BALRAMPUR CHINI MILLS LIMITED - MarketsMojo.com

BALRAMPUR CHINI MILLS LIMITED

1


Balrampur Chini Mills Limited (BCML) is one of the largest integrated sugar manufacturing company in India. It also offers molasses, industrial alcohol, ethanol, and bagasse. In addi-tion, the company is involved in the generation and sale of electricity. The Company presently has ten sugar factories located in Uttar Pradesh (India) having an aggregate sugarcane crushing capacity of 76,500 TCD, distillery and co-generation operations of 360 KLPD and 163.2 MW (Saleable) respectively. BCML’s 79% of crushing capacity is based in Eastern Ut-tar Pradesh; 21% of the Company’s crushing capacity is based in Central Uttar Pradesh.

Rationale for Investment

BCML is one of the largest integrated sugar manufacturing companies in India with a combined capacity of 76,500 TCD of sugarcane, 360 KLPD of distillery and 163.2 MW of saleable cogeneration, mostly based in Uttar Pradesh. Being fully integrated player enable BCML to de-risk cyclical nature of the sugar industry, company’s ~17% earnings comes from business associated with sugar such as distillery (7% of FY18 revenue) & power (11% of FY18 revenue).

The Ethanol Blending Programme (EBP) seeks to achieve blending of Ethanol with motor sprit with a view to reducing pollution, conserve foreign exchange and increase value addition in the sugar industry enabling them to clear cane price arrears of farmers in years of surplus production of sugarcane, when sugar prices are depressed, as the sugar industry is unable to make timely payment of cane prices to farmers. Recently govern-ment has increased the ethanol price by INR 2.85 to INR 43.70 as well as lower the GST rate from 18% to 12%.

BCML has reduced the debt from INR 1,702 crores in FY17 to INR 876 crores in the FY18 on the back of healthy cash accruals, leading to substantial reduction in long-term loans. We estimate BCML to generate cumulative free cash flow of INR 616 crores be-tween FY2019E-20E due to lower capex. We expect the company to utilise the free cash flow to reduce leverage. Going ahead, we expect BCML is likely to reduce debt from 5-year average of 1.1x to a low of 0.3x FY2020E.

Outlook & Valuation

India is possibly the most exciting sugar market in the world for a reason that extends beyond mere under-consumption. Even at today’s relatively under-consumed levels, the increase in the country’s consumption of sugar is equivalent to the entire consumption of a country like Canada or Australia. Like any other sugar company in the country, BCML Earnings are highly sensitive to the cane and sugar prices. Any increase in sugar prices adds straight to the com-pany's Bottom-line. Similarly, every increase in cane cost results increase in the company's overall costs. Further we believe that there are very low risks of sugar prices correcting from hereon. BRCM is the most efficient player in the industry and we feel that any upward swing in the domestic sugar prices would immensely benefit BRCM.

We have valued BCML based on average of P/B & EV/EBITDA as nature of sugar business is cyclic. At current levels the stock is available at 3.6x EV/EBITDA and 0.7x P/B on FY2020E earnings. Hence, we initiate BUY on stock based on average of EV/EBITDA & P/B i.e 3.5x EV/EBITDA & 1x P/B of FY20E. We have arrived at price target of INR 84 with upside poten-tial of 15.2%.

Financials : (Consolidated) (In INR Cr.)

