6-Stocks Emkay 180814

8/11/2019 6-Stocks Emkay 180814

1/29

Emkay Global Financial Services Ltd. January 06, 2010 |1

Home Next

Stock Update Areva T&D

x

Result UpdatesAurobindo Pharma Ltd

Sun TV Network Ltd

State Bank of India

Nava Bharat Ventures Ltd

Sobha Developers Ltd

Berger Paints India Ltd

Retail Advisory Team

Result UpdateYour success is our success

Contents

Equity Advisory August 11, 2014

8/11/2019 6-Stocks Emkay 180814

2/29

Your success is our success

Emkay

Res

ultUpdate

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 58,553 8,891 15.2 4,573 15.7 8.6 18.5 46.0 27.3 8.1

FY14A 80,998 21,320 26.3 13,751 47.2 200.7 43.3 15.3 11.6 5.6

FY15E 124,113 23,207 18.7 14,651 50.3 6.5 33.3 14.3 10.7 4.2

FY16E 143,156 26,634 18.6 17,277 59.3 17.9 29.6 12.2 9.1 3.2

Aurobindo Pharma

Solid future providing an opportunity to accumulate

August 11, 2014

Rating

Buy

Previous Reco

Hold

CMP

Rs721

Target Price

Rs890

EPS Chg FY15E/FY16E (%) 15.5/13.1

Target Price change (%) 41.3

Nifty 7,569

Sensex 25,329

Price Performance

(%) 1M 3M 6M 12M

Absolute -2 21 42 348

Rel. to Nifty -1 7 15 232

Source: Bloomberg

Relative price chart

150

275

400

525

650

775

Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14

Rs

0

50

100

150

200

250%

Aurobindo Pharma (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock DetailsSector Pharmaceuticals

Bloomberg ARBP IB

Equity Capital (Rs mn) 291

Face Value(Rs) 1

No of shares o/s (mn) 291

52 Week H/L 787/ 154

Market Cap (Rs bn/USD mn) 210/ 3,434

Daily Avg Volume (No of sh) 2,123,110

Daily Avg Turnover (US$mn) 23.5

Shareholding Pattern (%)

Jun'14 Mar'14 Dec'13

Promoters 54.3 54.6 54.7

FII/NRI 27.6 23.7 21.2

Institutions 7.7 9.9 10.4

Private Corp 1.6 2.1 3.0

Public 8.8 9.7 10.7

Source: Bloomberg

n Aurobindos Q1FY15 results (vs expectation)- Revenues at

Rs29.1bn (vs Rs28.9bn), EBITDA Rs6.6bn (vs Rs6.5bn) and

APAT at Rs4.1bn (vs Rs4.2bn)

n Consolidation of Actavis acquired European business led to

lower margins. 1Q15 was the last quarter of high

contribution from gCymbalta. API business growth low at 4%

n Long term scale benefits outweigh near term consolidation

challenges. US base business excluding gCymbalta remains

strong and EU turnaround to add to the bottom line in FY16

n Tepid financial performance in FY15E provides an

opportunity to accumulate for long term solid returns.

Upgrade to BUY; TP of Rs 890 (15x FY16E EPS of Rs 59.3)

EU consolidated numbers smooth; US continues to be strongBeing the last quarter with gCymbalta exclusivity, US business continued to deliver solid

growth of 79% yoy (in Dollar terms, up 67% yoy to USD 186mn). Aurolife and

Auromedics continued healthy growth with Aurolife generating revenues of USD 26mn

(FY14 full year revenues ~USD 75mn). Europe & RoW business were up 229% yoy as

the quarter saw consolidation of the acquired business of Actavis. The acquired

business contributed Rs 6.2bn sales in the quarter. ARVs business was up 17% during

the quarter. API business was up 4% yoy (high value non-betalactam business was up

5% yoy, and SSPs was up 7% yoy). During the quarter, the company filed 40 ANDAs

including 8 filings for injectables. Till date, it has filed a total 376 ANDAs, of which 194

have been approved, out of which 29 have received Tentative Approvals and balance

are pending for approval.

US base business strong growth ahead; Opportunity to accumulate

Aurobindo has come a long way from its FY13 sales of Rs 58bn to ~Rs125bn in FY15E(

29bn already in 1Q15). Profitability has also improved sharply from 13% in FY13 to base

business EBITDA margins of 22.5% in the current quarter. We believe even excluding

one-off opportunities like gCymbalta, Aurobindo has been able to build a strong base

business in the US. Also, the leverage on the books today is sharply lower from ~USD

600mn in FY13 to USD 448mn in 1Q15 with D/E now below 1x. We believe going ahead

the pipeline in US launches remains strong (especially injectable space) and EU

turnaround possibilities give the company an excellent platform to achieve strong top

line and bottom line performance. We are building in 22% CAGR growth in the US

market for Aurobindo from FY14-16E. Taking confidence from managements reiteration

of an EU business turnaround we are building in an EBITDA neutral performance in

FY16E. From a near term perspective we believe financials for the company couldremain suppressed, however the same today provides a good opportunity to accumulate

a high quality growth stock at a good discount (12x FY16E EPS) to peer pharma names.

Valuation

We are upgrading our target multiple on the stock to 15x FY16E EPS factoring the

strong growth ahead (24% CAGR FY16E-FY18E). We upgrade the stock to a BUY with

a TP of Rs 890 (630 earlier) at 15x on our FY16E EPS of Rs 59.3.

8/11/2019 6-Stocks Emkay 180814

3/29

Aurobindo Pharma Result Update

Emkay Research August 11, 2014 2

Exhibit 1: Quarterly financial

Rs mn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 yoy (%) qoq (%) FY14 FY13

Revenue 17,156 19,139 21,406 23,298 29,111 69.7 24.9 80,998 58,553

Expenditure 14,079 14,755 14,968 15,869 22,529 60.0 42.0 59,670 49,661

as % of sales 82% 77% 70% 68% 77% 74% 85%

Consumption of RM 8,913 9,192 8,977 8,978 13,806 54.9 53.8 36,060 29,908

as % of sales 52% 48% 42% 39% 47% 45% 51%

Employee Cost 1,889 1,960 2,134 2,336 3,084 63.2 32.0 8,319 6,633

as % of sales 11% 10% 10% 10% 11% 10% 11%

Other expenditure 3,277 3,603 3,856 4,554 5,639 72.1 23.8 15,290 13,120

as % of sales 19% 19% 18% 20% 19% 19% 22%

EBITDA 3,077 4,384 6,438 7,430 6,582 113.9 -11.4 21,328 8,892

Depreciation 719 766 760 880 908 3,125 2,487

EBIT 2,358 3,617 5,678 6,549 5,673 140.6 -13.4 18,203 6,405

Other Income 39 51 36 107 108 232 285

Interest 254 246 237 342 189 1,079 1,313

PBT 2,143 3,423 5,477 6,314 5,593 161.0 -11.4 17,356 5,377

Total Tax 589 501 1,331 1,565 1,464 3,986 827PAT before MI 1,554 2,922 4,145 4,749 4,129 165.7 -13.1 13,370 4,550

Minority interest (MI) 11 11 14 2 12 38 25

Adj. PAT before extraordinary 1,565 2,932 4,159 4,751 4,140 164.5 -12.9 13,407 4,574

Extraordinary expenses 1,379 583 -16 -267 -14 1,679 1,636

Reported PAT 186 2,350 4,175 5,018 4,154 2133.5 -17.2 11,728 2,939

AEPS (Rs) 5.4 10.1 14.3 16.3 14.2 164.5 -12.9 46.1 15.7

Margins (%) (bps) (bps)

EBIDTA 17.9 22.9 30.1 31.9 22.6 467 -928 26.3 15.2

EBIT 13.7 18.9 26.5 28.1 19.5 574 -862 22.5 10.9

PBT 12.5 17.9 25.6 27.1 19.2 672 -789 21.4 9.2

Adj. PAT 9.1 15.3 19.4 20.4 14.2 510 -617 16.5 7.8

Effective Tax rate 27.5 14.6 24.3 24.8 26.2 -132 140 23.0 15.4

Source: Company, Emkay Research

Exhibit 2: Quarterly segmental break-up

Rs mn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 yoy (%) qoq (%) FY14 FY13

Formulations

USA 6,248 7,308 9,312 11,160 11,157 78.6 0.0 34,028 17,526

ARVs 1,918 2,331 2,204 1,949 2,242 16.9 15.0 8,402 7,503

Europe & Row 2,839 2,644 2,845 3,026 9,351 229.4 209.0 11,354 8,843

Total formulations 11,005 12,283 14,361 16,135 22,750 106.7 41.0 53,784 33,872

APISSPs

Cephs 2,222 2,429 2,583 2,544 2,385 7.3 -6.3 9,778 7,652

Non-Pen Non -Cephs 2,163 2,067 2,175 2,350 2,120 -2.0 -9.8 8,755 9,373

Total API 2,084 2,684 2,687 2,654 2,198 5.5 -17.2 10,109 8,337

Sale of Dossiers 6,469 7,180 7,445 7,548 6,703 3.6 -11.2 28,642 25,362


8/11/2019 6-Stocks Emkay 180814

4/29



Conference Call Highlights

Guidance (FY14E)

Management guided to maintain Rs 4.0bn PAT for the quarter as the base PAT goingahead

Base EBITDA margin to be maintained at 22-23% Capex- Rs 6.0bn

Business Highlights

US

gCymbalta sales expected to decline going ahead on account of entry of competitionand price erosion

ANDA filings During the quarter, the company has filed 40 ANDAs, 18 of which areinjectables

Management expects limited approvals in the near terms but sees strong number ofapprovals in FY16E

Both Aurolife and Auromedics part of business to grow stronger. Aurolife posted USD26mn sales during the quarter

Other highlights

Actavis acquired EU business was consolidated for the 1st time in this quarter. Thesame contributed Rs 6.24 bn to top line

Management has guided for EUR 10mn EBITDA loss from the acquired business inthe year FY15E and expects to break even on the same in FY16E

As on date, net debt has been reduced from to USD 448mn. Full year ECB debtrepayment is estimated to be ~USD 17mn

8/11/2019 6-Stocks Emkay 180814

5/29



Key Financials (Consolidated)

Income Statement

Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E

Net Sales 58,553 80,998 124,113 143,156

Growth (%) 26.5 38.3 53.2 15.3

Expenditure 49,662 59,678 100,906 116,521Raw Materials 29,908 36,060 63,682 73,575

