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8/13/2019 Sunil Hitech
1/19
A UG UST 17, 2010
Econ om y New s
4 Data released on Monday showed that the wholesale price index-basedinflation rose to 9.97% in July, below 10.55% for June and a Reutersforecast of 10.39% for t he mo nth. Policy rat es had some impact (onsliding inf lat ion) but t here a re also b ase fa ctors, f inance minister Pran abMukh erjee sa id. (ET)
4 The commerce and industry ministry ha s said t hat i t do es not fa vour anyrestrictions on exports of iron ore, arguing that production was highertha n do mestic consumption a nd f ai lure to export t he mineral could leadto environmenta l deg rada tion a nd haza rds in mining a reas. (ET)
Corporate New s4 State Bank of India (SBI), announced sharp increasesby up to 150
basis points in deposit rates, as banks aggressively compete for funds
to mee t burgeo ning credit dema nd. Both SBI and ICICI Bankon Mondayalso said they are raising their prime lending rates by 50 basis points.Banks ha ve been raising b enchma rk lending rat es follow ing a hike inpolicy rat es by Reserve Bank o f India in its la st q ua rterly review. (BS)
4 Vedanta will acquire between 51 per cent and 60 per cent of CairnIndia , w ith up t o 51 per cent coming from Cairn Energy. The price pershare o f Rs 405 include s Rs 50 a share f or a non -compet e clause, th a t is, apledg e from Cairn Energy not to pursue licences in India, Pakista n, Bhuta na nd Sri La nka . This price is a t 32 per cent premium t o Ca irn Ind ia'saverage closing price for the 90 days before the deal. (BL)
4 Public sha reholders of Cairn Indiaw ill lose out on a w ho pping Rs 35.7 bnto the promoters who would be only beneficiary of a non-compete feesto be paid by its suitor, London-listed Vedanta group. As part of the deal,the prom ot ers w ill get no n-compete fees to ta lling a bo ut Rs 6 bn. The
non-promoter sha reholders, w ith the ir over 71 crore shares amount ing t oa 37.64 per cent eq uity, wo uld have g ot Rs 35.7 bn ha d t he no n-competefees also been paid t o t hem. (FE)
4 Lanco Infratech ha s firmed up Rs 24.0 bn investme nt plans for b ecominga 9,300-MW company in the next four years from the current powerge nera tion cap acity of 2,082 MW. We w ould a dd over 7,000 MW ofpow er by 2014, ou r current insta lled capa city is 2,082 MW, Mr J. SureshKumar, Chief Finance Officer, Lanco Infratech. (BL)
4 Tata Motorsg loba l sa les increased b y 36 per cent in July to 90,646 unitson rob ust dema nd f or bo th comme rcial and pa sseng er vehicles. Thecompa ny said its to ta l pa sseng er vehicles sales w ere up by 42 per cent to50,070 units and commercial vehicles sales rose 30 per cent to 40,576units. (BL)
4 Sadbhav Engineering Ltdannounced on Monday that the company hassecured Rs 2.3 bn con tra ct in joint ventu re w ith GKC Projects Ltd ,Hyderabad, from the Road Construction Department of the Governmentof Jharkhan d. (BL)
4 Text ile ma jor Arvind is targeting a Rs 40 bn turnover this financial year,driven by B-to-C (business to customer) retail business in the domesticmarket , a t op execut ive sa id toda y . " With the expor t market w e ha vethe risk of running into forex losses. We give high importance to thedome stic grow th in bot h reta il and b randed seg ment. I t w il l cover the r iskof running exchange r isk as we have the pricing advantage in the retai lmarket, " said Sanjay Lalbha i chairman a nd mana ging director Arvind.(BL)
Equity
% Chg14 A ug 10 1 Day 1 Mth 3 Mths
Indian Indices
SENSEX Index 18,051 (0.6) 0.5 7.2
NIFTY Index 5,418 (0.6) 0.5 7.1
BANKEX Index 12,132 (0.5) 6.5 12.4
BSET Index 5,479 (0.6) 0.4 6.4
BSETCG INDEX 14,557 (0.9) (3.0) 7.1
BSEOIL INDEX 10,061 (0.8) (4.4) 3.8
CNXMca p Index 8,716 0.1 3.8 10.3
BSESMCAP INDEX 9,686 (0.3) 2.6 10.7
World Indices
Dow Jones 10,302 (0.0) 2.0 (3.0)