RATING: BUY Target: 84.0

Upside: 15.2%

CMP : 72.90 ( As on 02/08/2018)

Reuter Code : BACH.NS

Bloomberg Code : BRCM.IN

Market Data

Face Value (INR) 1.00

Equity Share Capital (INR cr.) 22.8

Share Outstanding (cr.) 22.8

Market Cap (INR cr.) 1,665.0

Book Value / share 70.8

Daily Avj. Volume 32,05,756

52 W High 182.5

52 W Low 58.7

Shareholding %

Promoter 41.0

Foreign 18.5

Institutions 18.5

Public & Others 32.3

Sensex and Stock Movement

FY2016 FY2017 FY2018 FY2019 (E) FY2020 (E)

Net Sales 2,757 3,460 4,343 4,541 4,554

EBDITA 457 894 482 488 501

PAT 100 593 232 225 240

Basic EPS 4.1 24.3 9.9 9.6 10.2

P/E 26.4 6.0 7.7 7.6 7.1

Source - DSPL Research

Dinesh Gupta +91 22 30272867 [email protected]

mailto:[email protected]

2

Sugar Industry in India

India is the second largest producer of sugar in the world after Brazil and is also the largest consumer. Today Indian sugar indus-

try’s annual output is worth approximately Rs.80,000 crores. There are 735 installed sugar factories in the country as on 31st Jan

2018, with crushing capacity to produce around 340 lakh MT of sugar. The capacity is roughly distributed equally between pri-

vate sector units and cooperative sector units.


Top Ten Country Producing Sugar

Production in MMT 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Brazil 38.6 37.8 36 34.7 39.1 39.7

India 27.4 26.6 30.5 27.4 21.9 25.8

European Union 16.7 16 18.5 14.3 16.5 18.6

Thailand 10 11.3 10.8 9.7 10 11.2

China 14 14.3 11 9.1 9.5 10.5

US 8.1 7.7 7.9 8.2 8 7.9

Mexico 7.4 6.4 6.3 6.5 6.6 6.6

Pakistan 5 5.6 5.2 5.3 6 6

Russia 5 4.4 4.4 5.2 6.1 5.8

Australia 4.3 4.4 4.7 4.9 5.1 4.8

Particular 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

No of Factories in Operation

507 529 526 509 538 526 493

Cane Acreage (000 Hectares)

4,885 5,100 5,279 5,341 5,307 5,284 4,945

Sugarcan Production (Lakh Tons)

3,424 3,538 3,544 3,456 3,668 3,369 3,036

Molasses Production (000 Tons)

10,970 11,824 11,744 10,882 12,482 10,837 9,026

Sugar Factories in India

Source – ISMA’S, DSPL Research

3

Sugarcane Pricing Policy in India

The concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the ‘Fair and Remunerative Price (FRP)’ of sugar-

cane for 2009-10 and subsequent sugar seasons. The cane price announced by the Central Government is decided on the basis

of the recommendations of the Commission for Agricultural Costs and Prices (CACP) in consultation with the State Governments

and after taking feedback from sugar industry association.

Under the FRP system, the farmers are not required to wait till the end of the season or for any announcement of the profits by

sugar mills or the Government. The new system also assures the farmer a far better, risk reward ratio, irrespective of the fact

whether sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill. In order to en-

sure that higher sugar recoveries are adequately rewarded and considering variations amongst sugar mills, the FRP is linked to a

basic recovery rate of sugar, with a premium payable to farmers for higher recoveries of sugar from sugarcane.

Although India is the world’s largest sugar consumer but reality is that the country’s per capital sugar consumption is fraction of

the global averages. Higher sugarcane production is primarily responsible for the fall in prices. Indian Sugar Mills Associa-

tion (ISMA) has reported a 45% increase in total sugar output at 28.18 million tonnes (mt) as of March 31, 2018 against 18.89

mt a year ago. During the sugar year 2017-18, the government has allowed 2 mt of sugar export in view of a 45.4 per cent year-

on-year rise anticipated in production during the year. Also, sugar output from the European Union, China and Thailand is ex-

pected to rise adding to global sugar supply. This is likely to create pressure on international prices in 2017-18.


