1. Art and Diseño

NiveshDaily
January 29, 2015
INDICES
Indices
Previous (day) Close
% chg
Sensex
Nifty
29,559.18
8,914.30
-0.04%
+0.04%
(As on 28th January, 2015)
FROM RESEARCH DESK
 Stock Updates
Max India achieves target price… continue to maintain HOLD rating with target price of Rs
518…
 News Updates
Lupin | CCEA nod for increase in foreign investment limit in Lupin to 49% | Maintain BUY
rating on the stock with price target of Rs1,710
HDFC Bank | CCEA approves HDFC Bank’s proposal of raising capital of Rs 100 bn…
positive over long term, maintain HOLD with target price of Rs 910…
 Company Updates
Bajaj Finance Ltd. (BFL) | Company Update | Outperformance likely to continue… upgrade
to BUY with upwards revised target price to Rs 5,500
 Results Preview
DRREDDY, SSLT
 First Cut Analysis
Torrent Pharmaceuticals| Q3FY15 First Cut Analysis | A subdued performance impacted
by relatively lower sales growth and higher interest outgo | HOLD rating with PT of Rs1,010
 Result Updates
Ajanta Pharma Ltd.| Q3FY15 Result Update |Good show continues | Maintain HOLD rating
with TP of Rs2,402 (from Rs1,846 earlier)
Lumax Auto Technologies (LATL)| Q3FY15 Result Update | In line with our expectation |
Maintain BUY rating on LATL with target price of Rs. 575
Alstom T&D India Ltd.| Q3FY15 Result Update | Unexpectedly Disappointing Performance
| We change the rating from HOLD to SELL with TP of Rs 444
 Global Markets - Outlook
 Result Today
DRREDDY & SSLT
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
IndiaNivesh Research
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Stock Updates
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Yogesh Hotwani
Research Analyst
Tel: +91 22 66188839
[email protected]
Max India achieves target price… continue to maintain HOLD
rating with target price of Rs 518…
Max India has moved up significantly in last 1 / 3 month by 30% / 52% on back of 1)
news of Increase in FDI limit in insurance by passing ordinance and 2) disclosure by
company for corporate restructuring. We had recommended buy on Max India in
our report ‘Investment strategy…. Regardless of election outcome’ on 5th March
2014 at Rs 190 with target price of Rs 274 which was further upgraded to Rs 329 on
18th August 2014 and to Rs 465 on 14th January 2015 and to Rs 518 on 27th January
2015. Yesterday the stock has achieved all our earlier targets yielding returns of
162% since 5th March 2014.
The key rationales for recommendation were 1) Max India taking advantage of India’s
increasing insurance market size, increasing penetration and improving
demographics and 2) leveraged its expertise in healthcare business by taking the
advantages of under penetrated healthcare segment, lower bed density and lowest
per capita spending.
Max Life Insurance business continues to do well and maintain its growth momentum
at mid teen growth rate with strong persistency rate. Max Health also continues to
show traction on operating front with improving occupancy rate and EBITDA margins.
At CMP of Rs 498, Consolidated Max India is trading at P/ABV of 3.9x and 2.9x for
FY16E and FY17E respectively. We continue to maintain hold rating on Max India
with SOTP target price to Rs 518, valuing Max Life based on past deals in insurance
sector at ~3x embedded value for FY17E, 16x EV/EBITDA Max Healthcare business
for FY17E and 1x invested capital for Max bupa for FY17E. However we continue to
like the company and individual businesses and maintain positive outlook on the
stock.
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Tushar Manudhane
Research Analyst
Tel: +91 22 66188835
[email protected]
Lupin | CCEA nod for increase in foreign investment limit in
Lupin to 49% | Maintain BUY rating on the stock with price
target of Rs1,710
The Cabinet Committee on Economic Affairs (CCEA) gave its approval on 28 January
2015 to a proposal by pharmaceuticals company Lupin Limited for an increase in
the aggregate limit of investment by foreign institutional investors (FIIs) and their
sub-accounts registered with Securities and Exchange Board of Inda (SEBI) from 33
percent to 49 percent. (for details, pls clink the link below)
http://netindian.in/news/2015/01/28/00032397/ccea-nod-increase-foreigninvestment-limit-lupin-49
Our view: This has been awaited for long time now. Foreign investment limit has
now revised to 49% from 33% earlier. We believe that this could be sentiment
booster for Lupin. We continue to like business model of Lupin as it is on track in
terms of building blocks for future growth in sales as well as profitability. At CMP
price of Rs1,513, the stock is trading at 27.5x FY15E EPS of Rs55.1 and 22.1x FY16E
EPS of Rs68.4. We maintain BUY rating on the stock with price target of Rs1,710,
based on 25x FY16E earnings.
IndiaNivesh Research
NiveshDaily
January 29, 2015 | 2
News Updates
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Yogesh Hotwani
Research Analyst
Tel: +91 22 66188839
[email protected]
CCEA approves HDFC Bank’s proposal of raising capital of Rs
100 bn… positive over long term, maintain hold with target price
of Rs 910…
On 28th January 2015, Cabinet committee on Economic Affairs (CCEA) has approved
HDFC Bank’s fund raising plan of Rs 100 bn. On 19th December 2014, Foreign
Investment Promotion Board (FIPB) had given clearance to HDFC Bank’s fund raising
plan of Rs 100 bn. HDFC bank’s board has already given approval for raising Rs 100
bn in its board meeting held in May 2014.
Our take
Currently HDFC bank’s capital adequacy ratio is at 15.7% as per Basel III norms with
Tier I capital of 11.8% which is higher than the regulatory requirement of 11.5%
which the banks have to reach by FY19 as per Basel III norms. Post this capital, we
are expecting capital adequacy ratio for HDFC bank to increase to 17.1% and tier I
capital to 13.5% assuming it raise capital at current market price of Rs 1035.
Currently HDFC bank is trading at P/ABV of 5.1x and 4.2x for FY15E and FY16E ABV
respectively. We continue to maintain our positive view and hold rating on the stock
with target price of Rs 910.
Capital Adequacy
CAR (%)
Tier I (%)
Tier II (%)
Current
After Capital raising
15.7
17.1
11.8
13.5
3.9
3.6
Source: IndiaNivesh Research, Assumptions are taken at CMP of
IndiaNivesh Research
NiveshDaily
January 29, 2015 | 3
Results Preview
Tushar Manudhane
Research Analyst
Dr Reddy’s Lab | Reco: BUY | TP: Rs.3,581
Tel: +91 22 66188835
[email protected]
SALES
DRRD IN (Rs Mn)
Q3FY15E
Q3FY14
Q2FY15 Y-o-Y Ch. (%) Q-o-Q Ch. (%)
37,458
35,338
35,879
6.0
4.4
Operating Profit (EBIT)
6,700
8,467
6,200
(20.9)
8.0
Adj Net Profit
5,881
6,185
5,860
(4.9)
0.4
-
497
(118)
NA
-
Rep Net Profit
5,881
6,683
5,742
(12.0)
2.4
EPS (Rs.)
34.63
36.41
34.50
(4.9)
0.4
bps
bps
Forex (loss) gain/ other
EBIT Margins (%)
17.9
24.0
17.3
(607)
60
Net Margins (%)
15.7
17.5
16.3
(180)
(63)
Source: Company Filings, IndiaNivesh Research
We expect Dr. Reddy Laboratories to report contraction in adjusted PAT for second
consecutive quarter. We expect adjusted PAT to decline by 12% y-y to Rs5.9bn for
the quarter, led by muted US sales and Russian currency devaluation. We expect US
sales to remain almost flat y-y to US$270mn for the quarter due to high base of
past year. Domestic formulation sales are expected to grow at industry average
rate of 15% y-y. We expect EBITDA margin to decline by 607bps y-y due to lower
share of limited competition products in the total sales.
Key factors to watch: performance in PSAI segment, domestic formulation segment
and US market. R&D spend would also be the key factor to watch.
Valuation
At CMP of Rs3,238, the stock trades at 25.0x FY15E EPS of Rs129 and 22.6x FY16E
EPS of Rs143. We have BUY rating with price target of Rs3,581, based on 25x FY16
earnings.
Abhishek Jain
Research Analyst
Tel: +91 22 66188832
[email protected]
Sesa Sterlite | Reco: BUY | TP: Rs.378
Quick Fundamentals (Rs. Mn)
Sesa Sterlite
Revenue
EBIDTA
PAT
EPS (RS.)
EBITDA %
PAT %
Q3FY15e BL
192,920
58,612
14,150
4.77
Margin %
30.4
7.3
Q2FY15
195,494
63,269
16,193
5.46
Margin %
32.4
8.3
Q3FY14
195,230
64,903
18,683
6.30
Margin %
33.2
9.6
Q-o-Q %
‐1.3
‐7.4
‐12.6
‐12.6
bps
-198
-95
Y-o-Y%
‐1.2
‐9.7
‐24.3
‐24.3
-286
-224
Source: Company Filings; IndiaNivesh Research; BL‐ Bloomberg

Consolidated net sales to decline 1.3% QoQ and 1.2% YoY Rs. 192.9b, driven
by (1) lower oil prices driving 30% drop in sales at Cairn, and (2) lower iron
ore and copper realization, offset partly by higher realization in zinc business.

