15.9

P/E (x) 9.4 12.6 7.8 6.3

P/B (x) 2.3 2.0 1.6 1.3

EV/EBITDA (x) 6.8 9.4 7.1 5.5

ROE (%) 27 % 17 % 22 % 23 %

Core ROIC (%) 17 % 11 % 12 % 13 %

EBITDA Margin (%) 30 % 26 % 32 % 33 %

Net Margin (%) 14 % 10 % 15 % 15 %

Pokarna Ltd Absolute –LONG Relative – Overweight 26% ATR in 17 Months


Consolidated Quarterly performance

1QFY19 1QFY19E 4QFY18 1QFY18 % Change

Comments 1QFY19E 4QFY18 1QFY18

Net Sales 821 853 887 665 -4% -7% 23%

Raw Materials 244 210 245 132 16% -1% 85%

Employee Cost 90 89 84 88 2% 7% 2%

Other Expenses 291 314 320 284 -7% -9% 3%

Total Expenditures 625 612 650 504 2% -4% 24%

EBITDA 195 241 237 161 -19% -18% 21%

Depreciation 47 51 49 49 -8% -5% -5%

EBIT 148 190 188 112 -22% -21% 32%

Interest 67 75 75 55 -11% -10% 21%

Other Income 25 8 15 12 235% 65% 104%

PBT 107 123 129 69 -13% -17% 54%

Tax 15 27 -7 14 -45% -320% 6%

PAT before MI & Associates 92 95 135 55 -3% -32% 67%

Minority Interest 0 0 0 0

Profit from Assoc. 0 0 0 0

Recurring PAT 92 95 135 55 -3% -32% 67%

Extraordinaries 0 0 0 0

Reported PAT 92 95 135 55 -3% -32% 67%

EPS (Rs) 3.0 3.1 4.4 1.8 -3% -32% 67%

Gross Margin 70% 75% 72% 80% -516 bps -206 bps -988 bps

EBITDA Margin 24% 28% 27% 24% -448 bps -295 bps -45 bps

EBIT Margin 18% 22% 21% 17% -421 bps -312 bps 124 bps

PBT Margin 13% 14% 15% 10% -135 bps -150 bps 262 bps

PAT Margin 11% 11% 15% 8% 4 bps -408 bps 291 bps

Tax Rate 14% 22% -5% 20% -835 bps 1920 bps -630 bps



Earnings call takeaways

Segment performance overview

Consolidated (Rs mn) 1Q19 1Q18 %Growth

Revenue 821 674 22%

EBITDA 221 173 27%

PAT 92 54 69%

Granite (Rs mn)

Revenue 310 340 -9%

EBITDA 50 80 -38%

Capital Employed 910 1090 -17%

Quartz (Rs mn)

Revenue 510 330 55%

EBITDA 170 90 89%

Capital Employed 2420 2,230 9%

• The quartz facility operated at full capacity for a large part of the quarter and is

now fully operational.

• The granite business remains challenging amid pricing pressure and currency

headwinds. Efforts towards enhancing product mix and cost rationalization would

improve performance going forward.

• Management intends to increase contribution from lower volume and higher value-

added products which would lead to better realizations. POKR has already launched

newer product designs and expects contribution from them to pick up from 3QFY19.

• Quartz business continues to see steady momentum on strong demand and increasing

acceptance of per design offering. POKR is optimistic on new brand visibility; a

widening presence would reflect in quartz performance in the medium term.

• The US likely to announce, sometime next month, the tariff/ad valorem duty on

quartz from China into the US market, which is a positive sign for the company.

Management expects this to result in lower-end price products probably catching up

in the American market and supporting granite sales.

• POKR’s profitability has been under pressure due to higher input cost and currency

headwinds

o Prices of polyester, is a key raw material input for the quartz business, have

increased due to rising crude prices. Management expects further increase in

polyester prices on the back of strong demand growth.

o Currency depreciation has resulted in higher input prices affecting the overall

cost structure.

