REPORT - 2018 - smctradeonline.com · MAHINDRA & MAHINDRA LIMITED RECOMMENDATION: ... the Scorpio , its iconic SUV ... highest ever sales for Scorpio and Pik-Ups this year and Bolero

RURALFOCUS

May30,2018

REPORT - 2018

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1

SR. CO_NAME SECTOR MARKETCAP* PRICE* TARGET UPSIDE

NO POTENTIAL(%)

*CMPason30thMay,2018

1 M&M Automobile 105621.64 868.80 1110.00 28

2 AshokLeyland Automobile 42922.02 149.55 170.00 14

3 HavellsIndia CapitalGoods-ElectricalEquipment 35173.98 547.95 699.00 28

4 MuthootFinance Finance 16023.66 396.25 466.00 18

5 KECIntl. CapitalGoods-ElectricalEquipment 9586.83 373.65 441.00 18

6 GNFC Fertilizers 7516.89 469.60 575.00 22

7 KalpataruPower CapitalGoods-ElectricalEquipment 7106.76 454.00 613.00 35

8 BajajCorp FMCG 6807.86 462.95 534.00 15

9 JainIrrigation Plasticproducts 5370.72 105.85 130.00 23

10 SwarajEngines CapitalGoods-NonElectricalEquipment 2385.68 1944.55 2372.00 22

uralIndiaaccountsforabout70percentofthetotalpopulationandcontributesaroundhalfofthecountry'sGrossDomesticProductR(GDP).TheruralIndiathemewillcontinuetoremainvogueondomesticstockmarketsalongwithanelectionyearbeinginfocus.Afterthreeyearsofsubduedruralconsumption,therearenowincreasingsignsofapickup.Twogoodconsecutivemonsoon,coupledwith

governmentfocusontheruraleconomyintermsofbuildingruralinfrastructure,providingbetteragriculturalsupportprices,focusonincreasingfarmincomes, increasedspendingon irrigationamiddisbursalsof7thpaycommissionhavehelpedpickup inruralconsumption.Besides,Reformssuchasgovernmentextensionoffertilizersubsidyprogramuntil2020coupledwithfarmloanwaiversbysomestategovernmentsarebeingundertakenwithavisionthattheycanhaveamultipliereffectinincreasingmovementsofgoods,servicesandtherebyimproveearningspotentialofruralareassubsequentlyimprovingconsumption.

TheIndiancompaniesareveryoptimisticaboutgrowthoftheruralconsumermarketsasbetternetworkingamongruralconsumersandtheirtendencytoactivelyseekinformationthroughmanysourcestobebetterinformedwhilemakingpurchasedecisions.AlsothewiderreachofmediaandtelecommunicationserviceshashelpedIndia’sruralconsumerstoremaininformedandisinfluencingtheirpurchasedecisions.Owingtoafavorablechangingconsumptiontrendaswellasthepotentialsizeofthemarket,andonexpectationofgoodmonsoon(afterMetprojection)thisyear, rural India provides a large and attractive investment opportunity for private companies from sectors as diverse as Capital Goods, agricultureserviceandfertilizers,financialservicesandconsumerdurablescompanies.

Withincreasingruralincomelevelsinthecomingyears,theruralconsumptionwillgetaboost,whichinturnwouldprovepositivefortheIndianbusinessscenario.Fromtheperspectiveofaninvestor,theinherentqualityofthecompanyorthebusinessisequallyimportanttoplayanytheme.Investinginahigh-qualitybusinessalongwiththe“broadtheme”reducestheoddsoflosingmoneyasthe“theme”hastremendouspotentialinthelong-term.Oneshouldconsiderthefollowingrecommendationstoinvestinastaggeredmannerforalongtermperspective.

HappyInvesting

MAHINDRA&MAHINDRALIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

Mahindra & Mahindra, Ltd., through its subsidiaries, engages in the

manufacture, distribution, and sale of passenger cars, tractors,multi-

utility vehicles, light commercial vehicles, and threewheelers. It also

designs,develops,manufactures,andmarketsimplementsthatareused

inconjunctionwithtractors.

TostrengthentheUVportfolio,thecompanyhaslaunchedanewavatarof

the Scorpio, its iconic SUV— the 'All Powerful Scorpio'. The new “All

PowerfulScorpio”comeswithhigherpower(140bhp)andtorque,new

6-speed transmission, enhanced performance, imposing styling and

luxuriouscomfort.