Employee Cost 6,633 8,319 12,584 14,316

Other Exp 13,122 15,299 24,640 28,631

EBITDA 8,891 21,320 23,207 26,634

Growth (%) 45.7 139.8 8.9 14.8

EBITDA mar gin (%) 15.2 26.3 18.7 18.6

Depreciation 2,487 3,125 3,599 3,962

EBIT 6,403 18,195 19,608 22,672

EBIT marg in (%) 10.9 22.5 15.8 15.8

Other Income 285 232 412 409

Interest expenses 1,313 1,079 762 644

PBT 5,375 17,348 19,258 22,437Tax 827 3,635 4,607 5,161

Effective tax rate (%) 15.4 21.0 23.9 23.0

Adjusted PAT 4,548 13,713 14,651 17,277

Growth (%) 8.2 201.5 6.8 17.9

Net Margin (%) 7.8 16.9 11.8 12.1

(Profit)/loss from JVs/Ass/MI -25 -38 0 0

Adj. PAT After JVs/Ass/MI 4,573 13,751 14,651 17,277

E/O items -1,634 -2,022 26 0

Reported PAT 2,939 11,729 14,677 17,277

PAT after MI 4,573 13,751 14,651 17,277

Growth (%) 8.6 200.7 6.5 17.9

Balance Sheet


Equity share capital 291 291 291 291

Reserves & surplus 25,766 37,210 50,097 66,011

Net worth 26,058 37,501 50,388 66,302Minority Interest 110 257 257 257

Long Term Debt 12,253 14,940 15,290 12,881

Short Term Debt 22,361 23,546 22,935 19,321

Loan Funds 34,614 38,485 38,225 32,202

Other Liabilities 0 0 0 0

Total Liabilities 60,781 76,243 88,869 98,761

Gross Block 37,635 41,830 47,830 52,830

Less: Depreciation 11,246 14,613 18,212 22,174

Net block 26,389 27,217 29,618 30,656

Capital work in progress 2,185 3,097 0 0

Other Assets 409 382 3,479 3,479

Current Assets 43,796 64,202 84,466 97,762Inventories 19,236 23,675 37,404 43,143

Sundry debtors 15,970 26,366 34,004 39,221

Cash & Cash Equivalents 2,085 1,786 482 737

Loans & advances 5,749 11,662 10,201 11,766

Other current assets 756 713 2,376 2,896

Current liabilities 11,997 18,655 28,694 33,136

Accounts Payable 9,687 13,512 20,937 24,189

Other Current Liabilities 2,310 5,143 7,757 8,947

Net current assets 31,799 45,548 55,772 64,626

Misc. exp 0 0 0 0

Total Assets 60,781 76,244 88,870 98,761

Cash Flow


PBT (Ex-Other income) 5,090 17,115 18,846 22,028

Depreciation 2,487 3,125 3,599 3,962

Interest Provided 1,313 1,079 762 644

Other Non-Cash items 0 0 0 0

Chg in working cap -9,956 -14,048 -11,529 -8,599

Tax paid -827 -3,635 -4,607 -5,161

Operating Cashflow -3,408 2,538 6,839 12,875

Capital expenditure -2,661 -4,865 -2,903 -5,000

Free Cash Flow -6,069 -2,327 3,936 7,875

Other income 285 232 412 409Investments -155 27 -3,097 0

Investing Cashflow -2,530 -4,606 -5,588 -4,591

Equity Capital Raised 0 0 0 0

Loans Taken / (Repaid) 8,805 3,871 -260 -6,023

Interest Paid -1,313 -1,079 -762 -644

Dividend paid (incl tax) -363 -1,023 -1,533 -1,362

Income from investments 0 0 0 0

Others 0 0 0 0

Financing Cashflow 7,128 1,769 -2,555 -8,029

Net chg in cash 1,190 -299 -1,304 255

Opening cash position 895 2,085 1,786 482

Closing cash position 2,085 1,786 482 737

Key Ratios

Y/E Mar FY13A FY14A FY15E FY16E

Profitability (%)

EBITDA Margin 15.2 26.3 18.7 18.6

Net Margin 7.8 16.9 11.8 12.1

ROCE 12.2 26.9 24.3 24.6

ROE 18.5 43.3 33.3 29.6

RoIC 13.1 28.6 25.2 25.3

Per Share Data (Rs)

EPS 15.7 47.2 50.3 59.3

CEPS 24.3 58.0 62.7 73.0

BVPS 89.5 128.8 173.1 227.7DPS 1.2 3.5 5.3 4.7

Valuations (x)

PER 46.0 15.3 14.3 12.2

P/CEPS 29.8 12.5 11.5 9.9

P/BV 8.1 5.6 4.2 3.2

EV / Sales 4.1 3.0 2.0 1.7

EV / EBITDA 27.3 11.6 10.7 9.1

Dividend Yield (%) 0.2 0.5 0.7 0.6

Gearing Ratio (x)

Net Debt/ Equity 1.2 1.0 0.7 0.5

Net Debt/EBIDTA 3.6 1.7 1.6 1.2

Working Cap Cycle (days) 185.2 197.2 162.6 162.9

8/11/2019 6-Stocks Emkay 180814

6/29


Emkay

Res

ultUpdate





FY13A 19,230 14,091 73.3 7,096 18.0 2.4 25.8 23.3 11.4 5.7

FY14A 22,236 15,097 67.9 7,480 19.0 5.4 24.6 22.1 10.6 5.2

FY15E 24,239 16,470 67.9 7,625 19.3 1.9 22.8 21.7 9.6 4.7

FY16E 27,123 18,743 69.1 9,326 23.7 22.3 25.1 17.7 8.2 4.2

Sun TV Network

Muted quarter

August 08, 2014

Rating

Accumulate

Previous Reco

Accumulate

CMP

Rs420

Target Price

Rs461

EPS Chg FY15E/FY16E (%) -9 / -6

Target Price change (%) -6

Nifty 7,569

Sensex 25,329

Price Performance

(%) 1M 3M 6M 12M

Absolute -11 14 14 1

Rel. to Nifty -10 1 -8 -25

Source: Bloomberg


300

335

370

405

440

475


Rs

-40

-30

-20

-10

0

10%

Sun TV Network (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock DetailsSector Media & Entertainment

Bloomberg SUNTV IB

Equity Capital (Rs mn) 1,970

Face Value(Rs) 5


52 Week H/L 488/ 324


Daily Avg Volume (No of sh) 745,015




Promoters 75.0 75.0 75.0

FII/NRI 16.8 16.0 15.5



Public 5.3 5.7 5.6

Source: Bloomberg

n Weak on quality- Revenue at Rs6.3bn (+5.3% yoy), EBITDA at

Rs3.7bn (+4% yoy) with EBITDA margin at 58% (-72bps yoy).

PAT at Rs1.7bn (+1% yoy)

n Advt. growth of 0.5% yoy (vs estimate of 5%) disappointed.

Broadcast fees decline of 23% yoy was on expected lines.

IPL losses expanded to Rs435mn vs Rs308mn in Q1FY14

n Subscription growth decelerates with cable revenue declining

6% qoq while growing 15.7% yoy to Rs480mn; DTH revenue at

Rs1.3bn grew 20% yoy and 6% qoq

n Cut estimates for FY15/16E by 9%/6% due to disappointing

ad growth and deceleration in subscription revenue growth.

Maintain Accumulate with revised target price of Rs461

Revenue below expectations, lower costs aided EBITDA Reported revenue at Rs6.3bn was below estimates, largely on account of sub-par

ad growth. Broadcast fees decline of 23% yoy was on expected lines. Decline has

been on account of reduction in number of minutes retained by Sun for ad sales.

EBITDA at Rs3.6bn was up 4% yoy, 3% below our estimate. Programming cost waskept under control as it declined by 7% yoy and 4% qoq. Other expenses (Excluding

IPL) declined 28% yoy. It declined as there was provision for doubtful debts to the

tune of Rs100mn in Q1FY14. Lower cost led to EBITDA margin (Excl. IPL)

expansion of 266bps. PAT at Rs2.1bn increased 7% yoy yoy.

Ad revenue disappoints

Ad revenue was flattish yoy and declined marginally qoq, management attributed

weakness was on account of general elections. Weak ad growth was despite higherinventory utilization as company has not implemented 10+2ad cap/min. Smaller

channels continue to face pressure. The management expects advertising growth to pick

up from H2FY15E. Our estimates factor 9%/12% ad growth for FY15E/16E. The

company expects ad revenue growth to bounce back to 15-17% in FY16E.

Subscription growth to decelerate, weakness to continue in FY15E

Subscription revenue growth of 18% yoy was driven by 15.7% yoy growth in cable TV

revenues and 20% growth in DTH. However, cable revenue declined 6% qoq as

Q4FY14 revenue was higher on account of catch up revenue from Rest of India region.

Management expects it to be in the range of Rs480-500mn on a quarterly basis in

FY15E, implying FY15E growth at ~3%.

Outlook and valuationsAd growth disappointed despite increase in ad minutes and higher rates. Further,

deceleration in subscription growth and weak commentary on growth in FY15E has led

to cut in our estimates. Continued challenges in Telegu market, sub-par ad growth

(despite increase in ad minutes and realization) and substantial increase movie

acquisition cost would keep stock price under pressure in near-term. Nevertheless,

given the promising growth drivers and potential revenue triggers from ongoing

digitization remain the structural positive for long term. At CMP of Rs420, stock trades at

22x FY15E and 18x FY16E EPS with dividend yield of 2.4%.

8/11/2019 6-Stocks Emkay 180814

7/29

Sun TV Network Result Update


Exhibit 1: Quarterly financials

Rs mn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%)

Net Sales 6,019 4,664 5,083 5,202 6,336 5.3 21.8

Programming Cost 450 440 527 435 419 (7.0) (3.8)

as % of sales 7.5 9.4 10.4 8.4 6.6

Employee Expenses 442 483 494 506 458 3.5 (9.6)

as % of sales 7.3 10.3 9.7 9.7 7.2

SG&A and IPL expenses 1,590 365 342 260 1,782 12.1 585.2

as % of sales 26.4 7.8 6.7 5.0 28.1

Total operating expenditure 2482 1287 1363 1202 2659 7.1 121.3

EBITDA 3537 3377 3720 4000 3677 4.0 (8.1)

Depreciation 1,174 1,176 1,061 1,123 1,390 18.4 23.7

EBIT 2363 2201 2660 2877 2287 (3.2) (20.5)

Other Income 133.9 378.0 148.5 131.7 197.0 47.1 49.6

Interest 7 9 23 6 8

PBT 2489 2570 2785 3003 2476 (0.5) (17.5)

Tax 845 879 927 1,027 820 (3.0) (20.2)PAT 1644 1692 1858 1976 1656 0.7 (16.2)


EBIDTA 58.8 72.4 73.2 76.9 58.0 (72) (1,886)

EBIT 39.3 47.2 52.3 55.3 36.1 (315) (1,921)

EBT 41.4 55.1 54.8 57.7 39.1 (228) (1,864)

PAT 27.3 36.3 36.5 38.0 26.1 (118) (1,184)

Effective Tax rate 33.9 34.2 33.3 34.2 33.1 (84) (110)


Exhibit 2: Comparable abridged financials

Q1FY14 Q1FY15

Total Media and SunRisers Total Media and SunRisers

Particulars Entertainment Broadcasting Hyderabad Entertainment Broadcasting Hyderabad

Revenues 6019 5033 985 6335.8 5202 1134

Operating costs 3663 1189 1293 2658.6 1090 1569

EBITDA 3537 3844 -308 3677.2 4112 -435

EBITDA % 58.8 76.4 58.04 79.02


Exhibit 3: Segmental revenue break-up

Rs mn Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

Ad Revenue 2,351 2,442 2,350 2,428 2,445 2,930 2,694 2,790 2,336 2,720 2,820 2,804

YoY Growth 2.2% -6.4% -8.9% 5.1% 4.0% 20.0% 14.6% 14.9% -4.5% -7.2% 4.7% 0.5%

Broadcast 390 410 450 370 370 340 360 350 347 310 260 270

YoY Growth 10.1% -2.4% 21.6% -5.1% -5.1% -17.1% -20.0% -5.4% -6.2% -8.8% -27.8% -22.9%