Na sda q 2,182 0.4 0.1 (7.3)
FTSE 5,276 0.0 2.3 0.3Nikkei 9,197 (0.6) (3.0) (10.8)
Ha ng seng 21,112 0.2 4.0 6.8
Value traded (Rs cr)
14 A ug 10 % Chg - Day
Ca sh BSE 5,239 (8.1)
Ca sh NSE 15,959 (3.8)
Deriva t ives 102,320.8 7.9
Net inflows (Rs cr)13 Aug 10 % Chg MTD YTD
FII 717 59.6 4,028 51,930
Mutua l Fund (10) (93.0) (779) (13,310)
FII open interest (Rs cr)
13 Aug 10 % Chg
FII Index Fut ures 17,775 (0.4)
FII Index Opt io ns 61,548 1.6
FII St o ck Fut ures 36,948 0.7
FII St o ck Opt io ns 1,898 (1.8)
Advances /Declines (BSE)14 Aug 10 A B S Total % total
Adva nces 78 779 190 1,047 40
Declines 126 1085 247 1,458 56
Uncha nged 1 70 11 82 3
Commodity % Chg
14 Au g 10 1 Day 1 Mt h 3 Mt hs
Crude (NYMEX) (US$/BBL) 75 0.2 (0.8) 7.6
Go ld (US$/OZ) 1,225 0.8 2.5 0.0
Silve r (US$/OZ) 18 1.4 3.1 (2.7)
Debt /forex market14 Au g 10 1 Day 1 Mt h 3 Mt hs
10 yr G -Sec yie ld % 7.82 7.82 7.64 7.46
Re/US$ 46.80 46.77 46.77 45.63
Sensex
Source: ET = Economic Times, BS = Business Standard, FE = Financial Express,
BL = Business Line, ToI: Times of India, BSE = Bombay Stock Exchange
14,000
15,100
16,200
17,300
18,400
Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10
8/13/2019 Sunil Hitech
2/19
Kotak Securities - Private Client Research Plea se see t he d iscla imer o n t he la st pa ge Fo r Priva te Circula tio n 2
M O RNING INSIGHT A ugust 17, 2010
SHREECEMENTS
PRICE: RS.1809 RECOMMENDATION: ACCUMULATETARGETPRICE: RS.2100 FY11E P/CEPS: 5.5X
q Revenues for Q1FY11 registered a growth of 2% YoY, better than our es-timates. This was impacted by flattish dispatches and decline in cementrealizations but boosted by steep increase in power segment revenues.
q Operating margins of the company stood at 30.7% for Q1FY11. Marginshave declined on both yearly and sequential basis due to decline in real-izations and increase in power and fuel expenses.
q Net profits were impacted by higher depreciation charges as well as de-cline in operating margins. Thus due to this, net profits declined by 64%in comparison with Q1FY10.
q We maintain our revenue estimates but reduce our operating margin as-sumptions going forward.
q At current market price of Rs 1809, stock is trading at 5.5x P/CEPS and
4.8x EV/EBITDA for FY11. We value the company based on the average of6x P/CEPS and 5x EV/EBITDA and arrive at a revised price target of Rs 2100(Rs 2315 earlier) on FY11 estimates. Due to significant volume expansionas well as higher power segment revenues going forward, we continueto maintain ACCUMULATE rating on the stock and would advise investorsto use any decline in the price to buy the stock.
Financial highlight s
(Rs mn) Q1FY11 Q1FY10 YoY (%)
Net Sales 9,446 9,224 2
Expend it ure 6,550 4,974
Inc/Dec in t ra de -299 -9
RM 1,412 723As a % o f net sa les 14.9 7.8
St a f f co st 478 352
As a % o f net sa les 5.1 3.8
Po w er a nd fuel 2,274 1,399
As a % o f net sa les 24.1 15.2
Tra nspo rt a t io n & Ha ndling 1,783 1,842
As a % o f net sa les 18.9 20.0
Other expend it ure 903 667
As a % o f net sa les 9.6 7.2
Opera t ing Pro f it 2,895 4,250 -32
Opera t ing Pro f it Ma rg in 30.7 46.1
Deprecia t io n 1,509 973EBIT 1,387 3,277 -58
Interest 302 152
EBT(exc o ther inco me) 1,085 3,125
Ot her Inco me 168 473
Ext ra o rd ina ry It ems 9 42
EBT 1,245 3,557 -65
Ta x 185 645
Ta x Ra t e (%) 14.9 18.1
PA T 1,060 2,911 -64
Net Prof it 1,060 2,911 -64
NPM (%) 11.2 31.6
Eq uit y Ca pit a l 348.4 348.4
EPS (Rs) 30.4 83.6
Source: Company
Summary table
(Rs m n) FY09 FY10 FY11E
Revenues 27,150 36,321 41,404
% cha ng e YoY 31.4 33.8 14.0
EBITDA 9,508 15,025 12,837
% cha ng e YoY 10.2 58.0 (14.6)
Ot her Inco me 829 758 750Deprecia t io n 2,054 5,704 5,031
EBIT 8,283 10,079 8,556
% cha ng e YoY 81.3 21.7 (15.1)
Net in t ere st 744 766 732
Pre-o pera tive exp 309.3 634
Pro fit be f ore ta x 7,229 8,679 7,824