Sugar Season FRP (INR/quintal) Minimum Recovery

% Premium for every

0.1% increase

2010-11 139.12 9.50 1.46

2011-12 145.00 9.50 1.53

2012-13 170.00 9.50 1.79

2013-14 210.00 9.50 2.21

2014-15 220.00 9.50 2.32

2015-16 230.00 9.50 2.42

2016-17 230.00 9.50 2.42

2017-18 255.00 9.50 2.68

2018-19 275.00 10.00 2.75


4

Sugar prices witnessed decline in both domestic and global markets on account of surplus stocks. International sugar prices have

declined 23.9 per cent from the $465.1-per-tonne-level in April 2017 to $354.1 per tonne in March 2018. The International

Sugar Organisation (ISO) forecast global sugar surplus of around 10.51 mt for 2017-18 in May 2018. The ISO estimates world

sugar production at 191.8 mt (up 10.2 per cent from 174.0 mt in 2016-17) and consumption at 174.1 mt (higher by 1.9 per

cent compared with 170.8 mt in 2016-17) in 2017-18.



Source – USDA Foreign Agricultural Services, DSPL Research

5

India is not the largest sugar exporter globally; but with the expectation of surplus sugar in 2018-19 government may allow the

export of sugar. The surplus sugar in India would put pressure on domestic & Global sugar price. However we believe that the

current international futures price discounts near-term demand-supply imbalances in sugar.


Source – USDA Foreign Agricultural Services, DSPL Research

Source - International Sugar Organization, DSPL Research

6

Integrated value chain of different products from sugarcane


Source - ISMA’S, DSPL Research

7

Company Overview

Balrampur Chini Mills Limited (BCML) is one of the largest integrated sugar manufacturing company in India. It also offers molas-

ses, industrial alcohol, ethanol, and bagasse. In addition, the company is involved in the generation and sale of electricity. The

Company presently has ten sugar factories located in Uttar Pradesh (India) having an aggregate sugarcane crushing capacity of

76,500 TCD, distillery and co-generation operations of 360 KLPD and 163.2 MW (Saleable) respectively. BCML’s 79% of the

Company’s crushing capacity is based in Eastern Uttar Pradesh; 21% of the Company’s crushing capacity is based in Central Ut-

tar Pradesh.


Source – Company, DSPL Research

Units Sugarcane crushing

capacity (TCD) Distillery (KLPD)

Installed power generation

capacity (MW)

Saleable power capacity (MW)

Balrampur 12,000 160 49.6 27.3

Babhnan 10,000 100 21.7 8.0

Tulsipur 7,000 - 9.5 -

Haidergarh 5,000 - 23.3 21.0

Akbarpur 7,500 - 18.0 11.0

Manakpur 8,000 100 43.6 30.0

Rauzagaon 8,000 - 30.8 23.0

Kumbhi 8,000 - 32.7 23.0

Gularia 8,000 - 31.3 20.0

Maizapur 3,000 - 6.0 -

Total 76,500 360 266.4 163.2

Key Capacity as on March 2017

Key Management

Name Designation

Mr. Kamal Nayan Saraogi Chairman

Mr. Vivek Saraogi Managing Director

Mr. R. N. Das Independent Director

Mr. D. K. Mittal Independent Director

Mr. Krishnava Dutt Independent Director

Smt. Novel S. Lavasa Independent Director

Mr. Sakti Prasad Ghosh Independent Director

Mr. Sumit Mazumder Independent Director

Dr. Arvind Krishna Saxena Whole-time Director

Mr. Naresh Dayal Non-Executive Director (Additional)

Mr. Pramod Patwari CFO


8

Investment Rationale

Integrate sugar player and diversified revenue mix

BCML is one of the largest integrated sugar manufacturing companies in India with a combined capacity of 76,500 TCD of sug-

arcane, 360 KLPD of distillery and 163.2 MW of saleable cogeneration, mostly based in Uttar Pradesh. Being fully integrated

player enable BCML to de-risk cyclical nature of the sugar industry, company’s ~17% earnings comes from business associated

with sugar such as distillery (7% of FY18 revenue) & power (11% of FY18 revenue).