Thecompanycontinuedtobethe3rdlargestpassengervehiclecompany,

the 2nd largest commercial vehicle company and the largest small

commercialvehicle(LCV<3.5T)companyinIndia.Domesticsalescrossed

the5,00,000mark after a clapof five years. The company achieved its

highesteversalesforScorpioandPik-UpsthisyearandBolerovolumes

crossed1millionsincelaunch.Also,inFY2018,thecompanyhadrecorded

itshighestevertractorvolumesforbothdomesticandexport,andretained

theleadershippositionforthe35thconsecutiveyear.

ForQ4FY2018,thedomesticautoindustry(excluding2W)grew19%,

with the passenger vehicles reporting a growth of 7% and the UV

segmentagrowth25%.Thedomestictractorindustrywitnessedavery

highgrowthof44%.InQ4FY2018,thedomesticAutomotivevolumefor

thecompanygrew20%whilethedomestictractorvolumesgrew44%.

Thegroupwillsupply150ofthe500electricsedansinthefirstphaseofthe

government’sordertoprocure10,000electricvehicles.Itwillmanufacture

allkeycomponentsthatgointoanelectricvehicleitselfasIndia’slargest

utilityvehiclemakerprepares for thenext transition in theautomobile

industryamidthegovernment’spushtocutdependenceonfossilfuels.

For theyearFY2018, improvement inoverall economic sentiment, two

consecutive years of normal monsoon, Government's focus on

development of Agri and Rural sectors, with continued investment in

infrastructure,coupledwitheasyavailabilityofaffordablefinance,helped

drivethedemandfortheautomotiveaswellasthetractorindustry.

2

CMP:Rs.868.80 Target:Rs.1110.00 UpsidePotential:28%

RISK

RisingInterestrate

Changeinmajorregulation

ACTUAL ESTIMATES

FYMar-17 FYMar-18 FYMar-19

Revenue 43785.40 48685.60 54298.70

Ebitda 4769.30 6224.00 7475.00

Ebit 3442.10 4744.60 5896.10

NetIncome 3955.70 4356.00 4616.20

EPS 33.19 36.47 39.65

BVPS 206.65 - 273.36

RoE 14.38 14.53 15.41

(Rs.inCr.)FINANCIALPERFORMANCE

Source:Company'sWebsite,Reuters&Capitaline

CurrentMkt.Price(Rs.) 868.80

FaceValue(Rs.) 5.00

52WeekHigh/Low 887.95/612.50

M.Cap(Rs.inCr.) 108008.57

EPS(Rs.) 48.12

P/ERatio(times) 18.06

P/BRatio(times) 2.93

DividendYield(%) 0.75

StockExchange BSE

VALUEPARAMETERS

AsonMar’18 %OfHolding

Foreign 38.12

Institutions 20.08

NonPromoterCorporateHolding 6.49

Promoters 20.45

Public&Others 14.85

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

Thecompany'svolumegrowthisonanuptrendledbystrongdemandfor

tractorsandacyclicalrecoveryinlightcommercialvehicles.Apickupin

ruraleconomyislikelyandthisshouldbenefitM&M.Thus,itisexpected

thatthecompanywouldseegoodgrowthgoingforwardandthestock

willseeapricetargetofRs.1110in8to10monthstimeframeontarget

P/Eof28xandFY19(E)earningsofRs.39.65.

ASHOKLEYLANDLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

AshokLeylandisoneoftheleadingmanufacturersofmediumandheavy

commercial vehicles in India. Ashok Leyland is the 2nd largest

manufacturer of commercial vehicles in India, the 4th largest

manufacturerofbusesintheworldandthe12thlargestmanufacturerof

trucksglobally.Itofferspowersolutionsforelectricpowergeneration,

agricultural harvester combines, earth moving and construction

equipment,andmarineandothernon-automotiveapplications.

FY17-18,ithasbeenanextremelysatisfactoryyearwithachievementsin

manyfronts.Recorddomestictruckvolumes,substantialgrowthinLCV,

continued growth in marketshare and the transformation which

Intelligent Exhaust Gas Recirculation (i-EGR) brought to the Indian

market.Moreover,exportshaswitnessedahealthyjumpinthecurrent

year and the company will continue to focus on growing

InternationalBusinessaswellasDefenceandAfterMarketportfolios.

DuringFY17-18,Salesvolumesrose20.5%yoyto174,851unitsinFY18

visvis145,066unitsinthepreviousyear.Itssalesvolumesinthemedium

andheavycommercialvehicles(M&HCV)segmentstood16%higherat

131,432units.LCVsalesduringtheperiodrose36.6%to43,419unitsvis

avis31,774unitayearago.

AsBharatStandardsVIemissionnormswillgointoeffectby2020,the

company is working on capacity building and modernization of its

competenciesandtechnologiestomeetthegrowingrequirementsforthe

BS6.IthasreneweditspartnershipwithHinoMotors(Japan)forMutual

Cooperation Agreement (MCA) to utilize Hino’s Euro-VI compliance

engine technology for its new BS-VI (EURO-VI) development. This

partnershipwouldhelpthecompanytobereadyforBSVInorms.