Total ad Revenue 2,741 2,852 2,800 2,798 2,815 3,270 3,054 3,140 2,683 3,030 3,080 3,074

Subscription Revenue

Analog 470 290 310 300 340 370 380 415 492 540 510 480

YoY Growth -13.0% -45.3% -44.6% -46.4% -27.7% 27.6% 22.6% 38.3% 44.8% 45.9% 34.2% 15.7%

DTH 790 840 860 890 900 940 1,000 1,068 1,084 1,130 1,210 1,280

YoY Growth 12.9% 20.0% 4.9% 6.0% 13.9% 11.9% 16.3% 20.0% 20.5% 20.2% 21.0% 19.9%

International 180 240 220 260 260 260 260 290 323 330 310 330

YoY Growth 11.7% 19.9% 29.4% 30.0% 44.4% 8.3% 18.2% 11.5% 24.3% 26.9% 19.2% 13.8%

Total 1,440 1,370 1,390 1,450 1,500 1,570 1,640 1,773 1,900 2,000 2,030 2,090


8/11/2019 6-Stocks Emkay 180814

8/29



Exhibit 4: Quarterly financials (Ex-IPL)


Net Sales 5,033 4,609 5,083 5,202 5,202 3.3 (0.0)

Cost of revenues 450 440 527 435 419 (7.0) (3.8)

as % of sales 8.9 9.5 10.4 8.4 8.0

Employee expenses 442 483 494 506 458 3.5 (9.6)

as % of sales 8.8 10.5 9.7 9.7 8.8

SG&A expenses 297 365 342 260 214 (28.0) (17.8)

as % of sales 5.9 7.9 6.7 5.0 4.1

Total operating expenditure 1,189 1,287 1,363 1,202 1,090 (8.3) (9.3)

EBITDA 3,844 3,322 3,720 4,000 4,112 7.0 2.8

Depreciation 1,174 1,176 1,061 1,123 1,390 18.4 23.7

EBIT 2,671 2,146 2,660 2,877 2,722 1.9 (5.4)

Other Income 133.9 378.0 148.5 131.7 197.0 47.1 49.6

Interest 7.1 9.0 23.4 5.9 8.1 14.1 37.3

PBT 2,797 2,515 2,785 3,003 2,911 4.1 (3.1)

Tax 845 879 927 1,027 820 (3.0) (20.2)

PAT 1,952 1,637 1,858 1,976 2,091 7.1 5.8


EBIDTA 76.4 72.1 73.2 76.9 79.0 266 214

EBIT 53.1 46.6 52.3 55.3 52.3 (73) (298)

PBT 55.6 54.6 54.8 57.7 56.0 38 (177)

PAT 38.8 35.5 36.5 38.0 40.2 141 222

Effective Tax rate 30.2 34.9 33.3 34.2 28.2 (204) (604)


Exhibit 5: Ad revenue trend

2,428 2,4452,930 2,694 2,790

2,3362,720 2,820 2,804

5% 4%

20%15%

15%

-4%

-7%

5%1%

0

500

1,000

1,500

2,000

2,500

3,0003,500

Q1FY13

Q2FY13

Q3FY13

Q4FY13

Q1FY14

Q2FY14

Q3FY14

Q4FY14

Q1FY15

Rsmn

-10%

-5%

0%

5%

10%

15%

20%25%

Ad Revenue YoY Growth


Revision in estimates

Disappointing ad growth and deceleration in subscription revenue is resulting in 2%/3% cut

in revenue assumption for FY15/16E. However, lower cost assumption is restricting

EBITDA decline to 2% each for FY15/16E. Higher amortization charges have impacted the

profitability. Our revised EPS stands at Rs19.3 and Rs23.7 for FY15E and FY16E,

respectively.

Exhibit 6: Revision in estimates

FY15E FY16E

Particulars Old New % Chg. Old New % Chg.

Revenue 2,474 2,424 -2.0 2,790 2,712 -2.8

EBITDA 1,676 1,647 -1.7 1,913 1,874 -2.0EBITDA Margin % 67.7 67.9 21 bps 68.6 69.1 52 bps

PAT 837 762 -8.9 996 933 -6.3

EPS 21.2 19.3 -8.9 25.3 23.7 -6.3


8/11/2019 6-Stocks Emkay 180814

9/29



Concall highlights

Ad revenues

Ad growth was muted as advertisers migrated to news channels on account of generalelections. Weak ad growth was despite higher inventory utilization as company has not

implemented 10+2ad cap/min. It has been broadcasting 14min/hr of advertising on its

GEC and movie channels while for key programmes and smaller channels ad/hrextends to upto 15-16min/hr. As per management, implementation of 10+2ad cap

would not happen anytime soon.

Overall ad rates have remained consistent, in some cases they have been revisedupwards (GECs and movie channels) but for smaller channels ad rates have been

under pressure.

Management firmly believes that if 10+2ad cap/min is implemented then it would beeasily able to take ad rate hike. Advertising revenue growth to be in low double digits in

FY15E. Expect advertising revenues to bounce back to 15-17% in FY16E, led by

improved macro environment.

IPL

Losses increased during the quarter due to a) increase in player costs by Rs200mn b)Shift in venue entailed additional logistics cost c) Reduction in one playing team led to

loss of sponsorship revenue, d) lower gate receipts, e) Drop in overall rankings to 6 led

to loss in prize money of ~Rs60mn and f) failure to qualify for champions league led to

additional loss of sponsorship revenue. Further, BCCI has not indicated about

reimbursement of additional exp incurred by franchisees due to change in venue.

Management expects losses to reduce meaningfully in FY16E

Subscription revenue

Cable TV subscription revenues: Management expects it to be in the range ofRs480-500mn on a quarterly basis in FY15E. Pick-up in revenue would not happen

until digitization is implemented in Phase III and IV. Preceding quarters revenue was

higher as there was a lot of catch up revenue from Rest of India region.

DTH subscribers for the quarter stood at 10.5mn vs 10.2mn in the last quarter. TRAI mandated increase in tariff ceiling (+15%) has not been recorded in the books as

the management awaits the final verdict. Higher rate is being charged to the

distributors and incremental revenue is kept in the escrow account as matter is sub-

Judice

International subscription revenue is expected to growth ~10% in FY15 Nevertheless, management expects subscription revenue would reach Rs15-20bn

once the digitization across the country is complete. In FY14, subscription revenue

(DTH + Cable) was at Rs6.44bn

TRAI regulation for vertically integrated entities should help in making Sun Direct awholly owned subsidiary of Sun TV. The management is still awaiting the final

regulation.

Radio

Revenues grew 24% yoy to Rs380mn with PAT of Rs100mn (+120% yoy).Management intends to be conservative in phase III auctions and focus mainly on

metros and cities where there are operational synergies.

Expenses

Operating expenses (excluding IPL) declined yoy as there was one-time provision fordoubtful debts to the tune of Rs100mn in Q1FY14. Expenses are lower as company

has reduced investments for non-fiction content in Telegu genre

Investment in Telegu genre continues as company is striving to gain back lost marketshare in non-movie/fiction content

8/11/2019 6-Stocks Emkay 180814

10/29



The management indicated movie spends to be ~Rs4.5-5bn vs Rs4.2bn in FY14. Thecompany spends ~Rs20-25mn on acquiring movie right and ~Rs100-150mn for

blockbuster movies. It acquires right for ~150 movies in a year

Amortization during the quarter has increased due to rise in movie acquisition cost.Depreciation in Q1FY15: Rs190mn, Amortization: Rs1200mn. There is no impact on

depreciation due to change in policy as per revised companies act.

8/11/2019 6-Stocks Emkay 180814

11/29




Income Statement


Net Sales 19,230 22,236 24,239 27,123

Growth (%) 4.1 15.6 9.0 11.9

Expenditure 5,139 7,139 7,769 8,379Employee Cost 1,994 2,190 2,308 2,532

Other Exp 1,844 2,158 2,339 2,541

SG&A 1,301 2,791 3,122 3,307

EBITDA 14,091 15,097 16,470 18,743

Growth (%) -0.4 7.1 9.1 13.8

EBITDA mar gin (%) 73.3 67.9 67.9 69.1

Depreciation 4,417 4,783 5,878 5,734

EBIT 9,674 10,314 10,592 13,010

EBIT marg in (%) 50.3 46.4 43.7 48.0

Other Income 722 866 821 1,001

Interest expenses 49 46 68 68

PBT 10,347 11,134 11,345 13,943Tax 3,306 3,682 3,773 4,681


Adjusted PAT 7,096 7,480 7,625 9,326

Growth (%) 3.1 5.8 1.6 22.3

Net Margin (%) 36.6 33.5 31.2 34.1

(Profit)/loss from JVs/Ass/MI -25 -88 -23 -28


E/O items 0 0 0 0

Reported PAT 7,096 7,480 7,625 9,326

PAT after MI 7,096 7,480 7,625 9,326

Growth (%) 2.4 5.4 1.9 22.3

Balance Sheet


Equity share capital 1,970 1,970 1,970 1,970



Secured Loans 0 0 0 0

Unsecured Loans 0 0 0 0

Loan Funds 0 0 0 0

Net deferred tax liability 284 284 284 284


Gross Block 36,002 39,882 43,762 47,642


Net block 13,768 13,143 12,185 10,913

Capital work in progress 28 28 28 28

Investment 2,437 7,437 7,437 7,437

Current Assets 16,253 15,302 19,520 25,622Inventories 5 5 2 2

Sundry debtors 5,835 5,740 7,143 7,719

Cash & bank balance 4,260 5,110 7,528 12,207

Loans & advances 5,580 3,784 4,125 4,887

Other current assets 573 663 722 808

Current lia & Prov 3,006 3,330 3,576 4,152


Provisions 0 0 0 0


Misc. exp 0 0 0 0

Total Assets 29,480 32,580 35,594 39,848

Cash Flow



Depreciation 4,417 4,783 5,878 5,734

Interest Provided 49 46 68 68


Chg in working cap -98 2,126 -1,554 -848

Tax paid -3,306 -3,682 -3,773 -4,681

Operating Cashflow 10,688 13,541 11,142 13,214


Free Cash Flow 4,986 9,383 6,222 8,752

Other income 722 866 821 1,001Investments -193 -5,000 0 0



Loans Taken / (Repaid) 0 0 0 0

Interest Paid -49 -46 -68 -68

Dividend paid (incl tax) -4,357 -4,380 -4,611 -5,072


Others 3,150 4,288 5,163 7,593

Financing Cashflow -1,256 -139 485 2,453

Net chg in cash 4,260 5,110 7,528 12,207

Opening cash position 3,072 4,260 5,110 7,528

Closing cash position 4,260 5,110 7,528 12,207

Key Ratios


Profitability (%)

EBITDA Margin 73.3 67.9 67.9 69.1

Net Margin 36.6 33.5 31.2 34.1

ROCE 37.0 36.0 33.5 37.1

ROE 25.8 24.6 22.8 25.1

RoIC 43.8 48.2 52.2 63.8

Per Share Data (Rs)