Sugar account for ~83% of FY18 revenue of INR 4,400.7 crores, share of sugar revenue has increased in last 2 years due to

uptick in sugar realisation. Going forward we believe revenue from sugar to decline to ~80.1% over next two years.

The Central Government is promoting and encouraging the usage of ethanol derived from molasses for blending with petroleum.

The Central Government approved National Policy on Biofuels encourages the use of renewable energy resources as alternative

fuels. In a bid to renew its focus and implement the ethanol blending programme, the Central Government recommended a 10%

mandatory blending of ethanol with gasoline across all states. Throughout the last decade, ethanol requirement grew from 1.8

billion litres to 2.4 billion litres in 2016, and is expected to have increased 2.5 billion litres 2017. BCML is among the few com-

panies in India with ability to convert ethanol from molasses, recently ethanol price have been hiked to INR 43.70 from INR 40.85

per litre. Government’s ethanol blending program is likely to benefit integrated player like BCML.

Government’s Ethanol Blended Petrol Programme (EBP Programme)

Ethyl alcohol or ethanol can either be produced by direct fermentation of cane juice or from molasses, which is a by-product of

the sugar manufacturing process. In India, ethanol can be produced only from molasses whereas mills in Brazil produce ethanol

directly from sugarcane juice. Ethanol can be used for potable alcohol industry, chemical industry and as a bio-fuel in vehicles

(direct/blended with gasoline). In India, ethanol is consumed primarily by portable alcohol industry, Oil marketing companies (for

blending with petrol) and chemical industries.



9

The Ethanol Blending Programme (EBP) seeks to achieve blending of Ethanol with motor sprit with a view to reducing pollution,

conserve foreign exchange and increase value addition in the sugar industry enabling them to clear cane price arrears of farmers

in years of surplus production of sugarcane, when prices are depressed, as the sugar industry is unable to make timely payment of

cane price to farmers.

The Central Government has scaled up blending targets from 5% to 10% under the Ethanol Blending Programme (EBP). The pro-

cedure of procurement of ethanol under the EBP has been simplified to streamline the entire ethanol supply chain and remunera-

tive ex-depot price of ethanol has been fixed.


Ethanol Production Process

Source – researchgate.net, www.e-education.psu.edu


Calendar Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Beginning stocks 1,374 1,672 1,440 1,241 847 824 618 422 286 321

Production 2,150 1,073 1,522 1,681 2,154 2,057 2,002 2,292 2,085 1,918

Imports 70 280 92 39 35 33 107 217 450 600

Exports 12 5 53 119 177 234 175 200 140 140

Total Consumption 1,940 1,580 1,760 1,995 2,035 2,062 2,130 2,445 2,360 2,510

Used as fuel Consumption 280 100 50 365 305 382 350 685 1100 800

% towards fuel consumption 14.40% 6.30% 2.80% 18.30% 15.00% 18.50% 16.40% 28.00% 46.60% 31.90%

Ending Stocks 1,672 1,440 1,241 847 824 618 422 286 321 189

Feedstock Use (MT) Feedstock A (based on 24% recovery)

8,958 4,469 6,342 7,004 8,975 8,573 8,343 9,551 8,689 7,994

Market Penetration Fuel Ethanol 280 100 50 365 305 382 350 685 1100 800

Gasoline 15,368 17,608 19,563 20,716 21,842 23,749 21,843 29,651 32,409 34,916

Blend Rate (%) 1.8 0.6 0.3 1.8 1.4 1.6 1.4 2.3 3.4 2.3

10

Recently, sugar prices have plummeted due to surplus production because of which mill owners have found it difficult to pay cane

growers. The arrears are estimated to be around INR 22,000 crores across the country. A better solution to the crisis, perhaps,

would be to encourage ethanol production, which will not only bring down the country’s mounting oil import bill, but fulfil the

government’s mandate to have 10% ethanol blending of petrol for a cleaner fuel as well. Recently government has increased the

ethanol price by INR 2.85 to INR 43.70 as well as lower the GST rate from 18% to 12%.