• POKR has applied for requisite regulatory approvals for commencing work on the new

greenfield Engineered Stone Facility

o POKR has completed regulatory approvals for the purchase of 39 acres of land.

o Land is strategically situated ~25kms from the Rajiv Gandhi International airport

and is also close to the inland container depot at Thimmapur, Hyderabad, and

well connected by roads/rail to key domestic ports.

o The facility will cater to international as well as domestic markets both of which

are witnessing encouraging demand trends.

o Similar to existing unit, this plant will be set up using Breton stone technology.

o Total investment towards new facility is estimated at ~Rs 3.3bn. Funding mix:

debt of Rs 2.5bn and internal accruals of Rs 800mn.

• Capex to be incurred for the quartz capacity expansion is ~Rs 3.3bn and is expected

to get commissioned within 18 months from today. Land has been acquired for the

project.

• Competition from Brazil in the granite space remains stiff but granite consumption

itself is seeing some revival. The US market is fairly good and construction activity is

buoyant; while the market has migrated to quartz, some customers continue to

prefer granite.

• In the US, the quartz market is seeing double-digit growth while other natural stone

segments (marble, granite) are witnessing low, single-digit growth.

• Chinese products generally compromise on quality, which helps them sell at lower

ASPs. POKR is making efforts to educate Indian consumers on the quality aspect,

thereby justifying its premium pricing.

• Management added that new equipment and process improvement initiation would

help produce innovative and better margin products.

• POKR is looking for expansion into new geographies such as India, Europe, and

Australia, which would get equal focus along with the US.



Exhibit 1:Granite revenue & EBITM trend

Source: Company, Equirus Securities

Exhibit 2:Quartz revenue & EBITM trend

Source: Company, Equirus Securities

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Quartz revenue (Rs mn) Quartz EBITM (%)



Exhibit 3: Volume-wise Quartz Import data for US market – Chinese imports have seen

a substantial jump in last 5 years as cost-wise they are among the cheapest

Volume in

Sq.ft. CY13 CY14 CY15 CY16 CY17

CY13-17

CAGR %

China 50,32,059 88,89,528 2,10,13,296 3,77,15,597 6,03,77,094 86%

Spain 94,24,247 1,08,65,285 1,31,87,284 1,47,67,823 1,83,38,499 18%

Israel 68,18,360 1,09,39,868 1,10,35,592 91,86,978 97,01,729 9%

Canada 35,10,850 49,44,484 55,28,963 60,11,606 61,58,565 15%

India 10,27,856 10,07,899 35,04,241 41,35,189 51,79,922 50%

Vietnam 8,24,289 27,79,078 49,14,861 55,37,413 47,00,929 55%

Turkey 45,047 30,171 10,21,828 19,62,184 19,66,500 157%

Italy 10,39,954 9,99,912 19,03,305 19,29,364 18,70,863 16%

Portugal 5,36,193 6,89,040 12,93,121 8,89,905 10,54,066 18%

Korea 4,17,327 8,01,964 12,93,121 7,67,014 8,11,081 18%

Source: US International Trade Commission

Exhibit 4: Value-wise Quartz Import data for US market

Total Sales in Mn. USD CY13 CY14 CY15 CY16 CY17 CY13-17 CAGR %

China 36.47 67.15 167.47 298.76 459.64 88%

Spain 88.93 101.50 126.90 136.82 182.13 20%

Israel 61.60 102.80 109.50 96.90 106.55 15%

Canada 40.13 58.51 66.23 66.85 60.73 11%

India 5.56 8.11 25.82 33.60 38.70 62%

Vietnam 8.53 25.10 46.48 57.93 54.45 59%

Turkey 0.43 0.24 9.83 17.54 18.95 157%

Italy 8.53 9.75 18.92 19.72 19.85 24%

Portugal 3.75 5.83 11.69 9.45 10.05 28%

Korea 3.68 7.79 12.76 9.17 9.87 28%

Source: US International Trade Commission

Exhibit 5: Realizations data for US market

Realizations (Value/sq.ft.) 2013 2014 2015 2016 2017 CAGR %

China 7.2 7.6 8.0 7.9 7.6 1%

Spain 9.4 9.3 9.6 9.3 9.9 1%

Israel 9.0 9.4 9.9 10.5 11.0 5%

Canada 11.4 11.8 12.0 11.1 9.9 -4%

India 5.4 8.0 7.4 8.1 7.5 8%

Vietnam 10.3 9.0 9.5 10.5 11.6 3%

Turkey 9.6 7.9 9.6 8.9 9.6 0%

Italy 8.2 9.8 9.9 10.2 10.6 7%

Portugal 7.0 8.5 9.0 10.6 9.5 8%

Korea 8.8 9.7 9.9 12.0 12.2 8%

Source: US International Trade Commission, Equirus Securities



Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY19E 11.2 - - There is not much active coverage on

the stock FY20E 18.1 - -

Sales FY19E 3,360 - -

FY20E 3,859 - -

PAT FY19E 346 - -

FY20E 560 - -

Our Key Investment arguments:

Well-positioned to capture fast-growing quartz demand in the US but only post new

capacity commissioning by end of 1H20:We expect POKR to clock a 15% quartz revenue

CAGR over FY17-FY21E led by (a) its status as an exclusive licensee of patented Breton

Stone technology to manufacture high-grade export quality quartz, (b) distribution in

more than 20 countries, (c) increasing presence in higher-value quartz, and (d) higher

quartz sale under own brand, ‘Quantra’.

Tie-up with IKEA,incremental capex to boost quartz revenues from FY21E: We expect

POKR to be a big beneficiary of IKEA’s entry into the Indian countertop market over the

next 3-4 years. Capacity expansion by 130% in FY20E would remove capacity constraints

in the quartz division.

Valuations remain cheap at 7.9x FY20E EPS of Rs 27/share.

Key Estimates:

(Rs. Mn) FY18E FY19E FY20E FY21E

Granite Revenues 2,080 2,356 2,779 3,313

Quartz Revenues 1,827 1,995 2,685 3,700

Risk to Our View: Prolonged slowdown in the US housing market.

Key Triggers: Pickup in the quartz business, revival in granite volumes and margin

expansion due to improved utilization in the quartz business and backward integration in

the granite business.

Sensitivity to Key Variables % Change % Impact on EPS

EBITDAM -1 % -5 %

- - -

- - -

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

7.8 % 1.0 14.3 % 2.5 % 58.9 %

- FY19E FY20E FY21-23E FY24-28E FY29-33E

Sales Growth 2 % 15 % 11 % 9 % 4 %

NOPAT Margin 16 % 20 % 18 % 16 % 16 %

IC Turnover 0.57 0.55 0.63 0.63 0.63

RoIC 10.8 % 11.9 % 12.1 % 10.6 % 10.3 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 85 125 110 106 107

Valuation as of Dec'19 102 150 132 128 129

Based on DCF, assuming 15 years of 4% CAGR growth and 10% average ROIC, we derive

our current fair value of Rs 107 and a Dec’19 fair value of Rs 129.

Company Description: POKR, promoted by Mr. Gautam Chand Jain, is one of India’s

leading granite exporters. It is the only granite company in India to be fully integrated from

quarries to marketing. It exports granite to over 49 countries around the world. The

company, through its wholly-owned subsidiary M/s Pokarna Engineered Stone Ltd.,

manufactures ‘Natural Quartz Surfaces’ also known as ‘Engineered Stone’ or ‘Compound

Stone’. It is the only licensee of Breton Stone Technology in India for Quartz surfaces. It

exports quartz surfaces to more than 20 countries across the globe.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY19E FY20E FY17A FY19E FY20E FY17A FY19E FY17A FY19E FY20E FY17A FY19E

Pokarna LONG 141 4,497 193 31st Dec'19 15.0 11.2 18.1 9.4 12.6 7.8 61.7 2.0 27 % 17 % 22 % 0.4 % 0.4 %

Aro Granite NR 57 868 NR NR 0.8 - - 71.8 - - 111.5 - 8 % - - 1.2 % -

Asian Granito NR 230 6,926 NR NR 17.5 22.3 28.7 13.2 10.3 8.0 143.4 1.7 10 % 10 % 5 % 0.2 % 0.5 %



Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19A 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E

Revenue 665 851 879 887 821 813 867 859 862 878 956 1,164 3,282 3,360 3,859 4,690 Raw Materials 132 197 186 245 244 257 233 231 215 215 243 304 761 964 977 1,221