The company is developing new vehicles for the armed forces,

aggressivelybiddingfornewcontractsandsettingupnewinfrastructure

to ready itself for a larger apie of thedefencebusiness.Thedefence

businessisexpectedtoachieveatleast3times(revenuegrowth)infive

years. Recently, the company has bagged tenders formine protected

vehiclesandbulletproofvehiclesfromthesecurityagenciesandtargets

threefoldbusinessincreasefromitsdefencevertical.

3


RISK

PolicyinterventionbyGovernment

Competition

ACTUAL ESTIMATES


REVENUE 20018.70 26247.90 30469.50

EBITDA 2338.80 2739.00 3346.50

EBIT 1820.90 2184.40 2772.40

PRE-TAXPROFIT 1680.90 2230.72 2829.10

NETINCOME 1573.90 1575.20 1983.10

EPS 5.46 5.36 6.82

BVPS 21.53 24.48 28.37

RoE 27.04 - 25.37




FaceValue(Rs.) 1.00

52WeekHigh/Low 167.50/87.35


EPS(Rs.) 5.36




StockExchange BSE

VALUEPARAMETERS


Foreign 25.57

Institutions 11.08

Government 0.08


Promoters 51.27

Public&Others 9.91

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

TheCompanycontinuedtooutperformtheCVindustryandhasmade

significant gains in market share and sales volume by focusing on

innovation, intensive marketing strategies and network expansion.

Moreover,themanagementofthecompanyisrapidlyestablishingrobust

businessprocessesacross thecompany takingstrides into theDigital

Age.ThusweexpectthestocktoseeapricetargetofRs170in8to10

monthstimeframeon1yearaverageP/Bvxof6andFY19(BVPS)of

Rs28.37.

HAVELLSINDIALIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

HavellsIndiaLimitedisoneofIndia’slargest&fastestgrowingelectrical

andpowerdistributionequipmentmanufacturerswithproductsranging

fromindustrial&domesticusage.Itownssomeoftheprestigiousglobal

brands like Crabtree, Reo & Standard Electrical. It now operates a

networkof90+branchesandrepresentativeofficesinover50countries

withanetworkof20,000distributors.

The company has 12 state-of-the-art manufacturing plants in India

located at Haridwar, Baddi, Sahibabad, Faridabad, Assam, Alwar and

Neemrana, manufacturing globally acclaimed products, synonymous

withexcellenceandprecisionintheelectricalindustry.

It has pioneered the concept of exclusive brand showroom in the

electrical industry with ‘Havells Galaxy’. It became the first FMEG

Companytoofferdoorstepserviceviaitsinitiative‘HavellsConnect’.

DuringQ4FY17,itslightingandfixturesbusinessgrew20percenttoRs

323croreduringthefourthquarterasagainstRs268croreinthesame

periodpreviousfiscal.Electricalconsumerdurablesgrew19percentto

Rs465crore,switchgearbusinessgrew5percenttoRs394crorewhile

thecablebusinessgrew13percent toRs769croreduring the three

monthsperiodendedMarch2018.Themanagementisconfidentthatthe

growthforthissegmentwillcontinueincomingyears.

Fans, appliances andwaterheatershaveperformedwellwithmarket

leadinggrowth.Thecompanyretainedmarket leadershipinpremium

fansegment,whichcontributes2/3rdof ceiling fanswith thehighest

averagepricerealizationinindustry.InWaterheaters,thecompanyis

firmlyestablishedastop3playerswithpremiumandtechnologyproduct

positioning.

Lloyds,whichwasacquiredbyHavellslastyear,reportedacontribution

ofRs1,414crorestoHavellstoplineinFY18.Salesremainedmutedasthe

demandwasimpactedbyGST.

Asapartofitsexpansionstrategy,itplanstoaddrefrigeratorsunderLloyd’s

portfoliowhichcurrentlyconsistsofair-conditioners,washingmachines,

andtelevisions.ThecompanyisincurringacapitalexpenditureofRs3,000

crorestosetupa600,000unitair-conditionermanufacturingfacility.This

plantisexpectedtobeoperationalbytheendofFY19.