We expect EBITDA margin to contract 286 bps YoY due to impact of lower oil
prices at Cairn offset partly by (a) higher realizations in zinc business (b) better
profitability in power business on slightly better utilization
Key points to watch out

Resumption of mining activity in Goa

Forex gain/loss
Valuation
Sesa Sterlite is one of the largest diversified metal companies in India, with
operations in aluminium, copper, zinc, iron ore, oil and power. Thus earning streams
would be relatively stable given its diversification across commodities. Further
resumption of Karnataka and Goa mines would lead to rerating on the stock. At
CMP Rs 201 the stock is trading at 4.2 x FY16E EV/EBITDA. We maintain BUY rating
on the stock with target price to Rs. 378 (based on 7x FY16 EV/EBITDA).
IndiaNivesh Research
NiveshDaily
January 29, 2015 | 4
Company Update
January 29, 2015
Bajaj Finance Ltd. (BFL)
Previous
Outperformance likely to continue… upgrade to BUY with
upwards revised target price to Rs 5,500
Rating : BUY
Rating : HOLD
Target : Rs.5,500
Target : Rs.3,418
BFL continues to remain preferred pick for investors led by strong business growth,
safer business model with lowest NPAs in industry and limited investment options
in financial space. We believe sharp move in stock price is mainly led by continuous
foreign flow in markets specifically in businesses which continues to do well in
terms of overall business metrics. Within the financial space, we believe private
sector banks and NBFCs qualifies for the said investment purpose. However since
investment options to foreign investors are very limited as foreign investment
limit in most of the private sector banks is either close to allowable limit or
already breached the limit, Bajaj Finance in NBFC space qualifies for both strong
company fundamentals and also in terms of scope for further foreign investments.
Current
CMP : Rs.4,323
STOCK INFO
BSE
NSE
Bloomberg
Reuters
Sector
Face Value (Rs)
Equity Capital (Rs Mn)
Mkt Cap (Rs Mn)
52w H/L (Rs)
Avg Daily Vol (BSE+NSE)
500034
BAJFINANCE
BAF IN
BJFN.BO
NBFC
10
502
216,778
4492/1460
41,947
SHAREHOLDING PATTERN
%
(as on Dec. 2014)
Institutions
Others, Incl Public
Promoters
19.4
19.0
61.6
Source: BSE
STOCK PERFORMANCE (%)
BAJFINANCE
SENSEX
1m
25
9
3m
54
10
12m
180
43
Source: Capitaline, IndiaNivesh Research
BAJFINANCE v/s SENSEX
250
210
170
130
BAJFINANCE
Sensex
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Yogesh Hotwani
Research Analyst
Tel: +91 22 66188839
[email protected]
IndiaNivesh Research
26/01/2015
12/01/2015
29/12/2014
15/12/2014
01/12/2014
17/11/2014
03/11/2014
20/10/2014
06/10/2014
22/09/2014
08/09/2014
25/08/2014
11/08/2014
28/07/2014
14/07/2014
30/06/2014
16/06/2014
02/06/2014
19/05/2014
05/05/2014
21/04/2014
07/04/2014
24/03/2014
10/03/2014
24/02/2014
10/02/2014
27/01/2014
90
BFL continues to perform well on overall business metrics with Asset Under
Management growth of 57% CAGR in FY09-14. As a result, AUM has grown 12.1x
since FY09 which remains best in the industry. This growth is mainly due to
company’s presence in segments which continues to remain unaffected by recent
slowdown in the economy. Penetration level in Consumer financing specially
consumer durables financing, digital product financing and two wheeler financing
continue to increase. Also cross selling of other products and SME financing
(Mortgage and LAP) remains the other key growth drivers. Further BFL continues its
growth trajectory in Q3FY15 as well with AUM growth 37% yoy to Rs 308 bn led by
strong demand for consumer financing in festive season. Growth in SME Financing
(which includes Mortgage, Loan against property Small Business Loan and Loan
Against securities) for BFL also remains strong at 46% yoy in Q3FY15.
NIMs (calc) for BFL is best in the industry at 11.2% in FY14 which has improved
marginally to 11.7% in Q3FY15 due to seasonality of higher disbursements in high
yielding consumer segment on back of festive season. Bank Borrowings for BFL has
come down significantly 56% in FY14 to 47% in Q3FY15 mainly due to cost
differentials between bank and market borrowings.
Asset quality of BFL also remains strong and best in the industry at Gross NPA of
1.5% and Net NPA of 0.49%. Further there is no impact on BFL on back of change in
regulations by RBI of higher standard asset provisioning and early recognition of
NPAs. BFL already follows substantially stringent policy on provisioning which
was higher than RBI norms applicable for NBFCs. BFL continues to provide 0.4% on
all standard assets as against earlier regulatory requirement of 0.25% and inline
with current regulatory requirement of 0.4%. BFL recognize NPAs on 90 days overdue
as against earlier regulatory requirement of 180 days and current requirement of
90 days. On capital adequacy front as well, BFL remains best with CAR of 18.7%
and Tier I capital of 14.7% in Q3FY15.
Valuation
BFL continues to remain preferred pick for investors led by strong business growth,
safer business model with lowest NPAs in industry and limited investment options
in financial space. We believe BFL deserves premium valuation compared to other
NBFCs and private sector banks due to reasons stated above and better return
profile with ROE / ROA of 21% / 3% for FY17E. We have built in 25% AUM CAGR
FY15-17E leading to 23-25% growth in Net interest income and Net profit. At CMP of
Rs 4,323, the stock is trading at P/ABV of 3.7x and 3.2x for FY16E and FY17E
respectively. We upgrade BFL to buy from hold with upwards revised target price of
Rs 5,500, 4x FY17E ABV.
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Company Updates (contd...)
(We have initiated BUY on BFL on 24th April 2012 at Rs 847 with target price of
Rs 1,040 and initiated coverage on 12th July 2013 with strong BUY rating on the stock
at Rs 939 with target price of Rs 1,125. Further we have upgraded the target price
continuously to Rs 3418 on 15th January 2015. All our earlier targets on BFL was
achieved yielding returns of 410% (based on yesterday’s closing price) since 24th April
2012).
Income Statement (Rs Mn)
Interest Earned
Interest Expended
Net Interest Income
Other Income
Net Income
Total Income
Total Expenses
Pre Provision Profit
Provisions
Profit before tax
Tax
Net Profit
Source: IndiaNivesh Research
Balance Sheet (Rs Mn)
Liabilities
Equity
Reserves and Surplus
Net Worth
Borrowings
Other Liabilities & Provisions
Total Liabilities
Assets
Assets on Finance
Investments
Net Block
Other Assets
Total Assets
Source: IndiaNivesh Research
FY14
37886
15732
22153
2848
25001
40733
11511
13490
2578
10912
3722
7190
FY14
FY15E
51506
22670
28836
3011
31847
54517
14532
17315
3550
13765
4703
9062
FY15E
FY16E
66156
29205
36950
3289
40240
69445
18292
21948
4683
17264
5898
11366
FY17E
81588
36279
45309
3555
48864
85143
22249
26616
5841
20775
7098
13678
FY16E
FY17E
498
39411
39909
197496
7220
244625
502
48925
49426
262181
11378
322985
502
59227
59729
333024
13059
405812
502
70413
70915
410133
14359
495408
229710
282
2199
12434
244625
308914
282
2419
11370
322985
391085
282
2660
11784
405812
481049
282
2926
11150
495408
IndiaNivesh Research
Valuation Ratios
Earning Per Share (Rs)
Book Value Per Share (Rs)
Adj Book Value Per Share (Rs)
Dividend Per Share (Rs)
P/E (x)
P/BV (x)
P/ABV (x)
Growth Y‐o‐Y (%)
Asset Under Management
Borrowings
Balance Sheet
Net Interest Income
Other Income
Net Profit
Return Ratios (%)
ROAE
ROAA
Yield / Margin (%)
Yield on Funds
Cost of Funds
Interest Spread
Net Interest Margin
Net Profit Margin
Dividend Yield
Other Ratios (%)
Cost / Income
Provision Coverage Ratio
Net NPA
Source: IndiaNivesh Research
Bajaj Finance Ltd.|Company Updates
FY14
145
802
783
16.1
31.1
5.6
5.8
FY15E
181
986
956
17.1
24.9
4.6
4.7
FY16E
227
1191
1153
18.1
19.9
3.8
3.9
FY17E
273
1414
1367
19.1
16.5
3.2
3.3
37.4
50.4
38.1
28.9
52.6
25.2
33.9
32.8
32.0
30.2
5.7
26.1
26.9
27.0
25.6
28.1
9.2
25.4
23.0
23.2
22.1
22.6
8.1
20.3
19.6
3.4
20.3
3.2
20.8
3.1
20.9
3.0
18.2
9.6
8.7
10.7
17.7
0.4
18.3
9.9
8.4
10.2
16.6
0.4
18.1
9.8
8.3
10.1
16.4
0.4
17.9
9.8
8.1
9.9
16.1
0.4
46.0
75.1
0.3
45.6
65.2
0.5
45.5
65.2
0.5
45.5
65.2
0.5
January 29, 2015 | 2
First Cut Analysis
January 29, 2015
Torrent Pharmaceuticals Ltd.
Previous
A subdued performance impacted by relatively lower sales
growth and higher interest outgo
Rating : HOLD
Rating : HOLD
Target : Rs.1,010
Target : Rs.1,010
Torrent Pharmaceuticals (TRP IN) reported below-expectation PAT at Rs1.67bn,
led by y-y sales de-growth in Europe and higher interest cost. EBITDA margin
improved by 53bps y-y to 19.7%, despite gross margin remaining stable for the
quarter on y-y basis. At CMP of Rs1,209, the stock trades at 22.5x FY15E EPS of
Rs53.6 and 21.5x FY16E EPS of Rs56. We have HOLD rating with PT of Rs1,010,
based on 18x FY16 earnings. We will review our estimates, PT and rating post
concall scheduled today at 5pm.
Current
CMP : Rs.1,209
Rs.mn
Revenue
EBIDTA
Adjusted
PAT
PAT
Q3FY15
11,560
2,280
Q3FY14
9,900
1,900
Q2FY15
12,030
2,590
Y-O-Y %
16.8
20.0
Q-o-Q %
(3.9)
(12.0)
INSPL Est Variance(%)
12,962
(10.8)
2,845
(19.9)
1,670
1,580
1,980
5.7
(15.7)
2,045
(18.3)
1,670
1,580
1,980
5.7
(15.7)
2,045
(18.3)
Source: IndiaNivesh Research
Domestic formulation and US sales drive overall sales growth for the quarter:
TRP’s sales came in at Rs11.6bn, up 16.8% y-y, led by addition of Elder portfolio,
decent growth in remaining domestic formulation (DF) segment. Excluding Elder
portfolio, the DF sales grew by 15% y-y. Even the Elder portfolio grew at healthy
rate of 15% y-y compared to market contraction of 5% on rolling quarter basis.
There has been moderate growth of 14% y-y in US sales to US$27mn. The y-y growth
has been on downtrend for third consecutive quarter now. This has been mainly
due to lack of potential approvals and high base of past quarters. Europe sales
declined by 9% to Rs2.3bn. Brazil sales grew at modest rate of 6% to Rs1.6bn. After
two consecutive quarters of strong y-y growth in Brazil, the y-y growth dipped in
Q3FY15, mainly due to currency fluctuations. In constant currency terms, Brazil
sales grew by 19% on y-y basis for the quarter. ROW sales at Rs1.1bn grew by 12%
y-y for the quarter.
Though sales up 16.8% y-y, PAT is up only 5.7% y-y: Gross margin at 67.8% was
stable y-y and down 51bps q-q. The sequential drop in gross margin is due to
increased competition in few products in US market. However, EBITDA margin grew
by 53 bps y-y to 19.7% y-y. This is mainly due to improved productivity resulting in
employee cost as % of sales reducing from 18.1% to 17.2% for the quarter. The
improvement in EBITDA margin and higher other income was offset by higher
depreciation and higher interest cost. This resulted in moderate growth of 5.7% y-y
in adjusted PAT to Rs1.7bn.
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Tushar Manudhane
Research Analyst
Tel: +91 22 66188835
[email protected]
IndiaNivesh Research
Inorganic growth on cards: Board of TRP has decided to obtain enabling approval
from shareholders for issue of equity shares including convertible bonds or
debentures through qualified institutional placement (QIP) or depository receipt
or any other mode for amount not exceeding Rs30bn. Board has decided to obtain
approval for private placement of unsecured/secured redeemable non-convertible
debentures/bonds for amount not exceeding Rs75bn, subject to overall borrowing
not exceeding Rs100bn. Raising maximum amount of Rs30bn as equity would have
dilution of equity to the extent of 15% on pre-dilution outstanding equity shares.
The amount of money to be raised indicates acquisition in medium term. We would
give more details post clarification in the concall scheduled today.
Valuation: At CMP of Rs1,209, the stock trades at 22.5x FY15E EPS of Rs53.6 and
21.5x FY16E EPS of Rs56. We will review our estimates, PT and rating post concall
scheduled today at 5pm. We have HOLD rating with PT of Rs1,010, based on 18x
FY16 earnings.
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
First Cut Analysis (contd...)
Quarterly financial summary
Rs mn
Net Sales
Other operating income
Consumption of raw material
Employee Cost
Manufacturing & Other Expenditure
Operating Expenses
EBITDA
Other income
Depreciation and Amortization
EBIT
Net Interest Expenses
Profit Before Tax
Tax
Net Profit After Tax
Minority Interest
Adj. PAT
Adj. EPS (Rs)
EO items
Reported PAT
Rep. EPS (Rs)
Q3FY15
11,560
120
3,720
1,990
3,570
9,280
2,280
650
540
2,510
500
2,010
340
1,670
1,670
9.9
1,670
9.9
Q3FY14
9,900
250
3,180
1,790
3,030
8,000
1,900
100
210
2,040
160
1,880
300
1,580
1,580
9.3
1,580
9.3
Y-y (%)
16.8
(52.0)
17.0
11.2
17.8
16.0
20.0
550.0
157.1
23.0
212.5
6.9
13.3
5.7
NA
5.7
5.7
5.7
5.7
Q2FY15
12,030
140
3,810
2,240
3,390
9,440
2,590
720
560
2,890
540
2,350
370
1,980
1,980
11.7
1,980
11.7
Q-q (%)
(3.9)
(14.3)
(2.4)
(11.2)
5.3
(1.7)
(12.0)
(9.7)
(3.6)
(13.1)
(7.4)
(14.5)
(8.1)
(15.7)
NA
(15.7)
(15.7)
(15.7)
(15.7)
9MFY15 9MFY14
34,510
28,290
480
1,300
10,540
9,230
6,070
5,330
9,800
9,010
26,410
23,570
8,100
4,720
1,860
640
1,310
640
9,130
6,020
1,280
390
7,850
5,630
1,640
1,070
6,210
4,560
6,210
4,560
36.7
26.9
(360.0)
6,210
4,200
36.7
24.8
Y-y (%)
22.0
(63.1)
14.2
13.9
8.8
12.0
71.6
190.6
104.7
51.7
228.2
39.4
53.3
36.2
NA
36.2
36.2
47.9
47.9
Key ratios
Ratios
Adj Gross Margins
Adj EBITDA margin
Net Margin
Material cost/Net Sales
Employee Cost/ Net Sales
Other Expenditure/ Net Slaes
Tax Rate
67.8
19.7
14.3
32.2
17.2
30.9
16.9
67.9
19.2
15.6
32.1
18.1
30.6
16.0
(6)
53
(127)
6
(87)
28
96
68.3
21.5
16.3
31.7
18.6
28.2
15.7
(51)
(181)
(197)
51
(141)
270
117
69.5
23.5
17.7
30.5
17.6
28.4
20.9
67.4
16.7
15.4
32.6
18.8
31.8
19.0
208
679
234
(208)
(125)
(345)
189
Sales breakdown
( Rs Mn)
Q3FY15
Q3FY14
Y-y (%)
Q2FY15
Q-q (%)
9MFY15
9MFY14
Y-y (%)
Branded business
4,203
881
5,084
1,558
1,717
2,257
1,064
11,680
2,960
760
3,720
1,470
1,480
2,480
1,000
10,150
42.0
15.9
36.7
6.0
16.0
(9.0)
6.4
15.1
4,420
980
5,440
1,600
1,670
2,480
980
12,170
(4.9)
(10.1)
(6.5)
(2.6)
2.8
(9.0)
8.6
(4.0)
12,143
2,121
14,314
4,648
6,077
7,037
2,914
34,990
9,050
2,430
11,510
4,050
3,760
6,790
3,470
29,580
34.2
(12.7)
24.4
14.8
61.6
3.6
(16.0)
18.3
Contract Manufacture
Total Domestic Sales
Brazil
USA
Europe
ROW
Net Sales
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Torrent Pharmaceuticals Ltd|First Cut Analysis
January 29, 2015| 2
First Cut Analysis (contd...)
Financial Summary
Profit & Loss
Y E March (Rs m)
Net sales
Growth %
Other Operating Income
Total sales
Expenditure
Raw Material
Employee cost
Other expenses
EBITDA
Growth %
EBITDA Margin %
Depreciation
EBIT
EBIT Margin %
Other Income
Interest
PBT
Tax
Effective tax rate %
Extraordinary items
Minority Interest
Adjusted PAT
Growth%
PAT margin %
Reported PAT
Growth%
Balance sheet
FY12
FY13
FY14
FY15E
FY16E
25,944
22.3%
1,015
26,959
30,540
17.7%
1,580
32,120
40,360
32.2%
1,480
41,840
49,334
22.2%
1,562
50,896
57,643
16.8%
1,722
59,365
9,260 12,430
6,230
7,410
9,700 12,480
6,930
9,520
38.4% 37.4%
22.7% 23.6%
830
870
6,100
8,650
20.0% 21.4%
430
380
340
590
6,190
8,440
1,470
1,800
23.7% 21.3%
(370)
(20)
4,700
6,640
34.5% 41.3%
15.4% 16.5%
4,330
6,640
52.4% 53.3%
14,677
9,425
14,251
12,543
31.8%
25.4%
1,030
11,513
23.3%
1,810
1,788
11,535
2,457
21.3%
9,078
36.7%
18.4%
9,078
36.7%
18,302
11,040
16,401
13,622
8.6%
23.6%
1,125
12,497
21.7%
1,000
1,474
12,023
2,525
21.0%
9,498
4.6%
16.5%
9,498
4.6%
8,631
5,337
7,984
5,007
22.4%
19.3%
817
4,189
16.1%
445
395
4,240
723
17.1%
(654)
(23)
3,494
29.3%
13.5%
2,840
5.1%
Y E March (Rs m)
FY12
FY13
FY14
FY15E
FY16E
Share Capital
Reserves & Surplus
Net Worth
Minority Interest
423
11,803
12,226
40
423
13,796
14,219
4
846
18,178
19,024
4
846
25,562
26,409
4
846
33,081
33,927
4
Secured Loans
Unsecured Loans
Total debt
Net defered tax liability
Total Liabilities
3,220
2,520
5,740
510
18,516
5,474
1,587
7,061
258
21,542
8,890 19,890 17,890
2,464
2,464
2,464
11,354 22,354 20,354
(182)
(182)
(182)
30,201 48,586 54,104
Gross Block
Less: Depreciation
Net Block
Capital Work in Progress
Investments
Current Assets
Inventories
Sundry Debtors
Cash & Bank Balance
Other Current Assets
Loans & advances