% cha ng e YoY 96.3 20.1 (9.9)
Ta x 1,449 1,918 1,408
a s % o f PBT 20.0 22.1 18.0
Net inco me 5,780 6,761 6,416
% cha ng e YoY 122.0 17.0 (5.1)
Sh a re s o ut st a nd in g (m ) 3 4. 8 3 4. 8 3 4. 8
EP S (re po rt ed ) (Rs) 1 65 .9 1 94 .1 1 84 .1
P/E(x) 10.9 9.3 9.8
P/CEPS (x) 8.0 5.1 5.5EV/EBITDA(x) 6.4 4.1 4.8
RoE(%) 61.0 43.8 29.6
RoCE(%) 36.4 35.0 24.4
Source: Company, Kotak Securities - Private
Client Research
RESULT UPDATE
Teena Virmani
teena.virmani@ kotak .com
+91 22 6621 6302
8/13/2019 Sunil Hitech
3/19
Kotak Securities - Private Client Research Plea se see t he d iscla imer o n t he la st pa ge Fo r Priva te Circula tio n 3
M O RNING INSIG HT A ugust 17, 2010
Revenue grow th led by steep increase in pow er revenues
n Revenues for Q 1FY11 registered a growth of 2% YoY , better than our estimates.
This was impacted by flattish dispatches and decline in cement realizations but
boosted by steep increase in power segment revenues.
n Cement dispatches stood at 2.52M T for Q 1FY11 while cement realizations wit-
nessed a decline of 7% YoY and stood at Rs 3229 per tonne. Realizations have
remained stable on a sequential basis. Company expects cement prices to con-
tinue to remain under pressure due to incremental supplies as well as lower than
expected demand growth.
n Power segment revenues have witnessed a signif icant jump of 258% YoY due to
commissioning of waste heat recovery plant and other 100M W power plant in
Q 4FY10. C ompany sold 142.6 mn units in Q 1FY11. A long with this, company has
also commenced power trading in the current quarter and purchased power for
Rs 473.2 mn in Q 1FY11 to sell it further.
n Company's capex plan for the thermal power plant is one track and fi rst phase
of 150M W of thermal power plant is likely to commission by June, 2011 and
second phase by Aug, 2011. A long with this, 1.5M T clinker and grinding unit is
likely to get operational by Dec, 2010. Thus, post commissioning of cement ca-pacities, total cement capacity of the company would increase to 13.5 M T.
n We thus continue to maintain our estimates for FY11 and expect cement vol-
umes to be 11.2M T and captive power sales of 1bn units. We expect total rev-
enues to be Rs 41.4 bn for FY11.
Operating margins impacted by power trading as well as declinein cement realizations
n O perating margins of the company stood at 30.7% for Q 1FY11. M argins have
declined sequentially due to decline in realizations and increase in power and
fuel expenses.
n M argins have also declined in power division due to low margin power trading
being commenced by the company in Q 1FY11.
n Based on Q 1FY11 performance, we reduce our operating margin assumptions
going forward and now expect margins to be 31% for FY11 as against 36.3%
estimated earlier.
Net profit declined by 64% due to lower operating margins asw ell as higher de pre ciation charges
n Net profits were impacted by higher depreciation charges as well as decline in
operating margins. Thus, due to this, net profits declined by 64% in comparison
with Q 1FY10.
n Depreciation charges have witnessed an increase due to commissioning of new
power plants by end of FY10. We expect depreciation charges to continue toremain high in the current fiscal.
n Post revising our margin estimates downwards, we now expect net profits to be
Rs 6.4bn for FY11.
Valuation and recomm endation
n At current market price of Rs 1809, stock is trading at 5.5x P/CEPS and 4.8x EV/
EBITDA for FY11.
n We value the company based on the average of 6x P/CEPS and 5x EV/EBITDA
and arrive at a revised price target of Rs 2100 (Rs 2315 earlier) on FY11 esti-
mates.
n Due to signif icant volume expansion as well as higher power segment revenues
going forward, we continue to maintain ACCUMULATE rating on the stock and
would advise investors to use any decline in the price to buy the stock.