4


RISK

HighCompetition

ChangeinTechnology

ACTUAL ESTIMATES


Revenue 8,138.60 9,743.10 11,231

Ebitda 1,049.30 1,287.20 1,527

Ebit 909.80 1,150.80 1,350

Pre-TaxProfit - 1,225.80 1,462

NetIncome 712.50 859.50 1,028

EPS 11.40 13.75 16.45

BVPS 59.82 67.12 76.74

RoE 18.02 21.63 22.76




FaceValue(Rs.) 1.00

52WeekHigh/Low 592.70/441.30


EPS(Rs.) 10.78




StockExchange BSE

VALUEPARAMETERS


Foreign 25.43

Institutions 5.05


Promoters 59.58

Public&Others 6.77

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

Thecompanyhasbeencontinuouslygrowingineachbusinessparameter

anditisexpectedthatitwouldbedirectbenefittedbytheGovernment

initiativessuchas“Housingandpowerforall”.Itisbestplacedtoattain

scale across businesses with its new SBU (Strategic Business Unit)

structure and focused product-wise branding strategy. Thus, it is

expectedthatthestockwillseeapricetargetofRs.699in8to10months

timeframeonancurrentP/Eof50.84xandFY19EPSofRs.13.75.

MUTHOOTFINANCELIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

MuthootFinanceisthelargestgoldfinancingcompanyinIndiainterms

ofloanportfolio.HeadquarteredinKerala,thecompanyisaSystemically

ImportantNon-deposittakingnon-bankingfinancecompany(NBFC).

The consolidated asset under management (AUM) of the company

increasedat improvedpaceof12%yoytoRs32154croreendMarch

2018.Theshareofsubsidiariesintheloanbookhasincreasedto10%end

March2018 from5%endMarch2017,while thecompanyexpects to

furtherraisetheshareofsubsidiariesinloanbookto15%byMarch2019

andfurtherhigherto20%byMarch2020.

ThegrowthofgoldloanAUMhasacceleratedonsequentialbasisto7%to

Rs 29138 crore end March 2018. The gold branch network of the

companyhasincreasedto4325branchesendMarch2018.

GrossNPA increased to6.98%atendMarch2018 from5.62%atend

December2017.Meanwhile,NetNPA also increased to 6.16%at end

March2018from4.93%atendDecember2017.

Muthoot Homefin, the wholly owned subsidiary, increased its loan

portfolio to Rs 1465 crore endMarch 2018 fromRs 440.8 crore end

March2017.TotalrevenuejumpedtoRs126croreinFY2018fromRs24

croreinFY2017.ItachievedanetprofitofRs28croreinFY18asagainst

previousyearprofitofRs3crore.

Netprofitofthecompanyrose40.28%toRs451.39croreinthequarter

ended March 2018 as against Rs 321.78 crore during the previous

quarterendedMarch2017.Salesdeclined9.28%toRs1550.97crorein

thequarterendedMarch2018asagainstRs1709.63croreduringthe

previousquarterendedMarch2017.

5


RISK

Fallincollateralvalue

Adverseregulatorychanges

Alternativeloanproducts



FaceValue(Rs.) 10.00

52WeekHigh/Low 525.80/360.00


EPS(Rs.) 43.00



StockExchange BSE

VALUEPARAMETERS


Foreign 11.26

Institutions 10.81


Promoters 73.61

Public&Others 3.60

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

The company is witnessing healthy financial growth across all the

businesssegmentsandmaintainingtheloangrowthsteady.Accordingto

themanagement,gold loanbusinesswouldgrow15%andsubsidiary

loanbooktogrowfasterat50-60%.Thus,itisexpectedthatthestockwill

seeapricetargetofRs.466in8to10monthstimeframeonacurrent

P/Bvof2.04xandFY19BVPSofRs.228.5.

ACTUAL ESTIMATES


Revenue 3345.70 4221.90 4220.70

Ebitda 2234.00 3040.60 2934.50

Ebit 2185.80 2996.70 3268.90

NetIncome 1179.80 1720.30 1779.50

EPS 29.45 42.85 44.44

BVPS 163.12 193.99 228.50

RoE 19.44 - 20.78


KECINTERNATIONALLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

KEC International, an RPG Group firm, is a global infrastructure EPC

(engineering,procurementandconstruction)majorandhaspresencein

powertransmissionanddistribution,cables,railways,water,renewables

and civil space. Globally, the company has empowered infrastructure

developmentinmorethan63countries.

Fresh ordersworthRs 1392 crorewerewon across various business

verticalsofthecompanysofarinFY2019.Majorjunkofthefreshorderso

farincurrentfiscalhascomefromrailwayaggregatetoRs928crorefor

bothoverheadelectrificationaswellascivilworks.Civilworksverticalof

thecompanyhasbaggedordersworthRs212crorefromleadingtyreand

cementmanufacturingcompanies.WhilecoreT&Dsegmentaccountsfor

Rs159croreworthofordersacrossIndiaandSAARCregion,thebalance

wasaccountedbycablesandsolar.