12,650
4,105
9,160
1,070
666
12,955
4,757
8,198
3,273
844
14,200
5,447
8,753
6,177
2,464
37,654
6,477
31,177
6,177
2,464
41,689
7,602
34,087
6,177
2,464
5,320
5,230
7,610
1,150
560
19,870
9,239
6,878
6,270
1,859
968
25,213
10,060
10,994
7,694
2,590
1,209
32,547
14,192
11,083
3,819
2,590
1,216
32,901
16,582
12,950
5,934
2,590
1,421
39,477
11,550
700
12,250
7,620
18,516
12,266
3,720
15,986
9,227
21,542
16,202
3,538
19,740
12,807
30,201
20,595
3,538
24,133
8,768
48,586
24,564
3,538
28,102
11,376
54,104
FY12
16.8
21.6
4.3
72.2
FY13
25.6
30.5
11.5
84.0
FY14
39.2
44.4
10.0
112.4
FY15E
53.6
59.7
8.6
156.0
FY16E
56.1
62.8
10.0
200.5
ROCE
ROE
12.6%
23.2%
13.4%
30.5%
16.9%
34.9%
14.1%
34.4%
14.3%
28.0%
EBITDA Margin %
Net Margin %
19.3%
13.5%
22.7%
15.4%
23.6%
16.5%
25.4%
18.4%
23.6%
16.5%
PER (x)
P/BV (x)
P/CEPS (x)
EV/EBITDA (x)
Dividend Payout (%)
72.04
16.7
55.9
40.5
23.6
47.25
14.4
39.7
29.64
45.6
30.81
10.8
27.2
21.88
27.0
22.54
7.7
20.2
17.79
20.0
21.54
6.0
19.3
16.08
20.0
7.9
(0.2)
(0.4)
6.7
0.1
0.1
5.1
0.2
0.4
4.1
0.7
1.5
3.5
0.4
1.1
Current Liabilities & provisions
Current Liabilities
Provisions
Net Current Assets
Total assets
Key ratios
Cash Flow
Y E March (Rs m)
PBT
Depreciation
Interest
Other non cash charges
Changes in working capital
Tax
Cash flow fromoperations
Capital expenditure
Free Cash Flow
Other income
Investments
Cash flow from investments
Equity capital raised
Loans availed or (repaid)
Interest paid
Dividend paid (incl tax)
Cash flow from Financing
Net change in cash
Cash at the beginning of the year
Foreign currency exchange impact
Cash at the end of the year
FY12
3,586
817
66
(87)
1,436
(827)
4,991
(1,613)
3,378
305
(62)
(1,370)
(248)
(307)
(1,373)
(1,927)
1,694
6,048
(134)
7,610
FY13
5,820
827
430
(4,218)
(1,325)
1,535
(2,929)
(1,394)
425
87
(2,417)
1,343
(312)
(834)
197
(685)
7,608
(49)
6,270
FY14
8,440
870
312
186
(1,197)
(2,617)
5,994
(4,001)
1,994
337
106
(3,558)
4,149
(610)
(2,674)
865
3,301
6,270
(624)
7,694
FY15E FY16E
9,679 12,023
1,030
1,125
1,788
1,474
164
(493)
(2,457) (2,525)
10,204 11,604
(3,453) (4,035)
6,751
7,569
(20,000)
(23,453) (4,035)
11,000 (2,000)
(1,788) (1,474)
(1,693) (1,980)
7,518 (5,454)
(5,731) 2,115
9,550
3,819
3,819
5,934
Y E March
EPS (Rs)
Cash EPS (Rs)
DPS (Rs)
BVPS
m cap/sales (x)
net debt/equity (x)
net debt/ebitda (x)
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Torrent Pharmaceuticals Ltd|First Cut Analysis
January 29, 2015| 3
Result Update
January 29, 2015
Ajanta Pharma Ltd.
Good show continues
Current
Previous
CMP : Rs.2,681
Rating : HOLD
Rating : HOLD
Target : Rs.2,402
Target : Rs.1,846
STOCK INFO
BSE
NSE
Bloomberg
Reuters
Sector
Face Value (Rs)
Equity Capital (Rs mn)
Mkt Cap (Rs mn)
52w H/L(Rs)
Avg Daily Vol (BSE+NSE)
532331
AJANTPHARM
AJP IN
AJPH.BO
Pharmaceutical
5
177
94,441
2,750 / 777
118,338
SHAREHOLDING PATTERN
%
(as on Dec. 2014)
Promoters
FIIs
DIIs
Public & Others
73.8
7.3
1.5
17.4
Source: BSE
STOCK PERFORMANCE (%) 1m
AJP
12.7
SENSEX
8.5
3m 12m
43.1 184.9
10.0 42.9
Source: Capitaline, IndiaNivesh Research
AJANTA PHARMA v/s SENSEX
300 250 200 150 100 50 ‐
AJANTA PHARMA
SENSEX Index
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Tushar Manudhane
Research Analyst
Tel: +91 22 66188835
[email protected]
IndiaNivesh Research
Adjusted PAT of Ajanta Pharma (AJP IN) at Rs821mn, was better-than-expectation,
led by improved operating margin. AJP has delivered highest ever EBITDA margin
at 35% in past fifteen quarters. The superior product mix and improved efficiency
led to such improvement in operating performance. We raise our FY15E and FY16E
EPS by 8.6% and 7.2% to Rs88.5 and Rs99, respectively. We also introduce FY17E
earnings and roll forward our valuation to 20x (unchanged) FY17E EPS of Rs120.1
to arrive at revised price target of Rs2,402 (from Rs1,846 earlier). At CMP of
Rs2,681, the stock is trading at 27x FY16E EPS of Rs99 and 22.3x FY17E EPS of
Rs120. We maintain HOLD based on valuation.
Particulars (Rs Mn)
Q3FY15
Q3FY14
Q2FY15
YoY %
Net Sales
3,563
EBITDA
1,251
Adj PAT
Reported PAT
QoQ % INSPL Est Variance (%)
2,926
3,312
21.8
7.6
3544
0.5
910
1,046
37.6
19.6
1095
14.3
821
644
775
27.5
6.0
751
9.4
848
624
786
35.8
7.8
751
12.9
Source: IndiaNivesh Research
Highest ever quarterly EBITDA margin in past 15 quarters: AJP’s adjusted PAT grew
by 27.5% y-y to Rs821mn. It surpasses previous high in terms of quarterly adjusted
PAT. The robust performance was driven by domestic formulation (DF), Asia region
and improved efficiency. The superior product mix led to lower material cost,
resulting in gross margin improving by 310bps y-y and 104bps q-q to 71.8% for the
quarter. In addition, lower antimalarial business in Africa also led to increase in
gross margin. Employee cost remained at similar rate of 13.5% of net sales for the
quarter. Other expenses, though increased by 15.2% y-y on absolute basis, it formed
23.2% of net sales, down 133bps y-y and 258bps q-q, indicating increased efficiency.
R&D expense was at Rs110mn for Q3FY15 and formed 3% of net sales. Management
has guided of 4.5% of net sales to be spent on R&D for FY15. The R&D spend would
be divided equally for DF, regulated markets and emerging markets, respectively.
Tax rate for quarter at 32.3% was higher by 259bps y-y and 143bps q-q.
Ophthalmology and Cardiology drive DF sales for the quarter: Domestic sales at
Rs1.3bn, grew by 36%y-y, led by 29.8% y-y growth in domestic branded formulation
sales and 76.9% y-y growth in institutional sales. Ophthalmology and cardiology
remained the key therapy areas, where AJP has shown superior growth of 38% y-y
and 35.7% y-y, respectively. Dermatalogy grew at relatively moderate rate of 14.3%
y-y for the quarter. AJP launched six new products during the quarter, out of which,
two were new to market. The new product launches and increased volume growth
in existing products led to better-than-industry growth for AJP during the quarter.
We expect robust growth to continue for AJP on the back of new product launches
and increased market share in existing products.
Lower anti-malaria business led to relatively moderate growth in emerging
markets: Emerging market sales grew by 14.4% y-y to Rs2.2bn. There has been
downtrend in y-y growth in emerging market sales for past two quarters, mainly
due to lower anti-malarial business in Africa. Excluding anti-malarial business, Africa
sales grew at commendable rate of 48% y-y. Asia sales grew at steady rate of 25% yy to Rs1.1bn for the quarter. AJP launched four products each in Africa and Asia
region. We expect newer products and increased reach of brands in emerging market
would drive growth in this segment for AJP.
AJP’s effort on track for regulated market: AJP’s cumulative ANDA filing stands at
25. AJP has approval for 2 ANDAs and has launched one in US through its own front
end. AJP had sales to the tune of Rs30mn from this product in 9MFY15. AJP has
guided for at-least 6 ANDA filing every year over next 2-3 years.
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Result Update (contd...)
Capex update: The capex program at Dahej, located in Gujarat, is on track. AJP has
spent Rs1.96bn till date out of Rs2.2bn to be spent in total. AJP expects
commercialization of this facility by Q1FY16. AJP has envisaged capex of Rs1.8bn
for Savli facility, located in Gujarat and have spent Rs150mn till date. The technical
issue at the site has led to delay in construction of this facility and is now expected
to start in Q1FY16 and complete by Q4FY17.
Board approved splitting of equity shares Rs5 to Rs2 per share: Board has approved
sub-division of nominal value of equity shares from Rs5 to nominal value of Rs2,
resulting in increase in equity shares to 87.9mn from 35.1mn currently. The paid-up
share capital would remain same at Rs175.8mn. Management has guided for the
procedure to complete by the end of Q4FY15.
Valuation: On the back of robust performance, we raise our adjusted PAT estimate
for FY15E and FY16E by 8.6% and 7.2% to Rs3.2bn and Rs3.5bn, respectively. We
also introduce FY17E earnings and roll forward our valuation. We now value AJP at
20x (unchanged) FY17E earnings to Rs2,402 (from Rs1,846 earlier. We have not
factored any earnings from regulated market in our FY17E financials. Hence there
remains upward bias in earnings, depending on regulatory approval for its facility.
We remain bullish on business model of AJP. However, we maintain HOLD rating
based on limited upside from current levels.
Key changes in estimates and introducing FY17E estimates
Rs mn
Sales
EBITDA
PAT
EPS (Rs)
PT (Rs)
Old estimates
FY15E
FY16E
13,935
16,466
4,306
4,989
2,880
3,262
81.5
92.3
1,846
New estimates
FY15E
FY16E
14,329
17,159
4,671
5,371
3,128
3,498
88.5
99.0
Change (%)
Introducing
FY15E
FY16E FY17E
2.8
4.2
20,095
8.5
7.6
6,109
8.6
7.2
4,244
8.6
7.2
120.1
2,402
Source: IndiaNivesh Research
IndiaNivesh Research
Ajanta Pharma Ltd|Result Update
January 29, 2015 | 2
Result Update (contd...)
Quarterly results summary
Particulars (Rs Mn) Standalone
Q3FY15
Q3FY14
Net Sales
3,563
2,926
Consumption of raw material
1,003
Employee Cost
y-o-y (%)
Q2FY15
9MFY15
9MFY14
7.6
9,683
7,787
9.7
967
3.7
2,773
2,590
7.1
25.5
445
8.2
1,355
1,096
23.7
718
15.2
854
(3.2)
2,427
1,966
23.4
2,312
2,016
14.6
2,266
2.0
6,556
5,652
16.0
1,251
910
37.6
1,046
19.6
3,127
2,136
46.4
126
95
32.7
122
3.2
368
271
36.0
1,125
815
38.1
924
21.8
2,759
1,865
47.9
99
123
(19.4)
208
(52.4)
461
381
21.1
13
(7.7)
(34.9)
21.8
3,312
915
482
384
Other Expenditure
827
Total Expenditure
EBITDA
Depreciation & Amortization
EBIT
Other Income
12
22
(45.0)
1,212
916
32.4
1,119
Tax
391
272
Adj Net Profit
821
644
Interest
Pre-tax Profit
y-o-y (%)
24.3
39
60
8.3
3,181
2,186
44.0
345
13.3
998
658
51.7
27.5
774
6.1
2,183
1,528
42.9
27
(20)
12
Net Profit Reported
848
624
35.8
786
Adj EPS (Rs)
Equity Capital (face value of Rs 5 each
23.2
18.2
21.9
177
177
27.5
-
Q3FY15
Q3FY14
Forex gain (loss)
Q-o-Q(%)
45.5
27
(20)
7.8
2,209
1,508
46.5
61.7
43.2
177
6.1
-
177
177
42.9
-
Q2FY15
bps
9MFY15
9MFY14
-
-
Key ratios
bps
bps
Gross margins (%)
71.8
68.7
310
70.8
104
71.4
66.7
461
EBITDA margin (%)
35.1
31.1
403
31.6
354
32.3
27.4
487
Net Margin (%)
23.1
28.2
22.0
31.3
104
(310)
23.4
29.2
(32)
Material cost/Net Sales (%)
(104)
22.5
28.6
19.6
33.3
(461)
Employee Cost/ Net Sales (%)
13.5
13.1
40
13.4
14.0
14.1
(8)
8
293
Other Expenditure/ Net Sales (%)
23.2
24.5
(133)
25.8
(258)
25.1
25.2
(18)
Tax Rate (%)
32.3
29.7
259
30.8
143
31.4
30.1
128
Q3FY15
Q3FY14
9MFY15
9MFY14
1,320
290
320
380
230
100
2,230
1,100
1,090
40
3,550
970
210
280
280
130
70
1,950
1,060
870
20
2,920
3,660
900
900
1,110
450
300
5,990
3,140
2,750
100
9,650
2,870
647
754
774
482
213
4,886
2,628
2,156
103
7,756
Sales Breakdown
Domestic formulation
- Ophthalmology
- Dermatology
- Cardiology
- Institution
- Others
Emerging market
- Africa
- Asia
- Latam
Total
y-o-y (%)
36.1
38.1
14.3
35.7
76.9
42.9
14.4
3.8
25.3
100.0
21.6
Q2FY15
1,140
300
260
360
120
100
2,160
1,120
1,010
30
3,300
Q-o-Q(%)
15.8
(3.3)
23.1
5.6
91.7
3.2
(1.8)
7.9
33.3
7.6
y-o-y (%)
27.5
39.1
19.3
43.4
(6.6)
41.1
22.6
19.5
27.6
(2.5)
24.4
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Ajanta Pharma Ltd|Result Update
January 29, 2015 | 3
Result Update (contd...)
Therapeutic category-wise composition of domestic
formulation sales for the quarter
Domestic formulation
Region-wise composition of emerging market sales for
the quarter
Latam
2%
Emerging markets
Others
8%
Ophthalmology
22%
Institution
17%
Africa
49%
Asia
49%
Dermatology
24%
Cardiology
29%
Source: Company Filings; IndiaNivesh Research
Source: Company Filings; IndiaNivesh Research
Proportion of DF increases sequentially due to lower
Anti-malaria sales in Africa
EBITDA margin remains on uptrend
50.0
39
DF (as % of total sales)
EBITDA margin (%)
44.8
34
31.6
31.1
29.6
40.0
37.1
36.0
29
27.7
27.6
34.8
33.2
35.0
30.0
35.1
34.0
43.0
45.0
31.6
24
22.1
28.5
19
25.0
14
20.0
Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Source: Company Filings; IndiaNivesh Research
Ajanta Pharma Ltd|Result Update
January 29, 2015 | 4
Result Update (contd...)
Consolidated Financial Statements
Income statement
Balance sheet
Y E March (Rs m)
Y E March (Rs m)
FY13
FY14
FY15E
FY16E
Share Capital
118
177
177
177
177
3,816
5,756
8,572
11,650
15,258
3,934
5,933
8,749
11,827
15,434
Long term borrowings
733
523
623
323
323
Deferred Tax liabilities
237
230
230
230
230
25
Net sales
Growth %
FY13
9,201
38.3%
FY14
11,783
28.1%
FY15E
14,329
21.6%
FY16E
17,159
19.7%
FY17E
20,095
17.1%
Expenditure
Reserves & Surplus
FY17E
Non Current Liabilities
Material Cost
3,026
3,455
4,084
5,062
6,029
Employee cost
1,232
1,570
1,906
2,265
2,813
Other expenses
2,806
3,371
3,668
4,461
5,144
Other long term Liabilities
25
25
25
25
EBITDA
2,138
3,387
4,671
5,371
6,109
Long term Provisions
30
28
28
28
28
Growth %
64.8%
58.4%
37.9%
15.0%
13.7%
1,025
806
906
606
606
EBITDA Margin %
23.2%
28.7%
32.6%
31.3%
30.4%
342
439
468
630
715
EBIT
1,796
2,948
4,203
4,741
5,394
Trade payables
EBIT Margin %
18.8%
27.7%
32.1%
30.4%
29.7%
Deprecaition
Other Income
129
409
482
569
671
Interest
191
87
85
88
88
1,734
3,270
4,601
5,221
5,977
647
960
1,472
1,723
1,733
37.3%
29.4%
32.0%
33.0%
29.0%
PBT
Tax
Effective tax rate %
Extraordinary items
Current Liabilities
Short term borrowings
513
606
606
606
606
1,317
1,245
1,287
1,664
2,065
Other current liabilities
194
476
224
223
281
Short term Provisions
199
427
427
287
343
2,223
2,754
2,543
2,779
3,295
7,182
9,494
12,198
15,213
19,335
2,851
3,729
4,981
5,380
5,871
-
-
-
-
-
Total
Non Current Assets
Net Block
CWIP
34
29
-
-
-
Non current investment
71
88
88
88
-
-
-
-
-
Long term loans and advances
85
85
85
85
85
1,087
2,310
3,128
3,498
4,244
486
392
392
507
507
Growth%
32.1%
112.5%
35.4%
11.8%
21.3%
3,492
4,293
5,545
6,060
6,551
PAT margin %
11.8%
19.6%
21.8%
20.4%
21.1%
Current Assets
Reported PAT
1,121
2,339
3,128
3,498
4,244
Current Investments
Inventories
550
550
550
550
1,476
1,554
1,884
2,257
2,643
Sundry Debtors
Minority Interest
Adjusted PAT
Growth%
32.1%
112.5%
35.4%
11.8%
21.3%
Other non current assets
-
88
1,505
2,022
2,459
2,945
3,449
Cash & bank Balances
462
604
1,324
2,880
5,534
Loans & Advances
240
464
430
515
603
7
6
6
6
6
3,690
5,201
6,653
9,152
12,784
7,182
9,494
12,198
15,213
19,335
Other current Assets
Total
Key ratios
Cash Flow
FY14E
FY15E
FY16E
FY17E
Y E March
FY13
FY14
FY15E
FY16E
1,768
3,270
4,601
5,221
5,977
Adj EPS (Rs)
30.8
65.4
88.5
99.0
120.1
Depreciation
342
439
468
630
715
Cash EPS (Rs)
40.4
77.8
101.8
116.8
140.3
Interest
191
87
5
11
Y E March (Rs m)
PBT
FY13
Other non cash charges
85
-
88
-
FY17E
88
DPS (Rs)
2.9
10.0
8.9
11.9
18.0
-
BVPS
111
168
248
335
437
Changes in working capital
385
(745)
(944)
(823)
(463)
Tax
(331)
(937)
(1,472)
(1,723)
(1,733)
ROCE
15.7%
21.9%
23.4%
20.9%
19.8%
2,124
2,737
3,394
4,584
ROE
27.6%
38.9%
35.8%
29.6%
27.5%
(1,348)
(1,720)
(1,030)
(1,206)
1,018
2,365
3,378
-
-
-
Cash flow from operations
2,360
Capital expenditure
Free Cash Flow
(912)
1,448
Other income
(141)
CWIP
Cash flow from investments
776
(530)
-
-
-
-
-
(1,053)
(1,878)
(1,720)
(1,030)
(1,206)
(748)
57
100
(300)
48
63
Trades Payable days
159
132
115
120
125
22.3
41.0
30.3
27.1
16.0
10.8
8.0
6.1
P/CEPS (x)
66.3
34.5
26.3
23.0
19.1
EV/EBITDA (x)
44.7
28.1
20.3
17.3
14.8
Dividend Yield %
0.1%
0.4%
0.3%
0.4%
0.7%
4.7
(87)
(85)
(88)
(88)
(171)
(313)
(420)
(637)
Inc from other investments
(808)
63
87.2
(195)
(298)
48
63
24.1
(102)
(201)
48
63
P/BV (x)
Interest paid
(1,045)
48
60
PER (x)
Dividend paid (incl tax)
Cash flow from Financing
59
Sundry Debtors Days
-
Equity capital raised
Loans availed or (repaid)
Inventories Days
(725)
Net change in cash
262
45
720
1,557
2,654
m cap/sales (x)
10.3
8.0
6.6
5.5
Cash at the beginning of the year
115
462
604
1,324
2,880
net debt/equity (x)
0.3
0.2
0.1
0.1
0.1
85
97
net debt/ebitda (x)
0.4
0.2
0.0
-0.4
-0.8
462
604
Adjusted cash
Cash at the end of the year
1,324
2,880
5,534
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Ajanta Pharma Ltd|Result Update
January 29, 2015 | 5
Result Update
January 29, 2015
Lumax Auto Technologies Ltd.
In line with our expectation
Current