We continue to maintainACCUMULATE on Shree Cements
with a price target of Rs.2100
8/13/2019 Sunil Hitech
4/19
Kotak Securities - Private Client Research Plea se see t he d iscla imer o n t he la st pa ge Fo r Priva te Circula tio n 4
M O RNING INSIGHT A ugust 17, 2010
SUNILHITECHENGINEERSLTD(SHEL)
PRICE: RS.183 RECOMMENDATION: BUYTARGETPRICE: RS.240 CONS. FY11E P/E: 5.9X
q Sunil Hi-tech reported disappointing set of Q1FY11 results on the back of
a longer time taken for site mobilization and engineering drawings
q However we expect sequential growth in revenues going forward on the
back of execution of BOP job
q 66% YoY jump in order book to Rs.19.0 bn
q We remain positive on the medium to long term growth prospects of
SHEL
q Revise FY11E EPS to Rs.31.0 (Rs.36.0 earlier)
q Due to 31% upside potential and attractive valuations we continue to
recommend BUY on SHEL with revised price target of Rs.240 (Rs.270 ear-
lier)
Standalone performance - Sunil Hitech
(Rs mn) Q1FY11 Q1FY10 YoY% Q4FY10 QoQ (%)
Net Sales 1,347 1,945 (30.8) 1,726 (22.0)
Ra w ma teria ls 451 938 (51.9) 707 (36.2)
St a f f co st 91 60 52.2 103 (11.7)
Sit e & o epra t ing 573 691 (17.0) 673 (14.7)
Ad min 48 36 36.2 72 (32.8)
To t a l exp. 1,164 1,724 (32.5) 1,554 (25.1)
EBIDTA 183 222 (17.5) 172 6.4
Ot her inco me 20 9 139.5 84 (75.7)
Deprecia t io n 60 48 24.8 61 (2.5)
EBIT 144 182 (21.2) 195 (26.3)
Interest 62 54 14.9 63 (1.2)
PBT 82 128 (36.4) 132 (38.2)
Ext ra o rd ina ry g a in /(lo ss) - - - (136) -
Ta x & deferred t a x 25 44 (41.7) 36 (29.4)
Reported PAT 56 85 (33.7) (40.1) (240.1)
Adjusted PAT 56 85 (33.7) 96 (41.5)
Eq uit y sha res o /s (mn) 12.3 12.3 12.3
Ratios
Operting profit margin (%) 13.6 11.4 +220 bps 10.0 +360 bps
Ra w Ma teria ls /Sa les (%) 33.5 48.2 40.9St a f f co st /Sa les (%) 6.8 3.1 6.0
Site & Opera t ing /sa les(%) 42.6 35.5 39.0
Ad min Exp. /Sa les (%) 3.6 1.8 4.2
Ta x /PBT (%) 31.1 34.0 27.2
PAT (%) 4.2 4.4 5.6
Adj. EPS (Rs) 4.6 6.9 7.8
Ad j. CEPS (Rs) 9.4 10.8 12.8
Source: Company, Kotak Securities - Private Client Research
n For Q 1FY11 the company reported revenues of Rs.1.3 bn, down 30.8% YoY and
down 22.0% on Q oQ basis. This was primarily due to time taken for site mobili-
zation and engineering drawing. This is the typical nature of any BO P job where
it takes between four to six months for getting the project drawings and resource
mobilization.
Cons. Summary table
(Rs m n) FY09 FY10 FY11E
Sa les 5,982 7,227 9,167
Gro w th (%) 95.3 20.8 26.8
EBITDA 687 802 1,002
EBITDA ma rg in (%) 11. 5 11.1 10. 9
Net pro f it 243 314 380
Net debt 1,565 2,095 2,641
EPS (Rs) 19.8 25.5 31.0
Gro w th (%) 15.6 29.1 21.2
DPS (Rs) 1.2 1.5 2.5
ROE (%) 13.9 15.7 17.6
ROCE (%) 15.3 15.6 17.4EV/Sa le s (x) 0.6 0.6 0.5
EV/EBITDA (x) 5.5 5.4 4.9
P/E (x) 9.2 7.2 5.9
P/CEPS (x) 5.5 4.2 3.6
P/BV (x) 1.3 1.1 1.0
Source: Company, Kotak Securities - Private
Client Research
RESULT UPDATE
Apurva Doshi
doshi.apurva@ kotak .com
+91 22 6621 6308
8/13/2019 Sunil Hitech
5/19
Kotak Securities - Private Client Research Plea se see t he d iscla imer o n t he la st pa ge Fo r Priva te Circula tio n 5
M O RNING INSIG HT A ugust 17, 2010
n The management has confirmed that the drawings for the project have been
received in the month of June and the project is currently being executed. G oing
forward we would also see the incremental revenues due to commencement of
the supply component for the BO P job. Thus the revenues are expected to in-
crease going forward on a sequential basis.