Employee Cost 88 87 87 84 90 82 93 91 88 91 95 112 347 356 386 449

Other Expenses 284 292 306 320 291 271 313 306 290 299 315 373 1,202 1,182 1,278 1,489 EBITDA 161 275 299 237 195 203 227 232 269 272 303 375 972 858 1,219 1,531 Depreciation 49 50 51 49 47 55 56 56 55 57 66 66 199 214 244 332 EBIT 112 226 248 188 148 148 171 176 214 215 237 309 773 644 975 1,199 Interest 55 72 77 75 67 68 69 70 71 73 74 76 279 274 294 312 Other Income 12 15 14 15 25 6 6 6 6 6 6 6 57 44 25 25 PBT 69 169 186 129 107 86 108 112 149 149 169 239 551 413 706 912 Tax 14 39 41 -7 15 14 18 21 31 31 35 49 87 67 145 217 PAT bef. MI & Assoc. 55 130 145 135 92 73 91 91 118 117 134 191 464 346 560 696 Minority Interest 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT 55 130 145 135 92 73 91 91 118 117 134 191 464 346 560 696 Extraordinaries 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Reported PAT 55 130 145 135 92 73 91 91 118 117 134 191 464 346 560 696

EPS (Rs) 1.78 4.20 4.68 4.37 2.97 2.35 2.92 2.93 3.81 3.78 4.33 6.16 14.98 11.16 18.08 22.44

Key Drivers

Granite revenue (Rs mn) - - - - - - - - - - - - 2,080 2,356 2,779 3,313

Quartz revenue (Rs mn) - - - - - - - - - - - - 1,827 1,995 2,685 3,700

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue -33 % 28 % 3 % 1 % -7 % -1 % 7 % -1 % 0 % 2 % 9 % 22 % - - - - Raw Materials -40 % 49 % -6 % 32 % -1 % 5 % -9 % -1 % -7 % 0 % 13 % 25 % - - - - EBITDA -51 % 71 % 9 % -21 % -18 % 4 % 12 % 2 % 16 % 1 % 11 % 24 % - - - - EBIT -60 % 102 % 10 % -24 % -21 % 0 % 15 % 3 % 22 % 1 % 10 % 30 % - - - - Recurring PAT -69 % 136 % 11 % -7 % -32 % -21 % 25 % 0 % 30 % -1 % 15 % 42 % - - - -

EPS -69 % 136 % 11 % -7 % -32 % -21 % 25 % 0 % 30 % -1 % 15 % 42 % - - - -

Yearly Growth (%)

Revenue -24 % -9 % -1 % -11 % 23 % -4 % -1 % -3 % 5 % 8 % 10 % 35 % -11 % 2 % 15 % 22 % EBITDA -50 % -25 % -8 % -28 % 21 % -26 % -24 % -2 % 38 % 34 % 33 % 62 % -29 % -12 % 42 % 26 % EBIT -59 % -31 % -12 % -33 % 32 % -34 % -31 % -7 % 44 % 45 % 38 % 76 % -35 % -17 % 51 % 23 % Recurring PAT -70 % -36 % -22 % -24 % 67 % -44 % -37 % -33 % 28 % 61 % 48 % 110 % -31 % -25 % 62 % 24 %

EPS -70 % -36 % -22 % -24 % 67 % -44 % -37 % -33 % 28 % 61 % 48 % 110 % -40 % -25 % 62 % 24 %

Margin (%)

EBITDA 24 % 32 % 34 % 27 % 24 % 25 % 26 % 27 % 31 % 31 % 32 % 32 % 30 % 26 % 32 % 33 % EBIT 17 % 27 % 28 % 21 % 18 % 18 % 20 % 20 % 25 % 25 % 25 % 27 % 24 % 19 % 25 % 26 % PBT 10 % 20 % 21 % 15 % 13 % 11 % 12 % 13 % 17 % 17 % 18 % 21 % 17 % 12 % 18 % 19 %

PAT 8 % 15 % 17 % 15 % 11 % 9 % 10 % 11 % 14 % 13 % 14 % 16 % 14 % 10 % 15 % 15 %



Consolidated Financials P&L (Rs Mn) FY18A FY19E FY20E FY21E

Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E

Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E

Revenue 3,282 3,360 3,859 4,690 Equity Capital 62 62 62 62 PBT 551 413 706 912

Op. Expenditure 2,309 2,502 2,641 3,159 Reserve 1,851 2,175 2,691 3,342 Depreciation 199 214 244 332