Order execution is back on track andmargin is expected to stabilize on

account of cost control measures. The management expects traction in

orderingactivityfromSEBs(StateElectricityBoard)mainlyfromsouthIndia

andBihar.Further,railwayelectrificationorderswouldpickupandrevenue

from railway is expected to double in FY19. Healthy order book and

improvement in margins would drive the earnings growth. Moreover,

managementexpectorderbooktogrowby20%forcurrentfiscali.e.FY2019.

ItsdebtlevelshasreducedfromRs.1932croretoRs.1538croreoverthe

last12months ,which ismadeupofcurrentand longtermdebtand

managementexpectsmorereductionofdebtincomingyears.

ThecompanyhasputinbidsforsolarordersinMENAregionanditexpects

one or two solar order in this fiscal from that region. The company is

targetingSAARCandAfricaregionforRailwaysordersandhopetogetat

leastoneprojectthisfiscal.However,theticketsizeofinternationalrailway

orderswillbebiggerascomparedtodomesticmarket.

Consolidatedsalewasupby17%toRs10058.02crore.TheOPMwasup

by50bpsto10.0%andthustheoperatingprofitwasupby23%toRs

1006.18crore.Withtaxratestandlowerat33.3%comparedto34.2%in

correspondingpreviousperiod, thePATwasupby51%toRs460.41

crore.

6


RISK

Commoditypricevariationsandcurrencyfluctuations

Delaysinexecutionofprojects

ACTUAL ESTIMATES


REVENUE 8584.40 10096.40 11637.70

EBITDA 817.90 1006.20 1183.50

EBIT 688.20 896.40 1096.90

PRE-TAXPROFIT 463.50 690.24 821.50

NETINCOME 304.80 460.40 539.60

EPS 11.85 17.91 20.98

BVPS 61.70 77.70 98.80

RoE 19.67 - 23.37




FaceValue(Rs.) 2.00

52WeekHigh/Low 442.60/209.00


EPS(Rs.) 17.91




StockExchange BSE

VALUEPARAMETERS


Foreign 11.33

Institutions 20.20

GovtHolding 0.00

NonPromoterCorp.Hold. 3.35

Promoters 50.99

Public&Others 14.14

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

Thecompanyiscontinuouslyperformingwellanddeliveringinallthe

three parameters of revenue, profitability and order intake. The

managementofthecompanyexpectsinternationalbusinesstopickup

with large order inflow from Jordan, Saudi, Far East (Indonesia,

Thailand),etcandinternationalT&D,sub-stationsandcivilinfrawillbe

keydriversforFY18orderintakegrowthof10%.Weexpectthestockto

seeapricetargetofRs.441in8-10monthtimeframeonanexpectedP/E

of21xandFY19(E)EarningsPerShareofRs.20.98.

GUJARATNARMADAVALLEYFERTANDCHEMLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

GNFCtheleadersinfertilizerindustry,isengagedinmanufacturingand

sellingfertilizerssuchasUreaandAmmoniumNitro-phosphateunder

thebrandnameof"NARMADA".Thecompanyhasinitiatedauniqueand

first of its kind, socio economic project of collection of neem seeds

throughtheruralpoorespeciallywomentosupplementtheirincomeand

encouragethemfororganicfarming.

Onthedevelopmentfront,ithassetupcorechemicalandpetrochemical

plantssuchasMethanol,FormicAcid,NitricAcid,andAcetic;hasIndia’s

largest single stream plant of Aniline and the proposed di-calcium

phosphateprojectinjointventurewithBelgiancompanyEcoPhoswillbe

operational by 2019.Di-CalciumPhosphate ismainly used as dietary

supplement in prepared instant food products including noodles.

Moreover,thecompanyisonlymanufacturerofTolueneDi-Isocyanate

(TDI)inSouthEastAsiaandIndianSubContinent.Itschemicalsenjoy

highbrandvalueinnichemarket.

DuringtheYearendedMarch2018,thecompanyhashighesteverLong

TermDebtextinctionofRs.888crore.Longtermdebtlevelreducedby

100%from2,180crorein2013-14toRs.Nilasofdate.Rs.1,436croreof

totaldebtpaidoffinonesingleyear.GNFCisnowaLongTermDebtFree

company.

Most of the plants performed well. For TDI the combined capacity

utilisationstoodat93%duringtheyearasagainst73%lastyear.Also

duringtheyearAniline,EthylAcetate,FormicAcidandTechnicalGrade

Ureahave also recordedhighestproduction.The realisation inAcetic

Acid,FormicAcidandEthylAcetatewerethehighestinthelast6years.