EPS 18.0 19.0 19.3 23.7

CEPS 29.2 31.1 34.3 38.2

BVPS 73.3 81.1 88.8 99.6DPS 9.5 9.5 10.0 11.0

Valuations (x)

PER 23.3 22.1 21.7 17.7

P/CEPS 14.4 13.5 12.3 11.0

P/BV 5.7 5.2 4.7 4.2

EV / Sales 8.4 7.2 6.5 5.7

EV / EBITDA 11.4 10.6 9.6 8.2

Dividend Yield (%) 2.3 2.3 2.4 2.6

Gearing Ratio (x)

Net Debt/ Equity -0.1 -0.2 -0.2 -0.3

Net Debt/EBIDTA -0.3 -0.3 -0.5 -0.7


8/11/2019 6-Stocks Emkay 180814

12/29


Emkay

Res

ultUpdate


Financial Snapshot (Standalone) (Rsmn)

Y/E Net Net EPS ABV RoA RoE PE P/ABV

Mar Income Profit (Rs) (Rs) (%) (%) (x) (x)

FY13A 603,662 141,280 206.5 1,124.6 1.0 15.4 11.7 2.2FY14A 678,347 108,912 145.9 1,167.8 0.6 10.0 16.6 2.1

FY15E 766,198 137,511 184.2 1,198.5 0.7 11.1 13.1 2.0

FY16E 902,019 163,144 218.5 1,342.2 0.7 12.1 11.1 1.8

State Bank of India

Ability to combat NPAs stays compromised

August 08, 2014

Rating

Reduce

Previous Reco

Reduce

CMP

Rs2,418

Target Price

Rs1,940

EPS Chg FY13E/FY14E (%) NA

Target Price change (%) NA

Nifty 7,569

Sensex 25,329

Price Performance

(%) 1M 3M 6M 12M



Source: Bloomberg


1450

1715

1980

2245

2510

2775


Rs

-20

-10

0

10

20

30%

State Bank of India (LHS) Rel to Ni fty (RHS) Source: Bloomberg

Stock DetailsSector Banking & Financial Services

Bloomberg SBIN IB

Equity Capital (Rs mn) 7,466

Face Value(Rs) 10


52 Week H/L 2,835/ 1,453

Market Cap (Rs bn/USD mn) 1,805/ 29,451

Daily Avg Volume (No of sh) 2,528,485


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

Promoters 58.6 58.6 62.3

FII/NRI 13.1 11.8 11.3



Public 5.4 6.6 6.7

Source: Bloomberg

n SBIs Q1FY15 NII/PPOP at Rs132.5/87.9bn were inline with

estimates. With marginally lower than estimated provisions,

the PAT at Rs33.5bn was 3% higher than estimatesn Stressed assets addition remains high at Rs135bn (4.4%

annualised). Adj. NIMs* contract 20bp yoy to 210bp. Asset

sale to ARC/write offs aid flat GNPA/ NNPA ratio

n Cost controls continue with Opex growth at just +3.3% yoy.

Even non-discretionary spends grow slower. We expect staff

costs and Opex to grow much slower in FY15

n Expect 0.7% RoA with weak bias. Retain REDUCE with TP of

Rs1940

*Adjusted NIMs: calculated NIMs adjusted for provision costs **stressed assets = slippages + fresh restructuring

Results in line; asset sale + write offs drive stable asset quality

SBIs Q1FY15 NII/PPOP at Rs132.5/87.9bn were in line with consensus estimates

driven by 13%yoy growth in loans, stable NIMs at 2.9% and modest 3.3% yoy growth in

Opex. It was commendable that the bank could continue to drive cost controls even over

relatively non-discretionary spends also like lighting, stationary, insurance and

depreciation too. Consequently, the operating profit grew by 16.4% yoy.

Asset quality optically remained stable with GNPA/NNPA remaining flat at 4.9%/2.7%

vs. 5/2.6% respectively. It was largely driven by asset sale to ARC and higher write offs.

The bank sold off asset worth Rs55.6bn to ARC, of which Rs23.3bn was accounted in

recovery and Rs30bn as write off. Stressed assets additio ns, remained elevated at

Rs135bn for Q1FY15, 4.4% annualized, thoug h low er than average of Rs15.5bn for

preceding two quarters.

Exhibit 1: Yield analysis

YoY QoQ% Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

(bps) (bps)

Yield on advances* 9.1 9.4 9.3 9.1 9.2 10 1

Yield on investments* 7.6 8.0 8.0 8.0 8.1 46 12

Yield on assets* 8.0 8.2 8.2 8.1 8.1 13 -3

Cost of funds* 5.1 5.3 5.2 5.2 5.2 8 -5

Cost of deposits* 5.9 6.0 6.1 6.0 6.6 73 66

NIM* 2.9 3.0 3.0 2.9 2.9 5 2

NIM (Reported) 3.2 3.2 3.2 3.17 3.1 -4 -5

Source: Company, Emkay Research * calculated

8/11/2019 6-Stocks Emkay 180814

13/29

State Bank of India Result Update


Exhibit 2: Key financials - Quarterly


Net Interest Income 115,119 122,514 126,406 129,028 132,522 15.1 2.7

Other Income 44,743 32,778 41,903 65,857 42,521 -5.0 -35.4

Fee Income 25,580 26,146 29,713 44,671 28,372 10.9 -36.5

Net Income 159,862 155,292 168,309 194,884 175,043 9.5 -10.2

Total Operating Expenses 84,349 92,175 92,124 88,606 87,166 3.3 -1.6

As % Of Net Income 52.8 59.4 54.7 45.5 49.8

Employee Expenses 55,395 58,185 58,671 52,792 55,646 0.5 5.4

As % Of Net Income 34.7 37.5 34.9 27.1 31.8

Other Expenses 28,955 33,990 33,452 35,815 31,520 8.9 -12.0

As % Of Net Income 18.1 21.9 19.9 18.4 18.0

Operating Profit 75,513 63,116 76,186 106,278 87,877 16.4 -17.3

As % Of Net Income 47.2 40.6 45.3 54.5 50.2

Provisions 28,659 30,287 41,496 58,911 34,967 22.0 -40.6

Prov for NPA 22,658 26,454 34,286 58,838 39,034 72.3 -33.7

PBT 46,854 32,829 34,690 47,367 52,910 12.9 11.7

Total Tax 14,443 9,079 12,345 16,960 19,419 34.5 14.5Adjusted PAT 32,411 23,750 22,344 30,407 33,491 3.3 10.1

Extra Ordinary Items 0 0 0 0 0

Reported PAT 32,411 23,750 22,344 30,407 33,491 3.3 10.1

Reported EPS 47.4 34.7 32.7 40.7 44.9 -5.3 10.1


Key highlights

Operating income growth doesnt suffice for provisions

We have been highlighting that the weaker operating matrix of SBI wouldnt be able to

suffice for the credit costs that the bank may have to take on. Even as, SBIs operatingprofit grew by 16.5% yoy for Q1FY15, driven by (1) similar NII growth (2) 11% yoy growth in

fee income and (3) slower growth in staff expenses, the NIMs adjusted for credit costs have

in fact declined by 20bp yoy.

We do not see much improvement in the adjusted NIMs over FY15-16 given that the

stressed assets additions have continued to remain high and provision cover still remains

around 47% on calculated basis. Key risk to our assump tions wil l be aggressive asset

sale to asset recons truction companies.

Exhibit 3: NIMs adjusted for provisions

2.9 2.9 3.0 3.0 2.9 2.9 2.9 2.9

1.9

2.3 2.32.2

1.6

2.1 2.1 2.1

1.0

0.6 0.60.8

1.3

0.8 0.8 0.8

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 FY14 FY15E FY16E

Calculated NIMs NIMs adjusted for provisions Provisions


8/11/2019 6-Stocks Emkay 180814

14/29



Networth impairment improves however still on the higher side

Though the NNPA/net worth ratio of SBI improved to 26.2% from 34%, two quarters back, it

still is on the higher side and also driven by significant asset sale to ARCs. The position of

subsidiary banks too continued to remain precarious with provision cover being modest at

44% for all subs put together and NNPA/Net worth ratio at 33%. At consolidated level the

NNPA/net worth stood at 27.5%.

Exhibit 4: Impairment ratio Q1FY15: Group companies

Associates and subsidiaries

Rs mn SBI SBM SBBJ SBP SBH SBT Total subs Total group

Gross NPLs 604,342 24,899 23,314 33,750 61,741 32,824 176,528 780,871

Net NPLs 318,838 12,820 13,575 21,177 31,968 20,047 99,586 418,424

Gross NPLs (%) 4.9 5.1 3.6 4.4 6.3 4.7 5.0 4.9

Net NPLs (%) 2.7 2.7 2.1 2.8 3.4 2.9 3.0 2.7

Net NPLs/Net worth (%) 26.2 27.0 24.4 33.8 37.2 40.0 33.0 27.5

Provision cover (%) 47.2 48.5 41.8 37.3 48.2 38.9 43.6 46.4

TTM RoE (%) 12.9 7.7 18.3 10.0 15.4 7.6

Source: Companies, Emkay Research # SBP numbers pertain to Q4FY13

International NIMs saw sharp decline

While the domestic NIMs remain stable at 3.54%, banks international NIMs declined

sharply by 34bps qoq to 1.08%. The management attributes MTN raising of $1.25bn in last

quarter as the reason behind the fall. This was quite surprising as it would explain only 12-

13bps of decline as the capital raising was just 3% of the international book.

Stress asset addition remains high

Though asset quality optically remained stable with GNPA/NNPA at 4.9%/2.7% vs.

5%/2.6% qoq, it was largely driven by asset sale to ARC and higher write off. The bank

sold off asset worth Rs55.6bn to ARC, of which Rs23.3bn was accounted in recovery and

Rs30bn as write off.

Of Rs99bn of slippages, Rs19.6bn were from agriculture, of which Rs6bn were from

Andhra Pradesh. Bank also had to classify another Rs1.5bn of retail loans as slippages,

which were given to same borrowers.

The stressed asset additions showed only marginal moderation and stood at Rs135bn, vs.

Rs155bn on average for past two quarters. The outstanding restructured pool now stands

at Rs422.4bn, 3.5% of advances. The total restructuring pipeline (CDR) stood at

Rs37bn.

Exhibit 5: Portfolio wise stress

Rs bn Total loans Restructured GNPA Total stressed % of total loans

SME 1,730 60 154 214 12.4

Mid corporate 2,161 231 246 477 22.1

Large corporate 2,262 113 14 127 5.6


Tighter cost controls help Core PPOP show healthy growth

SBIs core operating profit growth turned positive for the third consecutive quarter after five

straight quarters of declines. However, the growth doesnt still seem to have stronger

footboard for few reasons:

Commissions on letter of credit and bank guarantees have grown by 7% yoy. Thiswould add to risks if its volume led growth.

Transaction fees has seen 37% growth with similar growth in ATM transaction fees

paid to other banks for its own customers Gains on foreign exchange transactions stood at Rs4.3bn, almost 16% increase over

last year

8/11/2019 6-Stocks Emkay 180814

15/29



Commendably, SBI has controlled other Opex quite tightly with even some of the non-

discretionary spends like lighting, depreciation, and insurance, and communication

charges.