EBITDA 972 858 1,219 1,531 Networth 1,913 2,237 2,753 3,404 Others 0 0 0 0

Depreciation 199 214 244 332 Long Term Debt 2,200 4,151 4,754 4,423 Taxes Paid 87 67 145 217

EBIT 773 644 975 1,199 Def Tax Liability 98 -60 -22 69 Change in WC -411 366 -143 -251

Interest Expense 279 274 294 312 Minority Interest 0 0 0 0 Operating C/F 253 926 662 776

Other Income 57 44 25 25 Account Payables 283 330 329 408 Capex -95 -2,407 -1,220 -520

PBT 551 413 706 912 Other Curr Liabi 615 672 772 938 Change in Invest 0 0 0 0

Tax 87 67 145 217 Total Liabilities & Equity 5,109 7,330 8,585 9,241 Others 0 0 0 0

PAT bef. MI & Assoc. 464 346 560 696 Net Fixed Assets 2,509 2,375 5,362 5,550 Investing C/F -95 -2,407 -1,220 -520

Minority Interest 0 0 0 0 Capital WIP 11 2,000 0 0 Change in Debt -150 1,951 602 -331

Profit from Assoc. 0 0 0 0 Others 344 682 671 671 Change in Equity -57 0 0 0

Recurring PAT 464 346 560 696

Inventory 972 856 983 1,195 Others -17 -181 -7 46

Extraordinaires 0 0 0 0 Account Receivables 691 598 687 835 Financing C/F -224 1,771 595 -285

Reported PAT 464 346 560 696 Other Current Assets 374 320 346 482 Net change in cash -67 290 37 -29

FDEPS (Rs) 15.0 11.2 18.1 22.4 Cash 209 499 536 508 RoE (%) 27 % 17 % 22 % 23 %

DPS (Rs) 0.6 0.6 1.2 1.2 Total Assets 5,109 7,330 8,585 9,241

RoIC (%) 17 % 11 % 11 % 12 %

CEPS (Rs) 21.4 18.1 26.0 33.1 Non-cash Working Capital 1,138 772 915 1,166

Core RoIC (%) 17 % 11 % 12 % 13 %

FCFPS (Rs) 12.6 -40.4 -10.5 15.9 Cash Conv Cycle 126.6 83.9 86.5 90.8 Div Payout (%) 1 % 6 % 8 % 6 %

BVPS (Rs) 61.7 72.2 88.8 109.8 WC Turnover 2.9 4.4 4.2 4.0 P/E 9.4 12.6 7.8 6.3

EBITDAM (%) 30 % 26 % 32 % 33 % FA Turnover 1.3 1.4 0.7 0.8 P/B 2.3 2.0 1.6 1.3

PATM (%) 14 % 10 % 15 % 15 % Net D/E 1.0 1.6 1.5 1.2 P/FCFF 11.2 -3.5 -13.4 8.8

Tax Rate (%) 16 % 16 % 21 % 24 % Revenue/Capital Employed 0.9 0.8 0.7 0.7 EV/EBITDA 6.8 9.4 7.1 5.5