Previous
CMP : Rs.359
Rating : BUY
Rating : BUY
Target : Rs.575
Target : Rs.575
STOCK INFO
BSE
NSE
Bloomberg
Reuters
Sector
Face Value (Re)
Equity Capital (Rs Mn)
Mkt Cap (Rs Mn)
52w H/L (Rs)
Avg Daily Vol (BSE+NSE)
532796
LUMAXTECH
LUAT.BO
LMAX IN
Auto Ancilliary
10
136
4,894
386/91
29,239
SHAREHOLDING PATTERN
%
(as on Sep. 2014)
Institutions
Others, Incl Public
Promoters
14.28
30.05
55.67
Source: BSE
STOCK PERFORMANCE (%) 1m
LATL
17
SENSEX
9
3m
45
11
12m
263
43
Source: Capitaline, IndiaNivesh Research
LATL v/s SENSEX
400.00
360.00
320.00
280.00
240.00
200.00
160.00
120.00
LATL
Sensex
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Abhishek Jain
Research Analyst
Tel: +91 22 66188832
[email protected]
IndiaNivesh Research
26/01/2015
12/01/2015
29/12/2014
15/12/2014
01/12/2014
17/11/2014
03/11/2014
20/10/2014
06/10/2014
22/09/2014
08/09/2014
25/08/2014
11/08/2014
28/07/2014
14/07/2014
30/06/2014
16/06/2014
02/06/2014
19/05/2014
05/05/2014
21/04/2014
07/04/2014
24/03/2014
10/03/2014
24/02/2014
10/02/2014
27/01/2014
80.00
Lumax Auto technologies (LATL) reported Q3 FY15 numbers in line with our
expectation. The company witnessed 9% YoY and 1% QoQ growth in the revenue
to Rs 2.09 bn (in line with our expectation of Rs 2.04 bn) due to higher
volume. On operational front, EBITDA margin expanded 101 bps YoY to 8.4
due to lower raw material expenses. Net profit increased by 30% YoY to Rs 83
mn, slightly lower than our expectation of Rs. 85 mn due to higher interest
expenses.
Rs.mn
Revenue
EBIDTA
PAT
Adjusted PAT
Q3FY15
2093
177
83
83
Q2FY15
2197
186
91
91
Q3FY14 Q‐o‐Q % Y‐o‐Y % INSPL Q3FY15e
1929
-5
9
2,045
144
-4
23
179
64
-10
30
85
64
-10
30
85
Variance(%)
2.36
-0.98
-2.86
-2.86
Source: Company Filings; IndiaNivesh Research