Source – Newspaper, DSPL Research

Source – Bloomberg, DSPL Research

11

Financial Performance

During 2013-18, BCML registered modest growth of 5.8% CAGR in Revenues to INR 4,342.5 crores from INR 3,274.8cr where-

as net profit registered a growth of 7.1% CAGR to INR 231.7 crores from INR 161.3 crores. The company reported net Profit of

INR 231.7 crores in FY2018 compared to INR 592.8 crores in FY2017, primarily due to record domestic sugarcane production

leading to large disparity in sugarcane costs and realisations because of which sugar operations had become unviable.

The sugar segment is estimated to contribute ~80% to Total Revenues in FY2020E. Moreover, on the back of lower sugar prices,

sugar segment is expected to see lower Profits in FY2020E. However, in FY2019E, sugar prices are expected to correct owing to

increased supply. As a result, contribution of sugar division to Total Revenues is expected to drop to ~81% in FY2019E from 83%

in FY2018. Further, EBITDA Margins of the segment are also expected to decline on the back of lower Realisations. Consequently,

we expect contribution from sugar division to overall EBITDA is likely to fall in FY2019E to FY2010E.


Operational summary

Cane crushed (in lac tonnes)

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17

Balrampur 12.59 12.12 12.91 12.02 12.34

Babhnan 10.48 10.03 11.24 8.77 9.84

Tulsipur 5.72 6.02 6.64 7.11 6.25

Haidergarh 4.17 3.71 3.53 3.31 3.75

Akbarpur 8.37 7.83 6.34 7.14 7.51

Rauzagaon 7.88 6.78 6.58 5.62 6.92

Mankapur 8.62 8.61 9.2 7.69 8.43

Kumbhi 10.77 9.31 9.79 10.01 10.48

Gularia 9.06 7.23 8.4 9.79 10.75

Maizapur 3.39 3.38 3.6 2.79 3.19

Khalilabad - 2.26 2.34 - -

Total 81.05 77.28 80.57 74.25 79.46



Sugar production (in lac tonnes)

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17

Balrampur 1.20 1.18 1.27 1.30 1.28

Babhnan 1.00 1.00 1.09 0.97 1.00

Tulsipur 0.53 0.58 0.66 0.76 0.65

Haidergarh 0.38 0.34 0.32 0.34 0.36

Akbarpur 0.82 0.77 0.61 0.78 0.76

Rauzagaon 0.76 0.67 0.64 0.61 0.75

Mankapur 0.82 0.85 0.91 0.85 0.84

Kumbhi 1.04 0.94 1.01 1.17 1.24

Gularia 0.86 0.69 0.85 1.14 1.26

Maizapur 0.31 0.32 0.35 0.30 0.33

Khalilabad - 0.21 0.21 - -

Total 7.72 7.55 7.92 8.22 8.47

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Diversified revenue stream helps BCML to partly offset the cyclicality in sugar business. BRCM’s diversified Revenue stream is led

by External co-gen power sales; BCML has 163.2 MW saleable powers. Further, BCML converts a majority of the rectified spirit

produced in the distillery into ethanol or directly produces ethanol from molasses, enabling the Company to service oil marketing

companies. These contracts are backed by attractive realisations and steady offtake, helping the Company enhance revenue visi-

bility, bottom line and steady y-o-y growth. Hence both the businesses EBIT margins are superior than sugar.

We estimate overall EBITDA to see marginal increase from INR 482 cr in FY2018 to INR 501cr in FY2020E. Hence, co-gen pow-

er sales & distillery is expected to support the company's Earnings during the down-cycle in FY2019E. We estimate BRCM to regis-

ter 3% de-growth in PAT in FY2019E.

BCML's profitability had peak in FY2017 and declined thereon. We expect RoCE and RoE to fall around ~14% and ~12% in

FY2019E-20E respectively, on the back of softening sugar prices (Rs33/kg).