n EBIDTA margin during Q1FY11 was up by 220 bps on YoY and up 360 bps on
Q oQ basis to 13.6% primarily due to reduction in supply of material which led to
higher services which typically enjoy higher operating margins. However going
forward as the supply commences for the BO P job the operating margins are
expected to stabilize around 11% .
n EBIDTA for Q1FY11 was at Rs.183 mn down 17.5% YoY and up 6.4% on QoQ
basis.
n The staff cost has shot up by 52.2% on Y oY basis to Rs.91 mn as the number of
employees have increased by 31% on Y oY basis to 2340 employees and also
there was 20% increase in salary and other benefits to the employees.
n The interest cost has gone up by 14.9% on Y oY basis to Rs.62 mn as any BO P
order would constitute supply portion which needs to be tied up. The advance
payment for such suppliers ensures timely delivery and rate benefits. This led to
increasing bank borrowing and subsequent increase in the interest cost.n PBT for Q 1FY11 was down 36.4% YoY and down 38.2% on QoQ basis to Rs.82
mn.
n Adjusted PAT for the Q1FY11 stood at Rs.56 mn, down 33.7% YoY and down
41.5% on sequential basis thereby translating into quarterly Adj. EPS of Rs.4.6
and CEPS of Rs.9.4.
60% YoY jump in order book to Rs.19.0 bn
n During FY10, SHEL won several major orders and with this the order book of the
company has gone up by 60% YoY to Rs.19.0 bn.
n The major order is of BO P (Balance of Plant) contract for 250 M W Parli TPS
project unit No.8 which is owned by M AHA G ENCO with order value of Rs.4.9
bn. The other major order is from L& T worth Rs.1.9 bn for the structural, fabrica-tion and architecture work of 1000 M W Koradi Thermal Power Station owned by
M AHAGENCO .
n The BO P order is very positive for SHEL as with this order it is eligible to bid for
larger BOP contracts and has moved up the value chain from being a contractor
to a large BO P player. With its strong execution track record it is likely to win
several large orders and this would lead to significant increase in revenues and
profitability for SHEL going forward.
n With this BO P job SHEL has joined the list of BOP players like TATA , BGR, Indure,
Punj Lloyd and L& T.
n SHEL has also forayed into fast growing airport infrastructure space. It has won
the job of construction of pre engineered building and allied works for warehous-
ing in M IHA N area through M aharashtra A irport Development Corporation(M ADC). This is the pilot job secured by SHEL and marks its entry into fast grow-
ing airport infrastructure space.
Change in earning estimates - FY11E
(Rs mn) Old Revised Grow th (%)
Net sa les 10,587 9,167 (13.4)
EBIDTA (%) 10.6 10.9 3.1
PAT 441 380 (13.9)
EPS (Rs.) 36.0 31.0 (13.9)
CEPS (Rs.) 56.9 51.3 (9.8)
WACC (%) 13.1 13.1 -
Termina l g ro w t h (%) 4.0 4.0 -
Price Ta rg et (Rs./sha re) 270 240 (11.1)
Source: Kotak Securities - Private Client Research
Order book as on (Rs. bn)
5
10
15
20
25
Dec_
07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Source: Company
8/13/2019 Sunil Hitech
6/19
Kotak Securities - Private Client Research Plea se see t he d iscla imer o n t he la st pa ge Fo r Priva te Circula tio n 6
M O RNING INSIGHT A ugust 17, 2010
Revise FY11 earning estimates and price target
n We have revised our FY11 earning estimates to account for lower then expected
revenues and profit. Basically we have accounted for delay of three months due
time taken by the company for resource mobilization at the site and engineering
drawings for the 250 M W BO P job at Parli in M aharashtra.
n We now expect SHEL to report revenues of Rs.9.1 bn (down 13.4% ), operating
margin of 10.9% (up 30 bps) and PAT of Rs.380 mn (down 13.9% ) in FY11E.
n Accordingly we expect SHEL to report lower EPS of Rs.31.0 and CEPS of Rs.51.3
in FY11E as against our earlier estimate of Rs.36.0 and Rs.56.9 respectively.
n We have valued SHEL on DC F method of valuation with 13.1% WA CC and
4.0% terminal growth rate (no change) based on FY11 earning estimates. Due
to downward revision in earning estimates the price target is also revised down-
wards from Rs.270 to Rs.240.