Sales Growth (%) -11 % 2 % 15 % 22 %

Capital Employed/Equity 3.1 2.4 2.5 2.8

EV/Sales 2.0 2.4 2.3 1.8

FDEPS Growth (%) -40 % -25 % 62 % 24 %

Dividend Yield (%) 0.4 % 0.4 % 0.9 % 0.9 %

TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE

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3000

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9000

12000

15000

Jun

/14

Sep

/14

De

c/1

4M

ar/1

5Ju

n/1

5Se

p/1

5D

ec/

15

Mar

/16

Jun

/16

Sep

/16

De

c/1

6M

ar/1

7Ju

n/1

7Se

p/1

7D

ec/

17

Mar

/18

Jun

/18

Sep

/18

De

c/1

8M

ar/1

9Ju

n/1

9Se

p/1

9D

ec/

19

3x

5x

6x

7x

8xEBITDA Growth

0%10%20%30%40%50%60%70%80%90%100%

- 50

100 150 200 250 300 350 400 450 500 550 600

Jun/

14Se

p/14

Dec

/14

Mar

/15

Jun/

15Se

p/15

Dec

/15

Mar

/16

Jun/

16Se

p/16

Dec

/16

Mar

/17

Jun/

17Se

p/17

Dec

/17

Mar

/18

Jun/

18Se

p/18

Dec

/18

Mar

/19

Jun/

19Se

p/19

Dec

/19

RoE

2x

4x

5x

6x

7x



Historical Consolidated Financials

P&L (Rs Mn) FY15A FY16A FY17A FY18A

Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A

Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A

Revenue 3,264 3,986 3,674 3,282 Equity Capital 62 62 62 62 PBT 354 836 971 551

Op. Expenditure 2,428 2,657 2,310 2,309 Reserve 468 906 1,447 1,851 Depreciation 231 183 172 199

EBITDA 836 1,329 1,364 972 Networth 530 968 1,509 1,913 Others 343 388 265 0

Depreciation 231 183 172 199 Long Term Debt 2,598 2,446 2,350 2,200 Taxes Paid 33 122 238 87

EBIT 605 1,146 1,191 773 Def Tax Liability 252 212 112 98 Change in WC -287 -230 -61 -411

Interest Expense 322 368 320 279 Minority Interest 0 0 0 0 Operating C/F 608 1,055 1,110 253

Other Income 72 58 100 57 Account Payables 312 243 279 283 Capex -157 -314 -311 -95

PBT 354 836 971 551 Other Curr Liabi 618 825 728 615 Change in Invest 0 0 0 0

Tax 120 147 199 87 Total Liabilities & Equity 4,310 4,692 4,978 5,109 Others 6 7 9 0

PAT bef. MI & Assoc. 235 688 772 464 Net Fixed Assets 2,406 2,388 2,596 2,509 Investing C/F -151 -307 -302 -95

Minority Interest 0 0 0 0 Capital WIP 56 201 28 11 Change in Debt -194 -186 -262 -150

Profit from Assoc. 0 0 0 0 Others 177 226 345 344 Change in Equity 0 0 0 -57

Recurring PAT 235 235 235 235 Inventory 772 886 976 972 Others -212 -566 -404 -17

Extraordinaires -79 175 0 0 Account Receivables 693 785 665 691 Financing C/F -406 -752 -666 -224

Reported PAT 314 314 314 314 Other Current Assets 86 75 93 374 Net change in cash 51 -3 142 -67

EPS (Rs) 7.6 22.2 24.9 15.0 Cash 120 132 276 209

RoE (%) 60 % 92 % 62 % 27 %

DPS (Rs) 0.6 0.6 2.0 0.6

Total Assets 4,310 4,692 4,978 5,109

RoIC (%) 14 % 28 % 27 % 17 %

CEPS (Rs) 15.0 28.1 30.5 21.4 Non-cash Working Capital 621 679 727 1,138 Core RoIC (%) 12 % 27 % 26 % 17 %

FCFPS (Rs) 21.6 33.9 34.3 12.6 Cash Conv Cycle 69.5 62.2 72.2 126.6 Div Payout (%) 7 % 1 % 1 % 1 %

BVPS (Rs) 17.1 31.2 48.7 61.7 WC Turnover 5.3 5.9 5.1 2.9

P/E 18.6 6.4 5.7 0.0

EBITDAM (%) 26 % 33 % 37 % 30 % FA Turnover 1.3 1.5 1.4 1.3 P/B 8.2 4.5 2.9 0.0

PATM (%) 7 % 17 % 21 % 14 % Net D/E 4.7 2.4 1.4 1.0 P/FCFF 6.5 4.2 4.1 11.2

Tax Rate (%) 34 % 18 % 21 % 16 % Revenue/Capital Employed 1.2 1.4 1.2 1.0 EV/EBITDA 8.9 5.4 5.0 0.0

Sales growth (%) 42 % 22 % -8 % -11 %

Capital Employed/Equity 7.2 14.8 14.6 8.4

EV/Sales 2.3 1.8 1.8 0.0

FDEPS growth (%) 457 % 193 % 12 % -40 %

Dividend Yield (%) 0.4 % 0.4 % 1.4 % 0.4 %



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Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

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