Thecompanyhasreporteda38percentriseinitsnetprofitatRs329

croreforthefourthquarterendedMarch2018.Netsalesofthecompany

increased46percenttoRs1,764croreduringJanuary-Marchquarterof

2017-18,comparedwithRs1,203croreinthepreviousyear.

7


VALUATION

Themanagementofthecompanyiscontinuouslyfocusingonincreasing

itscapacityadditionsinchemicalsegmentaswellastoimprovecapacity

utilizationofitsDahejPlantandduringtheyear;ithaspaidallofitslong

termdebtandnowplanningtoreduceitsworkingcapital.Moreover,it

hasdevelopedrequisiteexpertiseandconfidencewithprovenproject

managementcompetencies.Thus,itisexpectedthatthestockwillseea

pricetargetofRs.575in8to10monthstimeframeonacurrentP/Ex9.18

andFY19(EPS)ofRs.62.69.

ACTUAL ESTIMATES


Revenue 4588.80 6837.30 6863.20

Ebitda 652.80 1390.60 -

Ebit 401.40 1120.20 1792.00

Pre-TaxProfit 715.10 1162.00 1434.90

NetIncome 229.10 789.50 974.30

EPS 15.62 60.80 62.69

BVPS 244.60 286.83 331.13

RoE 7.08 19.12 18.93





52WeekHigh/Low 548.50/253.60


EPS(Rs.) 51.15




StockExchange BSE

VALUEPARAMETERS


Foreign 11.16

Institutions 15.06


Promoters 41.18

Public&Others 28.38

SHAREHOLDINGPATTERN

P/ECHART

KALPATARUPOWERTRANSMISSIONLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

KalpataruPowerTransmissionLimited(KPTL)isprimarilyengagedin

the business of Engineering, Procurement and Construction (EPC)

relatingtoinfrastructurecomprisingpowertransmission&distribution,

railwaytracklaying&electrification,oil&gaspipeLinesLaying,etc.

ForFY18-19,thecompanytargetstoachieve15-20%growthonrevenue

andfurtherimproveonprofitabilityandreturnratios,includingexitof

non-coreassets. Itplanstofurtherenhanceinternational footprinton

power transmission, civil contracting, manufacturing, railways and

pipeline divisions. The company will continue to drive of improving

productivity through automation, process re-engineering and

benchmarksoncostefficiency.

Orderinflowwasupby56%inFY18andstoodatRs9341crore.L1in

excessofRs2000crore.OverallorderbookpositionasonMar18for

KPTLstandaloneisaroundRs12404crore.40%ofordersarefromT&D

internationalmarkets, 28% fromdomestic transmissionmarkets and

16%oforderbookisfrominfrastructureand16%fromrailwaysegment.

PGCILaccountedforaround19%oftotalorderbook.

ForJMCProjects,,asubsidiaryofKPTL,thecompanyhasanorderbookof

aroundRs7616croreasonMar18,upby10%.OrderinflowstoodatRs

3339crore.L1standsatRs1500crore.Rs300croreoflegacyordersin

theorderbook.TargetforJMC15-20%growthinnetsalesandmargin

10.5-10.8%inFY19

The company has a global footprint in over 50 odd countries on

transmissionprojects.Itwouldcontinuetoexpandthatglobalfootprint

withthesupportfromEximBankofIndiaandopportunitiescomingfrom

the internationalmarket. The company is currently executing several

contractsinIndia,Africa,MiddleEast,CIS,SAARCandFarEast.

KPTLreportednetsalesgrowthofaround29%toRs1931.44crorein

Mar18quarterandPATforMar18quarterstoodatRs104.83crore,up

by17%YoY.

8


RISK

RegulatoryComplianceRisk

Executionrisk

CurrencyRisk

ACTUAL ESTIMATES


Revenue 4,838.10 5,741.20 6,608.70

Ebitda 529.10 631.20 739.00

Ebit 451.40 554.60 673.10

Pre-TaxProfit 402.60 491.6 591.00

NetIncome 269.10 322.00 394.70

EPS 17.54 20.98 25.58

BVPS 161.52 180.52 204.00

RoE 11.47 13.19 13.77




FaceValue(Rs.) 2.00

52WeekHigh/Low 535.95/322.60


EPS(Rs.) 20.98




StockExchange BSE

VALUEPARAMETERS


Foreign 6.17

Institutions 22.20


Promoters 59.32

Public&Others 8.73

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

The company continues to focus on improving profitability, order

visibilityandreturnratiosasaresultofimprovedmarginsandunlocking

ofcapitalfromnon-coreassets.Itsdiversificationfocushasledtosuccess

in securing significant orders in the non-T&D business, with healthy

margins.Thus,itisexpectedthatthestockwillseeapricetargetofRs.614

in8to10monthstimeframeonatargetP/Eof24xandFY19(E)earnings

ofRs.25.62.

BAJAJCORPLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

BajajCorpisanFMCGcompanywithmajorbrandsinhaircarecategory.It

is engaged in the business activity of trading and manufacturing of

cosmetics,toiletriesandotherpersonalcareproducts.

The company has reduced its dependency on wholesale trade which

accounted for around 35% of total sales, as compared to 55%, pre

demonetizationandalsodirectreachhasincreasedto3.9Mretailoutlets.

The management is hopeful for turnaround of rural demand and it

expects rural growth soon to pick up more than 10% every year.

Currentlyit’sstilllowerthanurbangrowthbutexpectsruralgrowthto

outperformurbangoingforward.Managementfurtherexpectsincrease

inruralgrowthwillleadtoevenhigherandbetterfutureforlighthairoil

segmentingeneralandparticularforthecompany.

Ithasbeenpursuinginorganicopportunitiesforthelastfewyears.For

inorganicgrowthopportunities,itwillfocusonnichebrandswhichcan

benefit from its strong distribution network that would help the

companytomakepanIndiabrands.Themanagementofthecompanyis

lookingtograbinorganicgrowthopportunitiesintheFMCG,Hairoiland

Nomarkscreamorotheranti-blemishcreamcategory.

March18quartersawavaluegrowthofaround5%andvolumegrowthof

5.8%onYoYbasis.Onanannualbasis,thevaluegrowthstoodat2.7%.

BajajAlmondshairoilgrewby7.3%byvolumes.Thecompanyhasgained

inmarketsharewithinthelighthairsegment.Ithas61%marketsharein

volumesinthequarter.

9


RISK

Frequentfluctuationsinthepricesofitsrawmaterial

HighlycompetitiveFMCGmarketwithcompetitors

ACTUAL ESTIMATES


REVENUE 794.80 828.50 930.40

EBITDA 263.60 253.90 292.10

EBIT 258.30 246.50 294.30

PRE-TAXPROFIT 296.60 269.80 317.90

NETINCOME 236.60 211.10 244.20

EPS 15.97 14.31 16.57

BVPS 33.50 33.39 36.22

RoE 48.53 42.79 48.29




FaceValue(Rs.) 1.00

52WeekHigh/Low 525.00/342.50


EPS(Rs.) 14.31




StockExchange BSE

VALUEPARAMETERS


Foreign 25.53

Institutions 4.63


Promoters 66.86

Public&Others 2.39

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

Withgoodcashonhandandzerodebt,thecompanyisgaininginitslight

hairoilcategorywhichispremiumhairoil.Ithasincreasednumberof

distributorsinruralareas.Actionsdoneinthepastsuchasincreasein

distribution and direct dealer network, has resulted in increase in

volumes better than the industry. Management aims to continue to

launchnewproducts.Immediatelauncheswillbeinhairoilandskincare.

Currentlyithasnewlaunchesinrelatedcategoryproductsandaimsto

use cash for acquisition to leverage the strong distribution. Thuswe

expectthestocktoseeapricetargetofRs534in8to10monthstime

frameanexpectedP/Exof32.25andFY19(E)earningsofRs16.57.

JAINIRRIGATIONSYSTEMSLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

Jain Irrigation Systems (JISL) is engaged in providing solutions in

agriculture, piping, infrastructure through manufacturing of micro

irrigationsystems,PVCpipes,HDPEpipes,plasticsheets,agroprocessed

products, renewable energy solutions, tissue culture plants, financial

servicesandotheragriculturalinputs.

Recently,ithasbaggedorderforintegratedirrigationsolutionprojectin

Karnataka. Visvesvaraya Jala Nigam, a division of Water Resources

DepartmentofKarnataka,hasplacedthisorderonthecompanythrough

nationalcompetitivebidding.ThevalueoftheprojectisRs287.66crore.

Thecompanyexpectstocompletetheprojectin24months.

Accordingtothemanagementof thecompany, foodbusinesswillalso

improveduetopickupindemandandexpectdoubledigitgrowthinthis

segment. The company expects strong business in spices andOrange

juice business. Company expects enormous opportunities in water

treatmentplantsandbetterirrigationproducts.

DuringQ4FY18,itsoverallplasticdivisionhasreportedgrowthof19.7%

onaccountofrobustoffakefromdomesticmarketandrevenuefromHi-

techAgriInputproducts

CurrentconsolidatedorderbookstandsatRs4089crorewhichincludes

ordersofRs1807.60croreforHitechAgriInputProductsDivision,Rs

964 crore for Agro Processing (JFFFL) and Rs 1208 crore for Plastic

Division.