Price performance comparison
Source: Bloomberg
Valuation & Recommendation
n O ver last four months the stock of SHEL has already corrected by ~ 21% while
the SENSEX was up 2% during the same period. Thus the stock has
underperformed the markets for last four months.
n At the current market price of Rs.183, the stock trades at attractive valuations of
1.0x book value, 5.9x earnings and 3.6x cash earnings based on FY11E.
n We believe that the current valuation is attractive considering the clear growth
prospects of the company, going forward. This is due to strong order book of
Rs.19.0 bn which is 2.6x FY10 revenues and superior execution capabilities.
n We remain positive on the medium to long term growth prospects of SHEL due
to continued growth prospects for the power sector in India primarily due to~ 16% peak power deficit.
n Due to 31% upside potential from the current levels we continue to recommend
BUYon SHEL with revised price target of Rs.240.
70
80
90
100
110
120
1-Apr
15-Apr
29-Apr
13-May
27-May
10-Jun
24-Jun
8-Jul
22-Jul
5-Aug
SHEL SENSEX
Revenues (Rs bn)
Source: Company, Kotak Securities - Private
Client Research
Adj. EPS (Rs)
Source: Company, Kotak Securities - Private
Client Research
-
3.0
6.0
9.0
12.0
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
0
10
20
30
40
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
We recommend BUY on Sunil Hi
Tech Engineers with a revised
price target of Rs.240
8/13/2019 Sunil Hitech
7/19
Kotak Securities - Private Client Research Plea se see t he d iscla imer o n t he la st pa ge Fo r Priva te Circula tio n 7
M O RNING INSIG HT A ugust 17, 2010
ALLCARGOGLOBALLOGISTICSLTD(A LLCARGO)
PRICE: RS.171 RECOMMENDATION: BUYTARGETPRICE: RS.210 CONS. CY10E P/E: 14.1X
q ALLCARGO reported good set of Q2CY10 results which are above our es-
timates both on the revenues and on the profitability front
q ECULINE volumes up 26% YoY, Indian MMTO volumes up 8% YoY and
CFS volumes up 37% YoY on the back of pick up in global trade
q Sharp revival in ECULINE profitability - sustainable in our view
q Looking to acquire NVOCC company in China
q To invest Rs.2.5 bn over next 18 months to augment capacities
q Revise CY10 earning estimates with EPS of Rs.12.1 (Rs.11.9 earlier)
q Due to good long term potential, attractive valuation and 22% upside
potential we upgrade ALLCARGO to BUY with increased price target of
Rs.210 (Rs.196 earlier)
RESULT UPDATE
Apurva Doshi
doshi.apurva@ kotak.com
+91 22 6621 6308
ALLCARGO Q2CY10 Results - Standalone
(Rs mn) Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%) H1CY10 H1CY09 YoY (%)
Net Sales 1,622 1,164 39.3 1,640 (1.1) 3,262 2444 33.4
Opera t ing exp. 1,011 649 55.8 1,017 (0.5) 2,028 1395 45.3
St a f f co st 121 73 66.2 104 16.2 224 158 41.7
Ot her exp. 100 68 47.9 102 (1.9) 202 159 26.8To ta l exp. 1,232 789 56.0 1,223 0.8 2,454 1,713 43.3
EBIDTA 390 375 4.0 418 (6.7) 807 731 10.4
Ot her inco me 77 39 99.7 51 51.9 128 79 62.1
Deprecia t io n 147 90 64.1 120 22.5 268 174 54.1
EBIT 319 323 (1.3) 348 (8.2) 667 636 4.9
Interest 30 42 (29.0) 23 28.0 53 85 (37.6)
PBT 289 281 2.9 325 (10.8) 614 551 11.5
Ta x & deferred t a x 30 56 (46.8) 40 (25.0) 70 109 (36.0)
PA T 260 225 15.2 285 (8.9) 544 442 23.1
Ratios
Operting profit margin (%) 24.0 32.2 -8.2 25.5 -1.5 24.8 29.9 -5.1
Opea t ing exp /Sa les (%) 62.4 55.8 62.0 62.2 57.1
St a f f co st /Sa les (%) 7.4 6.2 6.3 6.9 6.5
Ot her Exp. /Sa les (%) 6.2 5.8 6.2 6.2 6.5
Ta x /PBT (%) 10.3 19.9 12.2 11.3 19.7
TEU`s ha nd led 54,718 40,032 36.7 55,287 (1.0) 110,005 78,243 40.6
Avg . rea lisa t ions Rs /TEU 8,344 8,642 (3.5) 8,081 3.3 8,212 8,885 (7.6)
MTO ha nd led 6,302 5,865 7.5 6,978 (9.7) 13,280 11,726 13.3
Avg . rea lisa t ions Rs /MTO 141,576 107,808 31.3 133,484 6.1 137,324 117,757 16.6
Source: Company