We have seen a 11 percent rise in top-line in 9MFY15, Q3FY15 was little
subdued compared to the first two quarters mainly because of the less
number of working days as company undertakes annual maintenance shut
down in December. However Q4FY15 should be much stronger growth
compared to the initial quarters. So, we expect 14.5% growth in revenue for
the whole year. With comfortable debt to equity of just 0.2x & strong ROE of
~22% we believe the company has potential to yield very high returns in next
2-3 years. The company has a consistent dividend track record with dividend
payout of above 25%. At CMP of Rs 359, LATL is trading at 8.60x FY16e and
6.2x FY17e EPS. We find current valuation attractive and maintain BUY rating
on LATL with target price of Rs. 575 (10x FY17E EPS).
Quick Fundamentals (Rs. Mn)
Revenue
Other Operating Income
Total Income
Cost of Revenues
Raw Materials
Other Expenditure
Employee Expenses
EBIDTA
Depreciation
EBIT
Interest Expense
Other income
Exceptional item
PBT
Provision for taxation
PAT
Adjusted PAT
EPS (RS.)
Margin %
EBITDA
EBIT
PBT
PAT
Q3FY15
2,093
22
2,115
1,938
1,549
214
174
177
51
126
13
8
Q2FY15
2,197
21
2,218
2,032
1,637
218
174
186
51
134
12
10
121
39
83
83
6.07
132
41
91
91
6.72
8.4
6.0
5.7
3.9
8.4
6.1
6.0
4.1
Q3FY14 QoQ % YoY %
1,929
‐5
9
18
3
21
1,947
‐5
9
1,804
-5
7
1,460
-5
6
185
-2
16
159
0
10
144
‐4
23
48
0
6
95
-6
33
9
10
51
5
-16
65
91
28
64
64
4.68
7.4
4.9
4.7
3.3
-8
-5
‐10
‐10
32
39
30
30
Basis Points (BPS)
2 101
-9 108
-23 103
-22
63
9MFY15
6,258
62
6,320
5,798
4,655
635
507
522
155
368
39
34
214
577
165
413
199
14.64
9MFY14
5,615
48
5,663
5,241
4,278
525
438
421
126
296
21
23
YoY%
11
30
12
11
9
21
16
24
23
24
82
48
298
89
209
209
15.34
8.3
5.8
9.1
6.5
7.4
5.2
5.3
3.7
94
85
98
‐5
‐5
BPS
83
60
388
285
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Result Update (contd...)
Raw material prices decreased 167 bps YoY (as a percentage of revenue) to
74% from 75.7% in Q3 FY14. Staff cost increased by 11 bps YoY to 8.3% (as a
percentage of revenue) and other expenditure increased by 65 bps YoY to
10.2% (as a percentage of revenue).