10


RISK

Weatherandcroprelatedrisk

Delayinimplementationofproject

ACTUAL ESTIMATES


REVENUE 6769.80 7999.10 9194.10

EBITDA 940.20 1055.40 1232.70

EBIT 638.90 716.80 870.90

PRE-TAXPROFIT 243.00 299.17 460.70

NETINCOME 176.20 219.30 347.90

EPS 3.29 4.25 6.38

BVPS 90.35 91.76 91.49

RoE 4.29 - 7.50




FaceValue(Rs.) 2.00

52WeekHigh/Low 150.40/86.25


EPS(Rs.) 4.46




StockExchange BSE

VALUEPARAMETERS


Foreign 41.65

Institutions 6.89

Government 0.11


Promoters 28.46

Public&Others 20.12

SHAREHOLDINGPATTERN

P/ECHART

VALUATION

The company has maintained positive free cash flows and the

managementofthecompanyexpectstofollowthesameinnextquarter.It

expects20%salesgrowthforfullyearFY19duetorobustperformancein

piping business and project business due to strong orders. Thus we

expectthestocktoseeapricetargetofRs130in8to10month’stime

framea3yearaverageP/Bvxof1.42andFY19(BVPS)bookvalueper

shareofRs.91.49.

SWARAJENGINESLIMITED RECOMMENDATION:BUY

INVESTMENTRATIONALE

Swaraj engines limited (SEL) is into manufacturing and supplying of

dieselEngines in therangeof22HP toabove54HP.Thecompany is

equippedwithhighlyproductive&precisequalityanalyzingmachines.It

alsomanufactureshi-techenginecomponents.Tilldate,SELhassupplied

over7,00,000enginesforfitmentintoSwarajtractors.

DuringFY17-18,ithasattaineditshighesteverenginessaleof92,022

units(lastyear82,297units),agrowthof11.8%.Withriseinenginessale

volumecoupledwithincreaseinthesharpofhigherHPenginessale,net

operating revenue for FY18 stood at Rs.771.20 crores as against

Rs.666.10croreforthelastyear-agrowthof15.80%.

Onthedevelopmentfront,SwarajTractorshaslaunchedSwaraj963FE

(60-75HPcategorytractor)whichhasbeenwellacceptedinthemarket.

TheacceptanceofSwaraj’shigherHP tractorswouldhelp toenhance

operatingperformanceof the company. SwarajTractorshasamarket

shareof8–9%inthe60HPsegment.Withthislaunch,thecompanyis

targetingtoenhanceittoover11–12%bytheendoffirstyearofthe

launch. This new launch will further augment SEL's premium priced

enginesalesvolumes.

SEL’snewcapacitylargelyfocusedonhigherHPengines.InFY18,the

companyhasaddedcapacityby15katcostofRs25croremakingtotal

capacity tostandat1.2 lakhunitsofengine.Thecompanywill spend

aroundRs50crore,tofurtherincreasethecapacityto1.5lakhengine

unitsinnext2years.

11




52WeekHigh/Low 2545.00/1785.00


EPS(Rs.) 66.05




StockExchange BSE

VALUEPARAMETERS


Foreign 2.51

Institutions 13.05

GovtHolding 0.02

NonPromoterCorp.Hold. 0

Promoters 50.74

Public&Others 33.68

SHAREHOLDINGPATTERN

P/ECHART

RISK

Governmentpolicyonprocurement,creditavailability,commodity

pricetrends

Rain-dependentnatureofagriculturesector

VALUATION

SELhasahealthybalancesheetwithnodebtonitsbooksandrobust

returnratiosamidhealthydividendpayouts.Moreover,SwarajTractors

hasastrongbrandrecallandthelargeracceptanceofSwarajbrandof

tractors is primarily on the back of balanced design, low cost of

ownershipoverthelifecycleofproduct,robustservicenetworkandfuel

efficiency among others. A normal monsoon expectation in FY19,

upcomingLoksabha elections and an increase inminimumsaleprice

(MSPs)forRabicrop2017-18wouldaugurwellforagrimachineryand

inputsectors.WeexpectthestocktoseeapricetargetofRs.2372in8-10

monthtime frameona twoyearaverageP/Eof31.14xandFY19(E)

EarningsPerShareofRs.76.18.

ACTUAL ESTIMATES


REVENUE 683.30 771.20 866.80

EBITDA 121.60 121.60 144.90

EBIT 105.30 104.80 139.50

PRE-TAXPROFIT 105.50 122.70 140.50

NETINCOME 68.83 80.10 92.76

EPS 55.38 64.56 76.18

BVPS 228.16 188.43 200.36

RoE 25.18 31.30 38.91



E-mail: [email protected] Research also available on Reuters

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