Cons. Summary table
(Rs mn) CY08 CY09 CY10E
Sa les 23,141 20,609 26,013
Grow t h (%) 43.4 (10.9) 26.2
EBITDA 2,198 2,185.1 2 ,892.8
EBITDA ma rg in (%) 9.5 10.6 11.1
Net pro f it 1,077 1,299 1,586
Net debt 2,428 1,128 694
EPS (Rs) 9.6 10.4 12.1
Grow t h (%) 40.7 20.7 22.0
DPS (Rs) 1.0 1.2 1.5
ROE (%) 17.6 13.2 14.4
ROCE (%) 19.1 16.0 18.1
EV/Sa le s (x) 1.1 1.1 0.9
EV/EBITDA (x) 11.3 10.7 8.0
P/E (x) 17.8 16.4 14.1P/CEPS (x) 12.6 11.6 9.9
P/BV (x) 3.7 2.3 1.8
Source: Company, Kotak Securities - Private
Client Research
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M O RNING INSIGHT A ugust 17, 2010
Segmental Results
Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%) H1CY10 H1CY09 YoY (%)
Revenues (Rs.mn)
MMTO 892 632 41.1 931 (4.2) 1,824 1,381 32.1
CFS 457 346 32.0 447 2.2 903 695 29.9
Eq uipment Hiring 325 222 46.5 309 5.0 634 455 39.4PBIT (Rs. mn)
MMTO 86 110 (21.5) 108 (19.7) 194 204 (4.7)
CFS 202 180 12.3 214 (5.5) 416 360 15.6
Eq uipment Hiring 52 44 17.6 63 (18.0) 115 110 4.9
PBIT (%)
MMTO 9.7 17.4 (44.4) 11.6 (16.1) 10.6 14.8 (27.9)
CFS 44.3 52.0 (14.9) 47.8 (7.5) 46.0 51.7 (11.0)
Eq uipment Hiring 16.0 19.9 (19.7) 20.4 (21.9) 18.1 24.1 (24.7)
Source: Company
n Net Sales for Q 2CY 10 was at Rs.1.6 bn, up 39.3% on Y oY basis. This is primarily
due to 41.1% YoY growth in the M M TO business, 32.0% YoY growth in the CFS
business and 46.5% YoY growth in the equipment hiring business of the com-
pany.
n CFS volumes are up 36.7% YoY and down 1.0% on sequential basis to 54718
TEUs in Q2CY10 thereby indicating strong pickup in the EXIM volumes on the
back of global recovery.
n The average realizations per TEU have gone down by 3.5% on Y oY basis to
Rs.8344 per TEU. This is due to increased contribution from C hennai and M undra
CFS which typically enjoy lower average realization then those at JNPT.
CFS TEUs
Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%) H1CY10 H1CY09 YoY (%)
JNPT 32188 23571 36.6 34710 (7.3) 66898 70561 (5.2)
Chenna i 17615 12973 35.8 15449 14.0 33064 21059 57.0
Mundra 4915 3488 40.9 5119 (4.0) 10034 7682 30.6
To ta l 54718 40032 36.7 55278 (1.0) 109996 99302 10.8
Source: Company
MTO volumes
Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%) H1CY10 H1CY09 YoY (%)
Ind ia 6302 5865 7.5 6978 (9.7) 13280 11,726 13.3
Eculine 54000 42684 26.5 51265 5.3 105265 85,171 23.6
To ta l 60302 48549 (19.5) 58243 3.5 118545 96897 (18.3)
Source: Company
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M O RNING INSIG HT A ugust 17, 2010
CFS TEU handled and Average Realizations
Source: Company
n M TO volumes have grown by 7.5% on YoY basis to 6302 TEU`s in Q 2CY 10. This
is primarily due to pick up in both LCL and FCL M TO volumes.
nEBIDTA margin during Q 2CY10 was down sharply by 820 bps on YoY basis to24.0% . This was due to price increases taken by the company for its M M TO
business to pass the freight hik es. Basically the EBIDTA per TEU remains the
same while the prices have gone up thereby impacting operating profit as a per-
centage of revenues.
n The PBIT margin of M M TO business has gone down from 17.4% in Q2CY 09 to
9.7% in Q 2CY10 due to sharp increase in deprecation of the equipment hiring
division. The company has added 30 cranes at a capex of Rs.1.1 bn and has 84
cranes as of June 2010. A lso it provides aggressive depreciation in 6 years as
against its economic life of 15 years.
n EBIDTA for Q2CY 10 was at Rs.390 mn up 4.0% on YoY basis.
n Depreciation expense of the company increased significantly to Rs.147 mn dueto purchase of cranes and other handling equipments. However interest cost was
down 29.0% YoY to Rs.30 mn as it has repaid high cost debt.
n PBT for the Q 2CY 10 was at Rs.289 mn up 2.9% on YoY basis.
n PAT for the Q2C Y10 was at Rs.260 mn up 15.2% on YoY basis.