Cost Analysis (% of Revenue)
Raw Materials (Adj.)
Employee Expenses
Other Expenses
Q3FY15
74.0%
8.3%
10.2%
Q2FY15
74.5%
7.9%
9.9%
Q3FY14 bps QoQ bps YoY
75.7%
-52 -167
8.2%
39
11
9.6%
32
65
9MFY15 9MFY14 Change in bps
74.4%
76.2%
-181
8.1%
7.8%
30
10.1%
9.3%
80
Source: Company Filings; IndiaNivesh Research
Investment rationale
Lighting business, technology up gradation and innovation are the key
factor of growth

On consolidated basis ~36% of revenue of LATL comes from lighting products,
which have become an integral part of vehicle. Styling & design of lamp is
being upgraded continuously to enhance the appeal of the vehicle. Further,
OEMs now demand lower wattage & higher luminosity lamps to save energy
which has made these products more technologically advanced.

The company has been beefing up its in-house product development capability
to be self reliant & at par with evolving global light technologies. LATL has
also been strengthening its design & development team to handle the
increasing demand of OEMs for new products in the shortest lead time. We
believe the company’s competitive strength & proven track record will help
LATL in garnering large part of business share from OEM in their (OEMs) new
launches & maintain its dominant position. Lumax Industries, Autolite and
Phoenix Lamps are the other key player in the lighting business. We expect
revenue from lighting business to grow at CAGR of 12.3% from FY14-FY17e.

Further, Lumax Auto-technology has diversified into LED (Automotive and
infrastructure both) lighting businesses, which we believe will be the new
growth driver. LED lighting would have much higher realization than
traditional lightings; this will lead to strong growth in top line.
Lighting business revenue and Growth
15
4000
3500
10
3000
Rs Mn
2500
5
2000
0
1500
1000
-5
500
2903
2713
2984
3342
3744
FY13
FY14
FY15e
FY16e
FY17e
-10
0
Revenue
growth (%)
Source: Company Filings; IndiaNivesh Research
Automatic gears shifter game changer for the company

IndiaNivesh Research
Lumax produces manual automated gear shift (AGS) for different clients,
however the company has started to produce automatic gear shifter.
Automatic transmission cars are slowly catching the imagination of masses.
At present they account for less than 5% of the total vehicles and is expected
to increase at an alarming rate in the near future. An example would be
phenomenal success of Maruti Suzuki’s Celerio. Maruti has two models having
auto gear shift variants & also launched Alto K10, the country’s cheapest
small car with automated gear shift (AGS) technology. Tata Motors might
Lumax Auto Technologies Ltd.
January 29, 2015| 2
Result Update (contd...)
soon come out with automatic variants of its upcoming hatchback Bolt and
compact sedan Zest.
In order to speed the Automatic Gear Shift lever business, LATL has signed a
joint venture(55:45) agreement with Japan’s Mannoh Industrial Co Ltd to
design and manufacture complete gear shift lever systems for manual,
automatic, AMT & CVT transmissions in India. Recently the company has
sold 45% stake of LMAT to Mannoh Industrial Co, Ltd, Japan.Mannoh, a
technology leader in automatic, AMT, CVT and MT type gear shift lever
assemblies, will provide complete local designing & testing capability in
India through its R&D centre located at Manesar, Gurgaon. Key clients of
Japan’s Mannoh Industrial Co Ltd are Toyota Motor Co., Ltd., Hino Motors
Ltd., Daihatsu Motor Co., Ltd., Honda Motor Co., Ltd., Mitsubishi Motors
Corp., Isuzu Motors Ltd., Mazda Motor Corporation, Fuji Heavy Industries
Co., Ltd. LATL is in agreement to supply for Automatic Gear Shift . We expect
revenue from Gears shifter business to grow at CAGR of 30% from FY14FY17e on the back of entry in automatic gear product.