13

BCML has reduced the debt from INR 1,702 crores in FY17 to INR 876 crores in the FY18 on the back of healthy cash accruals,

leading to substantial reduction in long-term loans. We estimate BCML to generate cumulative free cash flow of INR 616 crores

between FY2019E-20E due to lower capex. We expect the company to utilise the free cash flow to reduce leverage. Going

ahead, we expect BCML’s likely to reduce Debt from 5-year average of 1.1x to a low of 0.3x FY2020E.

Outlook & View –

India is possibly the most exciting sugar market in the world for a reason that extends beyond mere under-consumption. Even at

today’s relatively under-consumed levels, the increase in the country’s consumption of sugar is equivalent to the entire consump-

tion of a country like Canada or Australia.

India is the world’s largest sugar consumer on one hand and also the world’s second largest sugar producer on the other. This is

on account of the fact that a number of cane growing pockets in India are among the most suitable in the world; Uttar Pradesh,

for instance, is recognised as the unique convergence of precipitation, topography, sunshine and scale where BCML has presence

which adds to the advantage of the company.

Like any other sugar company in the country, BCML Earnings are highly sensitive to the cane and sugar prices. Any increase in

sugar prices adds straight to the company's Bottom-line. Similarly, every increase in cane cost results increase in the company's

overall costs. Further we believe that there are very low risks of sugar prices correcting from hereon. BRCM is the most efficient

player in the industry, any small correction in the sugar prices would have an amplified impact on the stock price.

We have valued BCML based on average of P/B & EV/EBITDA as nature of sugar business is cyclic. At current levels the stock is

available at 3.6x EV/EBITDA and 0.7x P/B on FY2020E earnings. Hence, we initiate BUY on stock based on average of EV/

EBITDA & P/B i.e 3.5x EV/EBITDA & 1x P/B of FY20E. We have arrived at price target of INR 84 with upside potential of 15.2%.

Key Risk -

Significant variation in area under cane cultivation.

Delay in monsoon & change in climatic condition.

Change in Ethanol, MSP & SAP price.

Change in Government regulation like Import & Export of sugar.