Exhibit 6: Core operating profit

Rs mn Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

Reported operating profit 77,908 77,602 75,513 63,116 76,186 106,278 87,877Add: Pension/gratuity/revision 7,430 18,500 16,560 17,150 18,080 14,219 14,050

Adjusted operating profit 73,729 75,310 63,503 60,754 73,804 120,497 101,927

Less: Treasury gains 4,178 2,292 12,010 2,362 2,382 4,011 5,868

Core operating profit 81,159 93,810 80,063 77,904 91,674 116,486 96,059

% yoy change -11.4 -12.1 -5.4 -0.6 13.0 24.2 20.0


CASA ratio saw marginal drop

Deposits grew by 12.8%yoy aided by 15.1%yoy growth in term deposits and 9.8%yoy

growth in CASA. The growth in CASA deposits is entirely driven by saving deposits as

current account deposits remained flat yoy. CASA ratio declined by 92bps qoq to 43.5%.

Foreign loans, large corporate and Agri drive loan growth

SBIs loan book grew at 13% yoy driven by 20% growth in foreign loan book, 33% growth in

large corporate loans and 23% growth in agri loan. Retail and SME growth remain lower at

12%/ 6% respectively.

CET 1 at 9.77%+ a silver lining but impaired ratio still high at 26%

Post capital infusion by GOI of Rs20bn and QIP issuance of Rs80bn, SBIs core equity tier

I has now improved to a comfortable 9.77% . However, adjusted for NNPA/net worth of

26.2%, the same would stand at 7.1%.

Valuation and view

We estimate SBIs core operating profit to average assets to stay at 195bp for FY14-16E vsaverage 228bp for FY11-13. In our previous result updates, we have been highlighting that

weaker operating matrix would jeopardize SBIs ability to sustain continued asset quality

shock. FY14 results vindicate our view. The pressure also arises from the impairment of net

worth in the subsidiaries which warrants for lower consolidated banking ABV (including

associate banks). Retain REDUCE with a target price of Rs1940.

Exhibit 7: Loan portfolio

Rs bn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%) % of total

Foreign 1,862 1,892 2,177 2,143 2,238 20.2 4.4 18.7

SME 1,639 1,579 1,600 1,798 1,730 5.6 -3.8 14.4

Agriculture 1,261 1,216 1,234 1,547 1,558 23.5 0.7 13.0

Retail 2,166 2,242 2,308 2,377 2,425 12.0 2.0 20.2

Housing 1,247 1,300 1,351 1,407 1,442 15.6 2.5 12.0

Others 3,680 4,103 4,169 4,711 4,423 20.2 -6.1 36.9

Total 10,607 11,031 11,489 12,098 11,989 13.0 -0.9 100.0


Exhibit 8: Deposit mix

Rs bn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%)

Current Deposits 890 809 866 1,109 897 0.8 -19.1

Saving deposit 4,386 4,454 4,658 4,693 4,894 11.6 4.3

CASA 5,276 5,263 5,524 5,802 5,791 9.8 -0.2

Term deposits 7,298 7,662 7,976 8,142 8,398 15.1 3.1

Total Deposits 12,574 12,925 13,499 13,944 14,189 12.8 1.8

CASA (%) of domestic deposits 44.7 43.6 43.9 44.4 43.5 -116 -92


8/11/2019 6-Stocks Emkay 180814

16/29



Exhibit 9: Non-interest income breakup


Fee/Commission income 25,580 26,146 29,713 44,671 28,372 10.9 -36.5

Trading gains/(losses) 12,010 2,362 2,382 4,011 5,868 -51.1 46.3

Forex gains/(losses) 3,734 2,706 6,038 6,475 4,330 16.0 -33.1

Dividend income 330 38 83 4,514 199 NA -95.6

Other 69 0 427 8 1 -99.1 -92.2

Total 44,743 32,778 41,903 65,857 42,521 -5.0 -35.4


Exhibit 10: Asset quality


Gross NPAs 608,915 642,063 677,993 616,054 604,342 -0.8 -1.9

Net NPAs 299,898 321,514 371,574 310,961 318,838 6.3 2.5

Gross NPAs (%) 5.6 5.6 5.7 5.0 4.9 -0.05

Net NPAs (%) 2.8 2.9 3.2 2.6 2.7 0.09

Net NPAs/Net worth (%) 28.8 29.7 34.1 26.3 26.2

Provision cover (%) 50.7 49.9 45.2 49.5 47.2Provision cover (incl tech w/off) 60.6 60.2 58.3 62.2 62.7

Slippages (Rs bn) 137.7 83.7 114.4 79.5 99.3

Slippage rate (Annualised %) 5.2 3.0 4.0 2.6 3.3


Exhibit 11: Trend in stress asset addition

Rs bn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

Slippages 82 59 138 84 114

Restructuring (calc) 20 81 53 86 39

Total stress assets 102 140 191 170 153

Total loans 9,781 10,456 10,607 11,031 11,489% of loans 1.0 1.3 1.8 1.5 1.3


8/11/2019 6-Stocks Emkay 180814

17/29



Key Financials

Income Statement


Net interest income 443,313 493,067 562,248 668,476

Other income 160,348 185,280 203,951 233,543

Net income 603,662 678,347 766,198 902,019Operating expenses 292,844 357,254 384,513 448,118

Pre provision profit 310,817 321,093 381,685 453,901

PPP excl treasury 299,798 300,328 366,675 438,891

Provisions 111,308 159,354 176,444 210,402

Profit before tax 199,509 161,739 205,241 243,499

Tax 58,459 52,827 67,729 80,355

Tax rate 29% 33% 33% 33%

Profit after tax 141,050 108,912 137,511 163,144

Balance Sheet


Liabilities

Equity 6,840 7,466 7,466 7,466

Reserves 981,997 1,175,357 1,282,297 1,410,503Net worth 988,837 1,182,822 1,289,763 1,417,969

Deposits 12,027,396 13,944,085 16,985,319 20,028,147

Borrowing & Others 2,671,257 2,795,438 3,039,612 3,334,736

Total liabilities 15,687,489 17,922,346 21,314,694 24,780,853

Assets

Cash and bank 1,148,202 1,325,496 1,614,668 1,903,913

Investments 3,218,722 3,750,267 4,721,343 5,474,070

Customer assets 10,746,716 12,331,102 14,445,267 16,859,279

Others 573,850 515,481 533,416 543,590

Total assets 15,687,489 17,922,346 21,314,694 24,780,853

Key Ratio (%)


NIM 3.1 2.9 2.9 2.9

Non-II/avg assets 1.1 1.1 1.0 1.0

Fee income/avg assets 0.8 0.8 0.8 0.8

Opex/avg assets 2.0 2.1 2.0 1.9

Provisions/avg assets 1.1 1.3 1.2 1.2

PBT/avg assets 1.3 0.9 1.0 1.0

Tax/avg assets 0.4 0.3 0.3 0.3

RoA 1.0 0.6 0.7 0.7

RoAE 15.4 10.0 11.1 12.1

GNPA (%) 4.9 5.1 5.2 4.8

NNPA (%) 2.1 2.6 2.8 2.5

Valuation Table


Net profit (Rs mn) 141,280 108,912 137,511 163,144

Shares in issue (mn) 684 747 747 747

EPS (Rs) 206.5 145.9 184.2 218.5

PER (x) 11.7 16.6 13.1 11.1

FDEPS(Rs) 206.5 145.9 184.2 218.5

FDPER (x) 11.7 16.6 13.1 11.1

Book value (Rs) 1,445.6 1,584.3 1,727.6 1,899.3

P/BV (x) 1.7 1.5 1.4 1.3

Adj book value (Rs) 1,124.6 1,167.8 1,198.5 1,342.2

P/ABV (x) 2.2 2.1 2.0 1.8

P/PPP (x) 5.3 5.6 4.7 4.0

Dividend yield (%) 1.9 1.5 1.7 1.9

8/11/2019 6-Stocks Emkay 180814

18/29


Emkay

Res

ultUpdate





FY13A 11,422 2,746 24.0 2,309 25.8 -5.0 9.7 10.1 10.6 0.9

FY14A 17,276 4,728 27.4 2,963 33.2 28.4 11.4 7.9 8.1 0.9

FY15E 17,368 3,922 22.6 2,359 26.4 -20.4 8.3 9.9 12.3 0.8

FY16E 27,960 9,037 32.3 2,246 25.1 -4.8 7.4 10.4 5.4 0.7

Nava Bharat Ventures

Ahead of estimates, however need clarity on Zambia

August 08, 2014

Rating

Hold

Previous Reco

Hold

CMP

Rs223

Target Price

Rs300



Nifty 7,649

Sensex 25,589

Price Performance

(%) 1M 3M 6M 12M

Absolute -19 36 42 33

Rel. to Nifty -17 19 13 -3

Source: Bloomberg


150

180

210

240

270

300


Rs

-30

-20

-10

0

10

20%

Nava Bharat Ventures (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock DetailsSector Power

Bloomberg NBVL IB


Face Value(Rs) 2


52 Week H/L 300/ 148

Market Cap (Rs bn/USD mn) 20/ 325





Promoters 43.4 43.3 43.3

FII/NRI 32.7 32.8 32.7



Public 21.8 22.0 22.0

Source: Bloomberg

n Q1FY15 earnings were ahead of our estimates due to higher

volumes and realisations at the power segment. APAT

(Standalone+150MW) Rs827mn vs expectation of Rs528mn

n Paloncha (150MW) reported PLF of 94% (85% QoQ), tariff of

~Rs5.2/u, PBT of Rs275mn implying generation cost of

~Rs4.2/u. Off-take tie up for AP plat at Rs5.2/u till May-15

n Renewed PPA for the 150MW Paloncha plant in AP till May-

15, provides comfort for earnings in FY15E. Further, Zambia

commissioning in FY16E provides stability to earnings,

against the likely fall in profitability of southern region plant

n We maintain our Hold rating and PT of Rs300 (10% discount

to FY15 book). Would wait for visibility on Zambia before

taking a call on the stock. The key risks to our call would be

a significant up-tick in merchant prices (unlikely in our view)

Better than expected profitability in Q1

Nava Bharat Ventures (NBVL) Q1FY15 operational performance was ahead of our

estimates with total APAT (standalone + 150MW Paloncha) at Rs827mn (Rs528mn exp)

as profitability at power segment was better due to higher than expected volumes and

realizations. The EBIT-margins at the Ferro-alloys segments declined to 2.6% vs 6.9%

YoY and 2.7% QoQ, while the same for sugar segment was at 8.1% vs 9.2% YoY and

6.0% QoQ. The overall profitability at both these segments was better than our

expectation. The 150MW plant at Paloncha (AP) reported better than expected sales

volume of 277MU, average realization of ~Rs5.2/unit and PBT of Rs275mn; implying

generation cost ~Rs4.2/unit. On a standalone basis, the depreciation was much lower at

Rs82mn vs Rs110mn YoY and Rs275mn QoQ, on account of change in depreciationpolicy (impact of Rs52mn) and a deferred tax impact of Rs16mn on the same.

Retain our FY15/16 earnings

Despite better than expected performance in Q1, we retain our FY15/16 earnings

estimates as we would wait for one more quarter before revising them. With PPA for

150MW Paloncha plant in AP renewed till May-15, provides comfort for earnings in

FY15E. Further, commissioning of Zambia in FY16E will provides stability to earnings

against the likely fall in profitability of southern region plant.