Revenue from Gear shifter business
600
500
Rs Mn
400
300
200
100
480
245
319
414
538
FY13
FY14
FY15e
FY16e
FY17e
0
Revenue
Source: Company Filings; IndiaNivesh Research
Air intake system is a growing business- In 2-3 years business will be
sizeable
Another JV in equal proportion with Italy based Cornagila christened Lumax
Cornagiia Auto Tech (LCAT) is supplying Air Intake System (AIS) to leading automobile
manufactures in India like TATA, FIAT, VOLKSWAGEN, SKODA & General Motors. The
air intake ensures the optimal filling of the engine cylinders with a suitable mass
of comburent consisting of fresh air and recirculated exhaust gases. The intake
manifold also carries out the function of integrating other engine supply control
functions: fuel supply, fuel anti-evaporation system control, and engine operation
point control. Hence, the air intake manifold can also carry out the function of
engine supply mechatronic module, with the following advantages: compact size,
cost, and assembly on the engine. We expect revenue from Air Intake business to
grow at CAGR of 63% from FY14-FY17e.
Revenue from Air Intake System
600
500
Rs Mn
400
300
200
100
106
127
FY13
FY14
191
324
551
FY15e
FY16e
FY17e
0
Revenue
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Lumax Auto Technologies Ltd.
January 29, 2015| 3
Result Update (contd...)
Margin to expand to 11% by FY17e on the back of high operating leverage
and value added products
With strong volume growth expectations in automotive industry the next couple of
years, we expect robust margin expansion. We expect LATL margins to gradually
improve in coming quarters led by high operating leverage and value added products.
1600
11.0
1400
11
10.0
10
8.8
1000
8.7
9
7.9
800
8
600
7
400
6
200
0
5
FY13
FY14
EBITDA
FY15e
FY16e
Growth in percentage
EBITDA( Rs. mn)
1200
12
FY17e
EBITDA Margin %
Source: Company Filings; IndiaNivesh Research
The company’s manufacturing facility is presently operating in two shifts and
capacity utilization stand at 60 to 70 percent. From here on we expect capacity
utilization to increase to 80- 85 percent by FY16E. Thus higher operating leverage
would help in expansion of margin. We expect margins to gradually improve to
11% by FY17E vs. 7.9% margin in FY14.
Valuation
We expect company to witness strong volume growth coupled with margin
expansion in the next couple of years on the back of revival in automotive demand
and value added products. With comfortable debt to equity of just 0.2x & strong
ROE of ~22% we believe the company has potential to yield very high returns in
next 2-3 years. The company has a consistent dividend track record with dividend
payout of above 25%. At CMP of Rs 359, LATL is trading at 8.60x FY16e and 6.2x
FY17e EPS. We find current valuation attractive and maintain BUY rating on LATL
with target price of Rs. 575 (10x FY17E EPS).
IndiaNivesh Research
Lumax Auto Technologies Ltd.
January 29, 2015| 4
Result Update (contd...)
Consolidated Financials
Income Statement
Balance Sheet
Y E March (Rs m)
FY13
FY14
FY15e
FY16e
FY17e
Y E March (Rs m)
Net sales
7,663
7,628
8,732
10,285
12,298
Share Capital
Y/Y Ch %
2.1
‐0.5
14.5
17.8
19.6
COGS
6,688
6,679
7,606
8,845
10,453
SG&A
304
344
367
411
492
EBITDA
672
605
760
1,028
1,353
Y/Y Ch %
4.2
‐9.9
25.5
35.4
31.5
11.0
EBITDA Margin %
FY13
FY14
FY15e
FY16e
136
136
136
136
136
Reserves & Surplus
1,977
2,123
2,429
2,871
3,482
Net Worth
2,113
2,260
2,566
3,007
3,618
0
0
0
0
0
274
524
554
504
454
Minority
Long-term + ST loans
Others
FY17e
49
54
54
54
54
Total Liabilities
2,436
2,837
3,173
3,565
4,126
4,962
8.8
7.9
8.7
10.0
Deprecaition
108
176
196
205
214
EBIT
564
429
563
823
1,138
Gross Block
3,841
4,362
4,562
4,762
7.4
5.6
6.5
8.0
9.3
Less Depreciation
1,835
2,011
2,207
2,413
2,627
6
38
44
48
53
Net Block
2,006
2,351
2,355
2,350
2,335
50
Intangible
Investments
348
194
240
194
240
194
240
194
240
194
Defered tax (net)
-101
-144
-144
-144
-144
EBIT Margin %
Interest
Other Income (Inc Forex)
37
38
41
46
Extra Ordinary Exps/(Income)
-
-
-
-
PBT
594
429
561
820
1,135
Tax
183
127
168
254
352
Effective tax rate %
30.9
29.6
30.0
31.0
31.0
Current Assets
1,781
1,949
2,442
3,180
4,157
1,286
1,321
1,454
1,724
2,022
Reported PAT
Y/Y Ch %
-
411
302
393
566
783
Sundry Debtors
‐19.0
‐26.4
29.9
44.2
38.4
Cash & Bank Balance
Minority & Exceptional
-
-
-
-
-
Adj. PAT (APAT)
411
302
393
566
783
RPAT Margin %
Y/Y Ch %
5.4
4.0
4.5
5.5
6.4
‐19.0
‐26.4
29.9
44.2
38.4
98
139
470
846
1432
Loans & advances
108
143
123
144
148
Inventories
288
346
395
465
556
2,325
Current Liabilities
1,607
1,514
1,680
1,972
Provisions
184
239
235
282
332
Net Current Assets
-10
195
528
925
1,500
2,436
2,837
3,173
3,565
4,126
Total assets
Key Ratios
Cash Flow
Y E March (Rs m)
Operaing Profit
Depreciation
Interest Exp
FY13
564
108
-6
FY14
FY15e
429
563
176
196
-38
-44
FY16e
823
205
-48
FY17e
Y E March
FY13
FY14
FY15e
FY16e
FY17e
1,138
Adj.EPS (Rs)
30.1
22.2
28.8
41.5
57.5
214
Cash EPS (Rs)
38.1
35.1
43.2
56.6
73.2
-53
DPS (Rs)
6.0
6.0
6.0
6.0
6.0
BVPS
155.0
165.8
188.2
220.6
265.5
Changes in Working Capital
208
-79
40
25
14
Cash Flow After Chang in WCapital
874
488
756
1,005
1,314
ROCE %
23.9
16.8
19.5
24.8
29.3
-352
ROE %
19.4
13.4
15.3
18.8
21.7
ROIC %
13.5
7.8
9.7
12.4
15.9
8.8
7.9
8.7
10.0
11.0
Tax
Others
Cash flow from operations
Capital expenditure (net)
Free Cash Flow
Cash flow from investments
-183
-127
-168
-254
0
0
0
0
0
691
361
588
751
962
EBITDA Margin %
-1,111
-414
-200
-200
-200
PER (x)
11.9x
16.2x
12.5x
8.6x
6.2x
-420
-53
388
551
762
P/BV (x)
2.3x
2.2x
1.9x
1.6x
1.4x
P/CEPS (x)
9.4x
10.2x
8.3x
6.3x
4.9x
EV/EBITDA (x)
4.0x
4.2x
6.6x
4.4x
2.9x
Dividend payout %
19.9
27.1
20.8
14.4
10.4
m cap/sales (x)
0.3x
0.3x
0.6x
0.5x
0.4x
-0.3x
-1,111
-414
-200
-200
-200
Long-Term Debt (Decrease) Increase
257
249
30
-50
-50
Dividend paid (incl tax)
-82
-82
-86
-125
-126
net debt/equity (x)
0.1x
0.2x
0.0x
-0.1x
net debt/ebitda (x)
-44
-74
0
0
0
0.3x
0.6x
0.1x
-0.3x
-0.7x
Cash flow from Financing
132
94
-56
-175
-176
Debtors (Days)
60
62
61
61
60.0x
Net change in cash
-288
41
332
376
585
Creditors (Days)
75
71
70
70
69
846
Inventory (Days)
14
17
17
17
17
Cash Conversion Cycle (Days)
-1
7
7
8
8
Share Issue / Repurchase & Others
Cash at the beginning of the year
Cash at the end of the year
386
98
98
139
139
470
470
846
1,432
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Lumax Auto Technologies Ltd.
January 29, 2015| 5
Result Update
Alstom T&D India Ltd.
January 29, 2015
Unexpectedly Disappointing Performance
Current
Highlights:
Previous
CMP : Rs.538
Rating : SELL
Rating : HOLD
Target : Rs.444
Target : Rs.444
STOCK INFO
BSE
522275
NSE
ALSTOMT&D
Bloomberg
ATD IN
Reuters
ALST.NS
Sector
Heavy Electrical Equipment
Index
S&P BSE 500
Face Value(Rs)
2
Equity Capital(Rs mn)
512
Mkt Cap(Rs mn)
136,473
52w H/L
565/170
3m Avg Daily Volume(BSE+NSE)
186,217
Alstom T&D India reported disappointing set of numbers for Q3FY15. Despite of
large order book of Rs ~79 bn, company top-line has reported 9.7% y-o-y de-growth
to Rs 7,661 mn. EBITDA margin of 5.3% reported in Q3FY15 is at multi-quarters low,
which can be compared with 4.3% EBITDA margin reported in Q2FY13. Company
has been maintaining double digit EBIDTA margins since Q4FY14; this streak was
broken in Q3FY15 by huge variance. Company EBITDA has declined by 43.9% to Rs
405 mn, mainly on account of higher material/project costs and other expense.
Net profit of the company declined by 86.4% to Rs 26 mn, led by fixed costs like
depreciation (Rs 220 mn) and finance cost (Rs 149 mn).
Taking into consideration the highly unexpected negative result for the quarter,
we’ll introduce FY17E numbers post the concall which is scheduled on 3rd Feb, 2015.
Stock has run-up in last few days from Rs 470 to Rs 538, which is at FY16E PE multiple
of 36.3x. Taking notice of abrupt negative performance in Q3FY15, we change the
rating from HOLD to SELL. We’ve valued the stock conservatively with TP of Rs 444
(Implied PE 30x FY16E). This is tactical SELL rating on stock as we remain positive on
the long term growth story of the company.
Rs mn
SHAREHOLDING PATTERN
%
(as on Dec. 2014)
Promoters
FIIs
DIIs
Public & Others
75.00
1.37
14.97
8.66
Q3FY15
Q3FY14
Q2FY15
Y‐o‐Y
Q‐o‐Q
7,661
405
26
0.10
5.3%
0.3%
8,483
722
189
0.74
8.5%
2.2%
9,137
938
355
1.39
10.3%
3.9%
‐9.7%
‐43.9%
‐86.4%
‐86.4%
‐323
‐189
‐16.2%
‐56.9%
‐92.7%
‐92.7%
‐498
‐355
Net Revenue
EBITDA
Net Profit
EPS (Rs)
EBITDA margin %
Net margin %
INSPL
Estimate
9,690
1,026
393
1.53
10.6%
4.1%
Variance
%
‐20.9%
‐60.6%
‐93.4%
‐93.4%
‐531
‐371
Standalone, Source: Company, IndiaNivesh Research
Source: BSE
STOCK PERFORMANCE (%) 1m
3m 12m
ALSTOM T&D
14.34 43.70 184.91
SENSEX
8.55 10.53 42.80
Source: Capitaline, IndiaNivesh Research
ALSTOM T&D v/s SENSEX
300 250 Revenue disappointment despite of large order book:
In Q3FY15, Alstom T&D India top-line has shown de-growth of 9.7% y-o-y and 16.2%
q-o-q to Rs 7,661 mn. This large drop in top-line has come in-spite of company
having highest ever order backlog of Rs ~79 bn. In our opinion this de-growth could
be due two possible factors 1) Slower execution of current projects or 2) Delay in
revenue recognition of some projects in Q3FY15, which can be covered up in
Q4FY15E.
On a 9-month basis, Company top-line has increased marginally by 4.5% to Rs 23,531
mn in 9MFY15.
200 150 100 Net Revenue (Rs mn) and EBITDA margin (%):
Tel: +91 22 66188826
[email protected]
Rahul Koli
Research Associate
Tel: +91 22 66188833
[email protected]
IndiaNivesh Research
10.0%
8,483 5,858 11.4%
10.3%
9,137 6,733 7,129 7,661 Net Revenue (Rs mn)
12%
10%
8%
6%
4%
2%
0%
Q3FY15
Q2FY15
Q1FY15
5.3%
Q4FY14
4.3%
8.5%
Q3FY14
Daljeet S. Kohli
Head of Research
10.2%
6,830 13,130 9.3%
8,168 Q2FY14
Source: Capitaline, IndiaNivesh Research
7.5%
10.3%
Q1FY14
Sensex
10,958 Q4FY13
Alstom T&D
14,000
12,000
10,000
8,000
6,000
4,000
2,000
‐
Q3FY13
‐
Q2FY13
50 EBITDA margin %
Source: Company; IndiaNivesh Research
Abrupt break in streak of double digit EBITDA margin:
EBITDA margin of 5.3% reported in Q3FY15 is at multi-quarters low, which can be
compared with 4.3% EBITDA margin reported in Q2FY13. Company has been
maintaining double digit EBIDTA margins since Q4FY14; this streak was broken in
Q3FY15 by huge variance. Employee cost and other expenses have increased by
IndiaNivesh Securities Private Limited
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IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Result Update (contd...)
149 bps and 211 bps respectively (y-o-y basis), whereas material cost has remain
stable. Consequently EBITDA margin decline by 326 bps y-o-y. On q-o-q basis material
cost has jumped sharply by 369 bps and employee cost has gone up by 235 bps.
This resulted in q-o-q EBITDA margin contraction by 498 bps to 5.3%.
Finance cost of the company has declined by 35.3% y-o-y and 29.6% q-o-q to Rs
149 mn, which reflects possible decline in debt of the company.
For the 9-month-FY15, EBITDA margin has declined by 30 bps to 9%. EBITDA for
9MFY15 has shown marginal growth of 1.2% to Rs 2,108 mn. net profit for 9MFY15,
has increased substantially by 21.5% to Rs 665 mn reflecting 1) lower depreciation
cost of Rs 605 mn, down 6.6% y-o-y and 2) 21.1% decline in finance cost to Rs 502
mn.
Cost Analysis:
Rs mn
Material and Project cost
as % of net revenue
Employee benefit expense
as % of net revenue
Other expenses
as % of net revenue
EBITDA
EBITDA Margin %
Other Income
Depreciation
as % of EBITDA
EBIT
EBIT margin %
Q3FY15
5,283
69.0%
863
11.3%
1,110
14.5%
405
5.3%
4
220
54.5%
188
2.5%
Q3FY14
Q2FY15
5,882
5,964
69.3%
65.3%
829
815
9.8%
8.9%
1,050
1,420
12.4%
15.5%
722
938
8.5%
10.3%
20
1
225
191
31.2%
20.3%
517
749
6.1%
8.2%
Y‐o‐Y
‐10.2%
‐37
4.1%
149
5.7%
211
‐43.9%
‐323
‐81.1%
‐2.0%
2,330
‐63.6%
‐364
Q‐o‐Q
9MFY15 9MFY14
‐11.4%
15,299
14,607
369
65.0%
64.9%
5.9%
2,520
2,519
235
10.7%
11.2%
‐21.8%
3,604
3,299
‐105
15.3%
14.7%
‐56.9%
2,108
2,084
‐498
9.0%
9.3%
192.3%
7
31
15.7%
605
648
3,416
28.7%
31.1%
‐74.9%
1,510
1,467
‐574
6.4%
6.5%
Y‐o‐Y
4.7%
12
0.0%
‐48
9.2%
66
1.2%
‐30
0.0%
‐6.6%
‐240
3.0%
‐10
Source: Company, IndiaNivesh Research
Valuation and Outlook:
In addition to acquisition of newer orders, execution of in-hand order book and
retention/expansion of margin remains key concern for the companies in capital
goods sector. Alstom T&D has won many new orders in past quarters due to which
it now has the highest ever order book of Rs ~79 bn. More details on the performance
of the Q3FY15 will be available after the concall of the company. Taking into
consideration the unexpected negative result for the quarter, we’ll introduce FY17E
numbers post the concall which is scheduled on 3rd Feb, 2015.
Stock has run-up in last few days from Rs 470 to Rs 538, which is at FY16E PE multiple
of 36.3x. Taking notice of abrupt negative performance in Q3FY15, we change the
rating from HOLD to SELL. We’ve valued the stock conservatively with TP of Rs 444
(Implied PE 30x FY16E). This is tactical SELL rating on stock as we remain positive on
the long term growth story of the company.
IndiaNivesh Research
Alstom T&D India Ltd.|Result Update
January 29, 2015 | 2
Result Update (contd...)
Rs mn
Net Income from operations
Other Operating Income
Total Income from operations
Expenses:
Materials and related cost
Changes in inventories etc
Material costs
as % of net revenue
Employee benefit expense
Other expenses
EBITDA
EBITDA Margin %
Other Income
Depreciation
EBIT
EBIT margin %
Finance Cost
Exceptional Item
PBT
Tax expense
Effective tax rate %
Net Profit
Net Profit margin %
EPS (Rs)
Q3FY15
7,630
31
7,661
Q3FY14
8,472
12
8,483
Q2FY15
9,076
61
9,137
5,822
-539
5,283
69.0%
863
1,110
405
5.3%
4
220
188
2.5%
149
39
14
34.4%
26
0.3%
0.10
5,587
295
5,882
69.3%
829
1,050
722
8.5%
20
225
517
6.1%
230
287
97
34.0%
189
2.2%
0.74
6,384
-420
5,964
65.3%
815
1,420
938
10.3%
1
191
749
8.2%
211
538
183
34.0%
355
3.9%
1.39
Y‐o‐Y
‐9.9%
169.7%
‐9.7%
Q‐o‐Q 9MFY15 9MFY14
‐15.9%
23,417 22,090
‐48.8%
113
419
‐16.2% 23,531
22,509
‐10.2%
‐37
4.1%
5.7%
‐43.9%
‐323
‐81.1%
‐2.0%
‐63.6%
‐364
‐35.3%
‐11.4%
369
5.9%
‐21.8%
‐56.9%
‐498
192.3%
15.7%
‐74.9%
‐574
‐29.6%
‐86.3%
‐92.7%
‐86.4%
‐190
‐86.4%
‐92.7%
‐355
‐92.7%
17,074
-1,776
15,299
65.0%
2,520
3,604
2,108
9.0%
7
605
1,510
6.4%
502
1,008
343
34.0%
665
2.8%
2.60
15,525
-919
14,607
64.9%
2,519
3,299
2,084
9.3%
31
648
1,467
6.5%
637
830
282
34.0%
548
2.4%
2.14
Y/Y
6.0%
‐73.0%
4.5%
4.7%
12
0.0%
9.2%
1.2%
‐30
‐6.6%
3.0%
‐10
‐21.1%
21.5%
21.5%
39
21.5%
Standalone, Source: Company, India Nivesh Res earch
IndiaNivesh Research
Alstom T&D India Ltd.|Result Update
January 29, 2015 | 3
Global Markets - Outlook
Dharmesh Kant
VP Strategies & Fund Manager (PMS)
Mobile: +91 77383 93372
Tel: +91 22 66188890
[email protected]
Global Market Update