14


Profi t & Loss Statement FY2018 FY2019E FY2020E

Net Sales 4,342.5 4,540.9 4,554.2

To tal Revenue 4,342.5 4,540.9 4,554.2

Raw Material Cost 3,474.6 3,644.1 3,643.4

Gross Pro fi t 867.9 896.8 910.8

Employee Cost 204.0 213.3 213.9

Other Manufacturing Cost 212.3 227.0 227.7

Operating EB ITDA 451.7 456.5 469.2

Op. EBITDA Margin (%) 10.4% 10.1% 10.3%

Other Income 30.3 31.7 31.8

Deperication 95.2 97.2 94.1

EB IT 386.8 391.0 406.9

EBIT Margin 8.9% 8.6% 8.9%

Finance Cost 52.0 50.5 44.0

Exceptional Item - - -

PBT 334.8 340.6 362.9

Tax 113.5 115.5 123.0

Share of minority & Associate 10.4 - -

PAT 231.7 225.1 239.9

PAT Margin 5.3% 5.0% 5.3%

Share O/S (in cr) 23.5 23.5 23.5

Basic EPS (INR)9.9 9.6 10.2

Diluted EPS (INR) 9.9 9.6 10.2

Cash EPS (INR) 13.9 13.7 14.2

Balance Sheet FY2018 FY2019E FY2020E

Share Capital 22.8 22.8 22.8

Reserves and Surplus 1,594.2 1,819.3 2,059.2

Shareholders Fund 1,617.1 1,842.2 2,082.1

Minority Interest - - -

Total Loan 876.2 776.2 676.2

Deferred Tax Liailities 192.5 192.5 192.5

To tal Liabi l i t ies 2,685.8 2,810.9 2,950.8

Net Fixed Assets 1,458.3 1,411.1 1,367.0

Deferred Tax Assets - - -

Goodwill - - -

Inves tments 122.1 122.1 122.1

Sundry Debtors 182.2 190.5 191.1

Cash & Bank 8.7 149.3 330.0

Loans & Advances 0.1 0.1 0.1

Inventories 1,802.2 1,866.1 1,871.6

Other Current Assets 127.3 133.2 133.5

To tal Current Assets 2,120.6 2,339.3 2,526.4

Sundry Creditors 785.3 821.2 823.6

Provision 8.0 8.4 8.4

Other Current Liabilities 221.9 232.1 232.7

To tal Current l iabi l i t ies & Provis ion 1,015.3 1,061.6 1,064.7

Net Assets 1,105.3 1,277.6 1,461.6

Total Assets 2,685.8 2,810.9 2,950.8

Cashflow Statement FY2018 FY2019E FY2020E

PBT 334.8 340.6 362.9

Depreciation & Amortization 95.2 97.2 94.1

Finance Cost 52.0 50.5 44.0

Miscellanous / Others 8.5 - -

(Incr)/Decr in Working Capital 861.3 (31.7) (3.3)

Tax Paid (113.5) (115.5) (123.0)

Exceptional Item - - -

Cash Flow from Operating 1,238.3 341.0 374.7

(Incr)/ Decr in Gross PP&E (135.9) (50.0) (50.0)

Others (48.5) - -

Cash Flow from Inves ting (184.4) (50.0) (50.0)

Proceeds from issue of Shares & Warrants - - -

(Decr)/Incr in Debt (825.6) (100.0) (100.0)

Interest Paid (52.0) (50.5) (44.0)

Payment towards buy-back of shares (99.2) - -

Dividend Paid (70.5) - -

Others - - -

Cash Flow from Financing (1,047.2) (150.5) (144.0)

Change in Currency Fluctuation - - -

Incr/(Decr) in Cash & Cash Eq. 6.7 140.6 180.7

Op. Cash and cash equivalents 2.0 8.7 149.3

C l . Cash and cash equivalents 8.7 149.3 330.0

Other Bank Balances - - -

Cash & Bank Balance 8.7 149.3 330.0


Ratios Analys is FY2018 FY2019E FY2020E

Per Share Value

EPS (Rs) 9.9 9.6 10.2

BVPS (Rs) 70.8 80.7 91.2

DPS (Rs) 2.5 - -

Turnover Ratio

Inventory Days 173 147 150

Debtors Days 14 15 15

Creditors Days 45 65 66

Cash Conversion Cycle 142 98 99

Asset Turnover Ratio 1.2 1.2 1.1

Pro fi tabi l i y Ratio

EBITDA Margin 11.1% 10.8% 11.0%

PAT margin 5.3% 5.0% 5.3%

ROA 6.3% 5.8% 6.0%

ROE 14.3% 12.2% 11.5%

ROCE 10.2% 13.9% 13.8%

Solvency Ratio

Debt / Equity Ratio 0.5 0.4 0.3

Current Ratio 1.1 1.3 1.5

Quick Ratio 0.1 0.3 0.4

Interest Coverage Ratio 9.3 9.7 11.4

Valuation Ratios

PE (x) 7.7 7.6 7.1

P/B (x) 1.1 0.9 0.8

EV/EBITDA (x) 5.1 4.4 3.8

Mcap/Sales (x) 0.4 0.4 0.4

Earning Yield (%) 13.0% 13.1% 14.0%

Dividend Yield (%) 3.3% 0.0% 0.0%

Free Cash Flow Yield (%) 60.8% 14.4% 16.9%

DISCLOSURE

15

We/I, Dineshkumar Gupta, B.Com, M.Sc, as author / the name subscribed to this report, hereby certify that all of the views expressed in this research report reflect my / our personal views about the subject or securities and no part of my / our compensation was / is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.. We / I or my / our relative(s) or Research Entity does not have any financial interest in the subject company other than disclosed.