Need visibility on power plants/Zambia; Maintain Hold

We are relatively positive on NBVL vs JSWE, considering the valuation discount at

~30%. However, we are not structurally positive on the merchant power business model.Our key concerns for NBVL would be: 1) fuel supply for its 214MW capacity - AP

(150MW) and Odisha (64MW), 2) off-take for all its plants in the long-term and ,3) delays

and back-ended earnings profile from its huge investments planned in Zambia. We

maintain a Hold rating on the stock and would wait for visibility on Zambia to take a call

on the stock. We value the stock at Rs300/share based on a 10% discount to FY15E

book value (for uncertainties with respect to Orissa plants). The key risks to our call

would be a significant up-tick in merchant prices, though unlikely in our view.

8/11/2019 6-Stocks Emkay 180814

19/29

Nava Bharat Ventures Result Update


Exhibit 1: Standalone results snapshot


Revenue 2,524 2,475 2,863 3,144 3,062 21.3 -2.6

Expenditure -1,997 -1,884 -2,216 -2,375 -2,377 19.0 0.1

as % of sales -79.1% -76.1% -77.4% -75.5% -77.6%

Consumption of RM -1,538 -1,360 -1,637 -1,554 -1,785 16.1 14.9

as % of sales -60.9% -55.0% -57.2% -49.4% -58.3%

Employee Cost -158 -160 -177 -253 -182 15.4 -28.2

as % of sales -6.2% -6.5% -6.2% -8.1% -5.9%

Other expenditure -302 -364 -402 -568 -410 35.7 -27.8

as % of sales -12.0% -14.7% -14.0% -18.1% -13.4%

EBITDA 526 591 647 769 685 30.1 -10.9

Depreciation -110 -111 -119 -275 -82 -25.9 -70.3

EBIT 416 479 528 494 603 45.0 22.1

Other Income 93 66 62 259 75 -19.5 -71.1

Interest -36 -34 -32 -81 -76 109.0 -6.3

PBT 473 511 558 672 602 27.4 -10.4

Total Tax -49 -52 -56 -139 -51Adjusted PAT 424 460 502 533 552 30.1 3.4

Extra ordinary items 79 12 -8 -71 11 -86.1 -115.5

Reported PAT 503 472 494 463 562 11.9 21.5

Adjusted EPS 4.2 4.6 5.0 6.0 5.4 27.4 -10.4


EBIDTA 20.9 23.9 22.6 24.5 22.4 151 -209

EBIT 16.5 19.4 18.4 15.7 19.7 321 399

EBT 22.5 21.3 19.1 18.8 20.1 -238 135

PAT 16.8 18.6 17.5 17.0 18.0 122 105

Effective Tax rate 11.5 10.4 9.9 21.5 8.6 -280 -1287Source: Company, Emkay Research

Exhibit 2: Standalone segmental analysis

Segment analysis Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%)

Revenues

Ferro Alloys 963 1,195 1,506 1,589 1,495 55.2 -5.9

Power 1,577 1,544 1,608 1,790 1,748 10.8 -2.4

Sugar 299 317 405 526 450 50.5 -14.5

Others 0 0 0 0 0

Total 2,839 3,056 3,518 3,906 3,692 30.1 -5.5

Less:Intersegment revenue -316 -580 -656 -762 -630 99.8 -17.2

Net Revenues 2,524 2,475 2,863 3,144 3,062 21.3 -2.6EBIT

Ferro Alloys 66 62 49 43 39 -40.5 -7.8

Power 492 460 538 590 614 24.9 4.2

Sugar 27 28 -24 32 36 32.7 14.2

Others -1 -1 -1 0 -1 -16.5 158.3

Total 584 549 562 664 689 17.9 3.8

EBIT Margins (%) (bps) (bps)

Ferro Alloys 6.9 5.2 3.3 2.7 2.6 -424 -5

Power 31.2 29.8 33.5 32.9 35.2 396 222

Sugar 9.2 8.8 -5.9 6.0 8.1 -109 203

Others - - - - -


8/11/2019 6-Stocks Emkay 180814

20/29



Exhibit 3: AP-III (150MW) plant quarterly performance

Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%)

Capacity 150 150 150 150 150

Generation (MU) 260 213 285 275 308 18 12

Sales (MU) 229 193 253 244 277 21 13

Realisation (Rs/unit) 5.8 5.8 5.8 5.8 5.2 -10.0 -10.3

Generation cost (Rs/unit) 5.0 5.2 4.8 4.6 4.2 -15.3 -8.3

Source: Company, Emkay ResearchType text here

Exhibit 4: Cash flow analysis

Rsmn FY09-12 FY13 FY14 FY15E FY16E

Opening Cash In Hand 2,366 6,439 7,305 3,608 3,669

Equity Requirement 10,887 3,160 3,022 4,231 1,813

AP II 83 0 0 0 0

Orissa II 2,300 0 0 0 0

AP III 1,632 1,088 0 0 0

Zambia 3,022 0 3,022 4,231 1,813

Others 3,850 2,072 0 0 0

Cash flow from Operations 16,466 2,776 684 4,211 4,956

Debt Repayment 6,000 107 107 447 -3,784

Other Debt 1,939 151 378 115 768

Others 2,555 1,205 -1,629 412 -3,596

Closing Cash 6,439 7,305 3,608 3,669 7,767

Source: Emkay Research, Company

8/11/2019 6-Stocks Emkay 180814

21/29



Nava Bharat Ventures: Investment summary

Earnings forecast - Emkay vs. Consensus

(Rs mn) Emkay Consensus Variance

FY15E 2,359 2,530 -6.8%

FY16E 2,246 3,493 -35.7%

Source: Emkay Research, Bloomberg

Company description:

Nava Bharat Ventures Ltd (fka Nava Bharat Ferro Alloys Ltd),

incorporated in 1972, is a diversified player with presence in ferro

alloys, power generation, coal mining and agri business. It owns andoperates 442MW of generation capacity with another 300MW is

under-construction. It also owns coal mine in Zambia with 120MT of

reserves. The company got listed in 1987.

Consolidated PAT

2,4302,198

2,9452,359 2,246

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY12 FY13 FY14 FY15E FY16E

Rsmn


Recent update

Merchant based capacities in AP have contracts tied-up till May-15 at Rs5.2/unit

150MW in AP declared COD 64MW in Odisha commissioned, but awaiting COD Sale of coal from Zambia mines started in Jun12 Started construction at Zambian 300MW power plant from

May12

Promoters

Promoted by Dr D Subba Rao, Doctorate in Metallurgy, Late Sri P Punnaiah and A.S. Chowdhri in 1972

Investment rationale

NBVL is a better story vis--vis JSWE, in terms of southern region (PPA for 150MW Paloncha plant in AP renewed till May-15 ), highmerchant tariffs in the near-to-mid term as its earnings are likely to be more stable with: 1) Zambia kicking in from FY15/FY16, 2) part

coal supplies from CIL and 3) natural hedge from Ferro alloys business and long coal in Zambia.

With PPA for the 150MW Paloncha plant in AP renewed till May-15, we remain reasonably confident on its earnings in FY15E.Further, Zambia commissioning in FY16E to provide stability in earnings, against the likely fall in its southern region plant profitability.

We are relatively positive on NBVL vs JSWE, considering the valuation discount at ~30%. However, we are not structurally positiveon the merchant power business model.

Key concerns: 1) fuel supply for its 214MW capacity - AP (150MW) and Odisha (64MW), 2) off-take for all its plants in the long-termand ,3) delays and back-ended earnings profile from its huge investments planned in Zambia.

Valuations

Stock trades 9.9xFY15E EPS & 0.8xFY15E book. We maintain a Hold rating on the stock and would wait for visibility on Zambia totake a call on the stock.

We value the stock at Rs300/share based on a 10% discount to FY15E book value (for uncertainties with respect to Orissa plants).

Investment risk

The key risks to our call would be a significant up-tick in merchant prices, though unlikely in our view.

Top Institutional holdings

Name Holding %

Highfields Capital 9.5

James Caird Asset Management 6.0

Deutsche Securities Mauritius 2.1

Copthall Mauritius 1.9

Wellington 1.6

Source: Bloomberg

Shares pledge

PeriodPromoters

holding

Pledge % of

promoter equity

Pledge % of

total equity

Jun-13 43.2% 0.0% 0.0%

Sep-13 43.3% 0.0% 0.0%

Dec-13 43.3% 0.0% 0.0%

Mar-14 43.3% 0.0% 0.0%

Jun-14 43.4% 0.0% 0.0%

Source: BSE

8/11/2019 6-Stocks Emkay 180814

22/29




Income Statement


Net Sales 11,422 17,276 17,368 27,960

Growth (%) 14.8 51.3 0.5 61.0

Expenditure 8,676 12,547 13,447 18,923Employee Cost 955 1,042 0 0

Other Exp 3,822 2,253 5,500 6,132

SG&A 0 0 0 0

EBITDA 2,746 4,728 3,922 9,037

Growth (%) 58.0 72.2 -17.1 130.4

EBITDA mar gin (%) 24.0 27.4 22.6 32.3

Depreciation 588 1,119 947 3,018

EBIT 2,158 3,609 2,975 6,019

EBIT marg in (%) 18.9 20.9 17.1 21.5

Other Income 783 935 586 1,021

Interest expenses 189 1,263 612 3,248

PBT 2,752 3,282 2,949 3,792Tax 641 355 590 758


Adjusted PAT 2,309 2,963 2,359 2,246

Growth (%) 0.2 38.6 -19.4 28.6

Net Margin (%) 18.5 16.9 13.6 10.9

(Profit)/loss from JVs/Ass/MI -197 -37 0 788


E/O items -405 -164 0 0

Reported PAT 1,903 2,799 2,359 2,246

PAT after MI 2,309 2,963 2,359 2,246

Growth (%) -5.0 28.4 -20.4 -4.8

Balance Sheet




Net worth 24,606 27,327 29,257 31,503Minority Interest -497 -876 2,042 3,465

Secured Loans 13,118 18,721 28,426 32,978


Loan Funds 13,118 18,721 28,426 32,978



Gross Block 15,582 22,382 22,382 64,978


Net block 11,553 17,233 16,489 56,067

Capital work in progress 13,630 16,452 33,023 -3,529

Investment 202 146 146 146


Sundry debtors 953 1,111 1,482 2,381


Loans & advances 1,741 2,780 2,780 2,780

Other current assets 2,691 2,732 2,732 2,732

Current lia & Prov 5,112 4,014 5,462 5,857


Provisions 0 0 0 0


Misc. exp 0 0 0 0

Total Assets 37,566 45,436 59,988 68,208

Cash Flow



Depreciation 588 1,119 947 3,018

Interest Provided 189 1,263 612 3,248


Chg in working cap 896 -3,195 1,335 -1,097

Tax paid -641 -355 -590 -758



Free Cash Flow -3,528 -8,443 -12,107 1,138

Other income 783 935 586 1,021Investments 52 56 0 0



Loans Taken / (Repaid) 4,433 5,603 9,705 4,552

Interest Paid -189 -1,263 -612 -3,248

Dividend paid (incl tax) 402 447 447 447


Others -283 -138 2,934 1,081

Financing Cashflow 3,559 3,755 11,581 1,939

Net chg in cash 866 -3,696 60 4,098

Opening cash position 6,439 7,305 3,608 3,669

Closing cash position 7,305 3,608 3,669 7,767

Key Ratios


Profitability (%)