US Markets: U.S. stocks ended Wednesday’s choppy trading session sharply
lower after the Federal Reserve’s policy-making committee reiterated it plans
to remain patient and watch the data as it decides when to raise interest
rates.
Sharp losses added to declines from Tuesday, when markets sold off after
disappointing earnings and economic data. A renewed slide in oil prices
Wednesday sent energy and materials stocks sharply lower.
The Fed gave no sign that it is wavering on hiking interest rates some time in
the second half of 2015. The U.S. central bank was upbeat about the economy,
while the policy makers repeated that they think inflation will move back to
the 2% target after being pushed down by temporary factors.

Day’s Performance: The S&P 500 closed 27.39 points, or 1.4%, lower at
2,002.23, with all 10 main sectors finishing in the red. The energy sector fell
3.9%, as oil fell to lowest levels since March 2009. The Dow Jones Industrial
Average dropped 195.84 points, or 1.1%, to 17,191.37, with 27 of its 30
components ending lower. The Nasdaq Composite turned a big opening
advance into a loss by the end of the session, falling 43.50 points, or 0.9%, to
4,637.99.

Set ups on S&P 500, Dow Industrial Average and Nasdaq 100 are undergoing
a pull back while set ups still look weak where sell on pull backs is advocated.
We remain cautious on US markets, expecting a correction to 1900 levels on
S&P 500.

Emerging markets: Most of Asian stocks are trading with minor cuts this
morning on weak global cues.

Bullions & Commodities: Gold is trading at $1282 per troy ounce this morning
down (0.40%) from previous close. WTI Crude future is trading at 44.46 per
barrel while Brent Crude future is trading at $48.60 per barrel.

Currencies: The U.S. Dollar Index tracking the U.S. currency against a basket
of six others currencies trading at 94.62 this morning down (0.01%) from
previous close. Long term set ups up on Dollar Index are looking strong. Our
target of 89 has been achieved. The dollar and U.S. stocks often trade on
opposite paths, with a weak dollar seen as providing investors with cheap
funding to buy stocks. Plus the dollar’s drop generally helps U.S. companies’
overseas sales.
Source: Bloomberg
IndiaNivesh Research
NiveshDaily
January 29, 2015 | 5
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accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations
or views expressed in this report: Daljeet S Kohli, Amar Maurya, Abhishek Jain, Yogesh Hotwani, Prerna Jhunjhunwala, Kaushal Patel, Rahul Koli, Tushar Manudhane & Dharmesh Kant.
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
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Tel: (022) 66188800 / Fax: (022) 66188899
e-mail: [email protected] | Website: www.indianivesh.in
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January 29, 2015 | 6
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