Investment Rating

Expected return (Over 1 year)

Buy > 15%

Hold > -10% to 15%

Sell < -10%

Not Rated We have forward looking estimates for the stock but we refrain

from assigning recommendation

Business activity of the research entity Stock Broker, Merchant Banker, Depository Participant, Mutual Fund Distribu-tor

Disciplinary history of the research entity Nil

Terms & Conditions for offering Research Report by research entity On principal, we do not sell our research reports. The Research Report should be kept confidential. The Research Report is published with honesty and in good faith. The Research Report is prepared after thorough analysis of the Stock Market. Research analyst or research entity shall effectively address conflict of interest which may affect the impartiality of its research analysis and research report and shall make appropriate disclosures to address the same. Research analyst or research entity or any employees will not engage in insider trading or front running or front running of its own research report. Research analyst or research entity shall comply with all regulatory requirements applicable to the conduct of its business activities. Research analyst or research entity or its employees engaged in research analysis shall observe high professional standard while preparing research report.

Details of associate of research entity

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Chanda Bharech Beneficiary Trust

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Dalmia Devcon Pvt. Ltd.

Gita Dalmia Family Trust

Narain Prasad Dalmia HUF Damia Devcon Pvt. Ltd.

Namtech Commercial LLP.

Dalmia Janakalyan Kosh

Sweta Beneficiary Trust Suryakant Dalmia HUF Mount Intra Finance Pvt. Ltd.

Vaishnawi Housing Pvt. Ltd.

Avni Beneficiary Trust

Dalmia Securities Pvt. Ltd.Employees Gratuity

Fund

Mount Intra Properties Pvt Ltd.

Advay Beneficiary Trust

Dalmia Commodities Pvt Ltd

DISCLOSURE OF INTEREST: Whether the research analyst or his relative or research entity or his associate has any financial interest in the subject com-pany and the nature of such financial interest. □ Yes √ No

Whether the research analyst or research entity or its associates or relatives, have actual / beneficial ownership of one per cent or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report;

□ Yes √ No

Whether the research analyst or research entity or its associates have received any compensation from the subject compa-ny in the past twelve months; □ Yes √ No

Whether the research analyst or research entity or its associates have managed or co-managed public offering of securi-ties for the subject company in the past twelve months; □ Yes √ No

Whether the research analyst or research entity or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; □ Yes √ No

Whether the research analyst or research entity or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months;

□ Yes √ No

Whether the research analyst or research entity or its associates have received any compensation or other benefits from the subject company or third party in connection with the research report; □ Yes √ No

Whether the research analyst has served as an officer, director or employee of the subject company; □ Yes √ No

Whether the research analyst or research entity has been engaged in market making activity for the subject company. □ Yes √ No

Other Material Conflict of Interest, if any NIL

The definition of the terms used in making recommendations are available at http://www.dalmiasec.com/Pdf/Abbreviation.pdf. These terms have been consistently used throughout the Re-search Reports contained herein.

Trading Rating Expected return (less than1 year)

Buy > 5%

Hold > -5% to 5%

Sell < - 5%

http://www.dalmiasec.com/Pdf/Abbreviation.pdf

DISCLAIMER

DISCLAIMER This report has been prepared by M/s Dalmia Securities Pvt. Ltd. (hereinafter referred as DSPL, SEBI Registered Research Analyst) and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. This research report does not constitute an offer, invitation or inducement to invest in securities or other investments and DSPL is not soliciting any action based upon it. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. DSPL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the divi-dend or income, etc. Past performance is not a guide for future performance. Investors are advised to see Risk Disclosure Document of each product before investing. DSPL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. Our proprietary trading and investing business-es may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among other things, may give rise to real or potential conflicts of interest.

DSPL is registered under SEBI (Research Analyst) Regulations, 2014 vide Registration No INH300003066 dated 30.05.2016

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