EBITDA Margin 24.0 27.4 22.6 32.3

Net Margin 18.5 16.9 13.6 10.9

ROCE 8.5 10.9 6.8 11.0

ROE 9.7 11.4 8.3 7.4

RoIC 13.4 17.3 12.3 13.8

Per Share Data (Rs)

EPS 25.8 33.2 26.4 25.1

CEPS 32.4 45.7 37.0 58.9

BVPS 275.4 305.8 327.4 352.6DPS 4.5 5.0 5.0 5.0

Valuations (x)

PER 10.1 7.9 9.9 10.4

P/CEPS 8.1 5.7 7.1 4.4

P/BV 0.9 0.9 0.8 0.7

EV / Sales 2.6 2.2 2.8 1.7

EV / EBITDA 10.6 8.1 12.3 5.4

Dividend Yield (%) 1.7 1.9 1.9 1.9

Gearing Ratio (x)




8/11/2019 6-Stocks Emkay 180814

23/29


Emkay

Res

ultUpdate





FY13A 18,645 5,483 29.4 2,172 22.1 5.5 10.5 19.1 9.8 1.9

FY14A 21,734 6,025 27.7 2,350 24.0 8.2 10.6 17.7 9.0 1.8

FY15E 25,628 6,957 27.1 2,708 27.6 15.2 11.3 15.3 8.1 1.7

FY16E 27,856 7,710 27.7 3,122 31.8 15.3 12.0 13.3 7.3 1.5

Sobha

Weak Performance, may improve in rest FY15E

August 08, 2014

Rating

Accumulate

Previous Reco

Accumulate

CMP

Rs424

Target Price

Rs475

EPS Chg FY15E/FY16E (%) -17/-19


Nifty 7,569

Sensex 25,329

Price Performance

(%) 1M 3M 6M 12M



Source: Bloomberg


200

275

350

425

500

575


Rs

-30

-14

2

18

34

50%

Sobha Developers (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock DetailsSector Real Estate

Bloomberg SOBHA IB


Face Value(Rs) 10


52 Week H/L 584/ 213

Market Cap (Rs bn/USD mn) 42/ 678





Promoters 60.6 60.6 60.6

FII/NRI 32.2 33.0 32.7



Public 2.5 2.7 2.8

Source: Bloomberg

n Sells 0.75msf for Rs 4.8bn, down 20% QoQ & YoY. Achieves

18% of sales booking target of Rs 27bn. Cashflows too

remain weak with net cash from RE lowest in last 6 quarters

n Gross debt inches up to Rs 16.5bn vs. Rs 13.5bn QoQ.

Increase in debt is mainly due to payments of Rs 2.9bn to

acquire land in Kochi, Pune & Bangalore

n Operational and financial performance boils down to

launches. Sobha plans to launch 4msf+ in rest of FY15E to

attain its sales guidance as well as correct its debt levels

n Maintain Accumulate rating with TP of Rs 475. Uncertainty

towards sales booking run-rate would keep the stock under

pressure

Weak sales booking in Q1; would be a challenge to meet FY15 guidanceSobha Ltd. reported sales booking of 0.75msf for Rs 4.8bn, down 20% QoQ & YoY, was

worst ever quarterly run-rate in the recent history. The decrease was mainly due to weak

sales booking in Bangalore markets, attributed to no launches. Company has achieved

18% of its target sales booking of Rs 27bn for FY15E, which is much lower than 26% of

FY14 run-rate the company achieved in Q1FY14. To meet its target of Rs 27bn,

company will have to sell on an average Rs 7.4bn worth of sales booking every quarter,

which is 10% higher than the highest quarterly sales booking of Rs 6.7bn it achieved in

Q4FY13. Hence, to achieve the target would be quite a challenge

Balance sheet and cashflows to remain under pressure

Sobhas gross debt increased by Rs 3bn QoQ to Rs 16.5bn, the level which the

company was at post its QIP. The increase in debt is mainly due to outflow of Rs 2.85bn

towards land acquisition in Kochi, Pune and Bangalore. The debt also increased due to

lower collections from real estate business on back of lower sales booking. Going

forward, with no committed cash outflows towards land acquisitions and higher

collections seen from higher expected sales bookings, the gross debt level should

subside to ~Rs 15bn. As the pressure on sales booking run-rate would mount, it will be

seen in cashflows and hence on balance sheet

Performance boils down to aggressive launch pipeline

Sobhas sales bookings have always suffered when company is not able to launch

projects. With lower sales bookings, the cashflows and hence debt levels come under

pressure leading to more compelling reason for company to acquire land to launch. The

company with land acquisition in place is planning aggressive launch pipeline for

balance nine months of FY15E. The company has already launched 0.95msf across two

projects in Q2FY15 and expects another atleast 4.2msf of launches for other part of the

financial year. Launches in Q2FY15 have already led to an up-tick in the sales booking

run-rate, and company is quite confident of achieving the target of FY15E

8/11/2019 6-Stocks Emkay 180814

24/29

Sobha Result Update


Exhibit 1: Sales Booking Trend

0

2000

4000

6000

8000

Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115


Exhibit 2: Collections Trend

0

1500

3000

4500

6000

Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115


Exhibit 3: Quarterly Summary (Consolidated)

Rs mn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%) FY13 FY14 YoY (%)

Revenue 4,616 5,408 5,443 6,267 5,777 25.2 (7.8) 18,645 21,734 16.6

Expenditure 3,226 3,975 3,953 4,555 4,243 31.5 (6.8) 13,162 15,709 19.4as % of sales 69.9 73.5 72.6 72.7 73.4 100.0 100.0

Cost of Sales 2,122 2,928 2,799 3,311 3,053 9,583 11,160 16.5

as % of sales 46.0 54.1 51.4 52.8 52.8 72.8 71.0

Employee Cost 490 408 503 464 461 (5.9) (0.6) 1,635 1,865 14.1

as % of sales 10.6 7.5 9.2 7.4 8.0 12.4 11.9

Other expenditure 614 639 651 780 729 18.7 (6.5) 1,944 2,684 38.1

as % of sales 13.3 11.8 12.0 12.4 12.6 14.8 17.1

EBITDA 1,390 1,433 1,490 1,712 1,534 10.4 (10.4) 5,483 6,025 9.9

Depreciation 165 172 172 181 181 9.7 - 594 690 16.2

EBIT 1,225 1,261 1,318 1,531 1,353 10.4 (11.6) 4,889 5,335 9.1

Other Income 14 37 12 40 49 250.0 22.5 56 103 83.9

Interest 396 434 446 458 499 1,705 1,734

PBT 843 864 884 1,113 903 7.1 (18.9) 3,240 3,704 14.3

Total Tax 342 298 301 427 332 1,068 1,368

Adjusted PAT 501 566 583 686 571 14.0 (16.8) 2,172 2,336 7.6

(Profit)/loss from JV's/Ass/MI 0 0 2 -16 1 0 -14

APAT after MI 501 566 581 702 570 13.8 (18.8) 2,172 2,350 8.2

Extra ordinary items 0 0 0 0 0 0 0

Reported PAT 501 566 581 702 570 13.8 (18.8) 2,172 2,350 8.2

Reported EPS 5.1 5.8 5.9 7.2 5.8 22.1 24.0

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

EBIDTA 30.1 26.5 27.4 27.3 26.6 (356) (76) 41.7 38.4 (330)

EBIT 26.5 23.3 24.2 24.4 23.4 (312) (101) 37.1 34.0 (318)

EBT 18.3 16.0 16.2 17.8 15.6 (263) (213) 24.6 23.6 (104)

PAT 10.9 10.5 10.7 11.2 9.9 (99) (133) 16.5 15.0 (154)

Effective Tax rate 40.6 34.5 34.0 38.4 36.8 (380) (160) 33.0 36.9 396

Operating Cashflows 1190 1181 1395 1959 591 (50.3) (69.8) 4,528 5,725 26.4

Land Monetisation Value 0 0 0 0 0 1,021 0 (100.0)

Gross Debt 13011 13513 13948 13498 16538 27.1 22.5 54,067 53,970 (0.2)

Net Debt 12295 12681 13030 12342 15315 24.6 24.1 50,037 50,348 0.6

Sales Bookings (msf) 0.92 1.00 0.74 0.92 0.75 (18.0) (18.1) 3.76 3.58 (4.5)

Sales Bookings (Rs mn) 6028 6323 5023 6051 4822 (20.0) (20.3) 22,147 23,425 5.8Source: Company, Emkay Research

8/11/2019 6-Stocks Emkay 180814

25/29

Sobha Result Update



Income Statement


Net Sales 18,645 21,693 25,628 27,856

Growth (%) 32.4 16.3 18.1 8.7


Other Exp 0 0 0 0

SG&A 1,944 2,684 3,139 3,412

EBITDA 5,483 6,025 6,957 7,710

Growth (%) 17.5 9.9 15.5 10.8

EBITDA mar gin (%) 29.4 27.7 27.1 27.7

Depreciation 594 690 765 842

EBIT 4,889 5,335 6,193 6,868

EBIT marg in (%) 26.2 24.5 24.2 24.7

Other Income 56 103 0 0

Interest expenses 1,705 1,734 1,862 1,890

PBT 3,240 3,704 4,330 4,978Tax 1,068 1,368 1,572 1,806


Adjusted PAT 2,172 2,350 2,708 3,122

Growth (%) 3.4 7.6 18.1 15.0

Net Margin (%) 11.6 10.7 10.8 11.4

(Profit)/loss from JVs/Ass/MI 0 14 -50 -50


E/O items 0 0 0 0

Reported PAT 2,172 2,350 2,708 3,122

PAT after MI 2,172 2,350 2,708 3,122

Growth (%) 5.5 8.2 15.2 15.3

Balance Sheet





Secured Loans 12,924 12,997 15,438 15,474


Loan Funds 13,024 13,786 15,538 15,574

Net deferred tax liability 638 1,010 1,190 1,383


Gross Block 6,053 6,650 7,450 8,050


Net block 3,301 3,208 3,243 3,002

Capital work in progress 0 550 550 1,070

Investment 2 0 0 0


Sundry debtors 1,661 2,584 2,584 2,584

Cash & bank balance 670 1,055 750 750

Loans & advances 18,671 19,556 20,056 20,556

Other current assets 5,274 3,869 3,869 3,869

Current lia & Prov 13,467 17,298 16,806 17,825


Provisions 1,437 1,466 1,452 1,546


Misc. exp 0 0 0 0

Total Assets 35,130 37,797 41,684 44,282

Cash Flow




Interest Provided 1,705 1,734 1,862 1,890


Chg in working cap -1,300 -1,455 -3,977 -2,126

Tax paid -1,068 -1,368 -1,572 -1,806


Capital expenditure -1,043 -1,147 -800 -1,120

Free Cash Flow 2,072 2,055 608 2,657

Other income 56 103 0 0Investments -2 2 0 0

Investing Cashflow -989 -1,042 -800 -1,120


Loans Taken / (Repaid) 616 762 1,752 36

Interest Paid -1,705 -1,734 -1,862 -1,890

Dividend paid (incl tax) -803 -803 -803 -803


Others -253 0 0 0

Financing Cashflow -2,145 -1,775 -913 -2,657

Net chg in cash -19 385 -305 0

Opening cash position 690 670 1,055 750

Closing cash position 670 1,055 750 750

Key Ratios


Profitability (%)

EBITDA Margin 29.4 27.7 27.1 27.7

Net Margin 11.6 10.7 10.8 11.4

ROCE 14.5 14.9 15.6 16.0

ROE 10.5 10.6 11.3 12.0

RoIC 14.6 15.1 16.2 16.6

Per Share Data (Rs)

EPS 22.1 24.0 27.6 31.8

CEPS 28.2 31.0 35.4 40.4

BVPS 217.9 233.7 253.1 276.7DPS 7.0 7.0 7.0 7.0

Valuations (x)

PER 19.1 17.7 15.3 13.3

P/CEPS 15.0 13.7 12.0 10.5

P/BV 1.9 1.8 1.7 1.5

EV / Sales 2.9 2.5 2.2 2.0

EV / EBITDA 9.8 9.0 8.1 7.3

Dividend Yield (%) 1.7 1.7 1.7 1.7

Gearing Ratio (x)



8/11/2019 6-Stocks Emkay 180814

26/29


Emkay

Res

ultUpdate





FY13A 33,464 3,712 11.1 2,184 6.3 21.1 25.1 50.8 30.8 11.7

FY14A 38,697 4,314 11.1 2,494 7.2 14.1 24.1 44.5 26.3 9.9

FY15E 45,114 5,392 12.0 3,095 8.9 24.1 25.6 35.9 21.0 8.5

FY16E 53,800 6,662 12.4 3,882 11.2 25.4 27.2 28.6 16.8 7.2

Berger Paints

Growth remains Buoyant; Retain Accumulate

August 08, 2014

Rating

Accumulate

Previous Reco

Accumulate

CMP

Rs306

Target Price

Rs355


Target Price change (%) 27

Nifty 7,569

Sensex 25,329

Price Performance

(%) 1M 3M 6M 12M

Absolute 1 27 46 49

Rel. to Nifty 2 12 17 11

Source: Bloomberg


150

185

220

255

290

325


Rs

-20

-12

-4

4

12

20%

Berge r Paints (LHS) Rel to Ni ft y (RHS) Source: Bloomberg

Stock DetailsSector Consumers

Bloomberg BRGR IB


Face Value(Rs) 2


52 Week H/L 328/ 193






Promoters 75.0 75.0 75.0

FII/NRI 11.9 11.7 11.8



Public N/A 9.1 9.1

Source: Bloomberg

n Healthy topline, but misses PAT estimatesConsolidated

Revenues at Rs 10.6bn, up 17% yoy, EBIDTA at Rs 1.1bn, up

28% yoy and APAT at Rs 554mn, up 17% yoy

n Decorative business posted healthy growth with volume

growth of ~9%. Improved growth in Automotive & Powder

Coating segments, but protective coatings stays muted

n Outlook for FY15 is buoyant with healthy growth in domestic

business and improved growth in industrial segment

n Remain buoyed by healthy outlook on decorative business

and revival in Auto & Powder Coating. Retain Accumulate

with revised price target of Rs 355

Revenues in line; but misses PAT estimates

Berger Paints consolidated revenues were in line led by healthy performance indomestic as well as international operations, but missed PAT estimates. Key highlights

are (1) Revenues at Rs 10.6bn, up 16.8% yoy (2) Ebidta at Rs 1.1bn, up 27.8% yoy;

EBIDTA margins up 90bps yoy to 10.8%, led by gross margins which improved 80bps

yoy to 39.6% (3) APAT grew 17% yoy to Rs 575m owing to higher tax outgo (expiry of

80IB income tax benefit for a unit in Jammu plant)

Decorative continue to do well; industrial segment sees revival

Domestic operations reported growth of 15% yoy to Rs 9.4bn with underlying volume

growth at about 9%, but were below our estimate of 12% yoy. Decorative business

continued to show steady progress led by Tier 2 & Tier 3 towns and some pick up in Tier

1 cities. Advertised and premium products continued to grow ahead of the category.

Automotive and Powder coating segments of industrial business witnessed improvement

in growth rates, but growth in protective coatings continued to be sluggish.

Gross margin improvement fuels standalone EBITDA performance

Standalone EBITDA was in line with expectation at Rs 1.1bn, up 24% yoy with EBITDA

margins improving 90bps yoy to 11.9%. Large part of EBITDA margins increase was

driven by gross margins improvement, which rose 100bps yoy to 40.1%; function of

price increases and mix improvement in favour of decorative segment. Other operating

costs were largely under control.

Outlook for FY15 remains buoyant

Domestic decorative business is expected to report higher growth in FY15 led by

sustained off-take in Tier 2/3 cities and gradual revival in Tier 1 cities. Industrial segment

is expected to improve further, while recovery in Protective coatings might come with a

lag. Raw material price outlook remains a concern, but price increase & better product

mix to ensure healthy margins.

Growth remains buoyant; Retain ACCUMULATE

Strong growth in domestic decorative business coupled with improving growth profile in

Tier 1 cities and Auto & Powder Coating business, expect growth momentum to sustain.

Our core arguments remain intact (1) gains from scale & size (2) shift in product portfolio

and (3) retaining market shares. We retain Accumulate with revised price target of Rs

355/share.

8/11/2019 6-Stocks Emkay 180814

27/29

Berger Paints Result Update


Exhibit 1: Consolidated Quartely Performance at a Glance

Y/E, Mar (Rs. m) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%)

Revenue 9,078 9,662 10,298 9,660 10,605 16.8 9.8

Expenditure 8,181 8,620 8,982 8,600 9,458 15.6 10.0

Consumption of RM 5,557 5,837 6,231 5,829 6,402 15.2 9.8

as % of sales 61.2 60.4 60.5 60.3 60.4

Employee Cost 569 571 578 535 657 15.6 22.8

as % of sales 6.3 5.9 5.6 5.5 6.2

Other expenditure 2,055 2,213 2,174 2,235 2,399 16.7 7.3

as % of sales 22.6 22.9 21.1 23.1 22.6

EBITDA 897 1,042 1,315 1,060 1,147 27.8 8.1

Depreciation 152 165 183 208 213 40.0 2.3

EBIT 745 877 1,132 853 934 25.3 9.6

Other Income 86 83 83 107 105 21.7 -1.8

Interest 94 123 119 130 126 33.9 -3.1

PBT 738 837 1,097 829 913 23.8 10.1

Total Tax 247 210 274 275 338 37.3 22.9

Adjusted PAT 491 627 823 554 575 17.0 3.7(Profit)/loss from JV's/Ass/MI 0 0 0 0 0 - -

APAT after MI 491 627 823 554 575 17.0 3.7

Extra ordinary items 0 0 0 0 0 - -

Reported PAT 491 627 823 554 575 17.0 3.7

Adjusted EPS 1.4 1.8 2.4 1.6 1.7 17.0 3.7

Margins (%) Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 (bps) (bps)

EBIDTA 9.9 10.8 12.8 11.0 10.8 90 -20

EBIT 8.2 9.1 11.0 8.8 8.8 60 0

EBT 8.1 8.7 10.7 8.6 8.6 50 0

PAT 5.4 6.5 8.0 5.7 5.4 0 -30Effective Tax rate 33.4 25.1 25.0 33.2 37.1 360 390


International operations posts revenue growth, but posts net loss

International operations reported another quarter of stellar growth posting 34% yoy growth

led by sustained growth in Nepal, India JV operations (Berger Becker Coatings) and

improvement in Bolix S.A., Poland. Bolix growth was led by shorter winter and better

weather conditions for paints in northern Europe. However, EBITDA was below expectation

at Rs 28mn and net loss of Rs 51mn due to higher interest and tax outgo due to continued

losses in Bolix, but the extent of loss has reduced. BJN India (erstwhile Sherwin Williams)

is gradually picking up and will take another 6 months to improve performance.

Exhibit 2: Revision in Earnings Estimates

FY15E FY16E

Y/E, Mar (Rs. mn) Earlier Revised % Chg. Earlier Revised % Chg.

Revenues 44687 45,114 1.0 53180 53,800 1.2

EBITDA 5381 5,392 0.2 6627 6,662 0.5

EBITDA Margin (%) 12.0 12.0 -10 bps 12.5 12.4 -10 bps

APAT 3096 3,095 0.0 3866 3,882 0.4

EPS 8.9 8.9 0.0 11.2 11.2 0.4


8/11/2019 6-Stocks Emkay 180814

28/29

Berger Paints Result Update



Income Statement


Net Sales 33,464 38,697 45,114 53,800

Growth (%) 13.5 15.6 16.6 19.3


Raw material cost 20,586 23,454 27,213 32,456

SG&A 7,295 8,678 9,991 11,721

EBITDA 3,712 4,314 5,392 6,662

Growth (%) 19.9 16.2 25.0 23.6

EBITDA mar gin (%) 11.1 11.1 12.0 12.4


EBIT 3,144 3,607 4,518 5,712

EBIT marg in (%) 9.4 9.3 10.0 10.6

Other Income 314 360 360 360

Interest expenses 377 466 478 478

PBT 3,082 3,500 4,400 5,594Tax 898 1,006 1,305 1,712


Adjusted PAT 2,184 2,494 3,095 3,882

Growth (%) 21.3 14.2 24.1 25.4

Net Marg in (%) 6.5 6.4 6.9 7.2

(Profit)/loss from JVs/Ass/MI 0 0 0 0


E/O items 0 0 0 0

Reported PAT 2,184 2,494 3,095 3,882

PAT after MI 2,184 2,494 3,095 3,882

Growth (%) 21.3 14.2 24.1 25.4

Balance Sheet





Secured Loans 2,615 1,933 2,615 2,615

Unsecured Loans 2,882 3,349 2,879 2,879

Loan Funds 5,497 5,282 5,494 5,494



Gross Block 9,795 13,472 14,272 15,272


Net block 5,989 8,958 8,884 8,935

Capital work in progress 1,725 1,013 1,013 1,013

Investment 108 907 907 907


Sundry debtors 4,114 4,857 5,177 6,134


Loans & advances 1,194 1,301 1,423 1,555

Other current assets 103 116 116 116

Current lia & Prov 6,436 8,921 8,529 9,633


Provisions 922 1,081 1,081 1,081


Misc. exp 5 0 0 0

Total Assets 15,436 17,027 19,027 21,528

Cash Flow




Interest Provided 377 466 478 478

Other Non-Cash items -326 -5 0 0

Chg in working cap -1,299 1,161 -1,481 -1,192

Tax paid -858 -1,006 -1,305 -1,712


Capital expenditure -2,463 -2,964 -800 -1,000

Free Cash Flow -1,258 1,729 2,202 3,118

Other income 314 360 360 360Investments -68 -799 0 0

Investing Cashflow -2,041 -3,763 -800 -1,000


Loans Taken / (Repaid) 2,087 -215 212 0

Interest Paid -377 -466 -478 -478

Dividend paid (incl tax) -484 -884 -1,10

6-Stocks Emkay 180814

Documents

Transcript of 6-Stocks Emkay 180814