ECULINE revenues (Rs mn)
Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%)
Revenues 4,532 3920 15.6 4,064 11.5
EBIDTA 243 210 15.7 146 66.1
NPAT 101 61 65.6 56 79.8
Source: Company
Eculine Financials (mn Euro)
Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%)
Revenues 77.0 58.0 32.8 63.7 20.9
EBIDTA 4.1 3.0 36.7 2.3 78.3
NPAT 1.7 0.9 88.9 0.9 93.2
EBIDTA (%) 5.3 5.2 3.6
PAT (%) 2.2 1.6 1.4
Source: Company
35000
40000
45000
50000
55000
60000
Q1CY08
Q2CY08
Q3CY08
Q4CY08
Q1CY09
Q2CY09
Q3CY09
Q4CY09
Q1CY10
Q2CY10
4000
6000
8000
10000
12000CFS TEU handled Average Realisations (Rs./ TEU)
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M O RNING INSIGHT A ugust 17, 2010
Eculine Financials
M TO volumes of ECU LINE are up sharply 26.5% on YoY basis to 54000 TEUs. The
revenues of Eculine are up 15.6% YoY , EBIDTA is up 15.7% Y oY and NPA T is up
65.6% on YoY basis. The sharp improvement is on account of pick up in the global
economy. The management is seeing increased pick in certain parts of the world
economy like Asia, G ermany and France. T he revenues would have been even
higher however it to take 7.6% impact of Indian Rupee appreciation against Euro.
ALLCARGO Q2CY10 Results - Consolidated
(Rs mn) Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%) H1CY10 H1CY09 YoY (%)
Net Sales 6,395 5,232 22.2 5,858 9.2 12,253 10,039 22.1
Opera t ing exp. 4,375 3,365 30.0 3,892 12.4 8,267 6,347 30.2
St a f f cost 899 859 4.7 908 (0.9) 1,807 1,703 6.1
Other exp. 454 384 18.1 486 (6.7) 940 807 16.4
To ta l exp. 5,728 4,608 24.3 5,286 8.4 11,014 8,858 24.3
EBIDTA 667 624 6.8 572 16.6 1,238 1,181 4.9
Other inco me 77 67 15.8 42 82.5 119 107 11.8
Deprecia t io n 180 140 28.5 150 19.7 330 257 28.5
EBIT 564 551 2.4 464 21.6 1,027 1,031 (0.3)
Interest 73 89 (18.5) 35 105.6 108 142 (23.8)
PBT 491 461 6.4 428 14.6 919 889 3.4
Ext ra o rdina ry g a in /(lo ss) (5) 144 - - - (5) 144 -
Ta x & deferred ta x 86 125 (30.8) 75 15.8 161 237 (32.1)
PAT 400 480 (16.8) 354 13.0 753 796 (5.3)
Less Mino rit y Int . 21 14 47.3 13 55.4 34 53 (35.9)
NPA T 379 466 (18.7) 340 11.3 719 742 (3.1)
Adj. PAT 384 322 19.0 340 12.7 724 599 21.0
Eq uit y (Rs. mn) 261 224 250 261 224
Diluted eq uit y (Rs. mn) 261 261 261 261 261
Ratios
Operting profit margin (%) 10.4 11.9 -150 bps 9.8 +60 bps 10.1 11.8 -170 bps
Opea t ing exp /Sa les (%) 68.4 64.3 66.4 67.5 63.2
St a f f co st /Sa les (%) 14.1 16.4 15.5 14.7 17.0
Other Exp. /Sa les (%) 7.1 7.3 8.3 7.7 8.0
Ta x /PBT (%) 17.6 27.0 17.4 17.5 26.7
Diluted EPS (Rs) 2.9 3.6 2.6 5.5 5.7
Diluted CEPS (Rs) 4.3 4.6 3.8 8.0 7.7
Source: Company
n O n a consolidated basis, the company reported net sales of Rs.6.4 bn, up 22.2%YoY and up 9.2% on sequential basis. This was primarily due to 15.6% YoY
growth in the revenues of Eculine business. The company has passed on the
higher freight rates to its customers thereby reporting higher revenues.
n The operating profit is up 6.8% on YoY basis to Rs.667 mn due to ramp up in
volumes leading efficiency in its global operations.
n Adj. NPAT stood at Rs.384 mn up 19.0% YoY and up 12.7% on sequential basis
thereby translating into quarterly EPS of Rs.2.9 and CEPS of Rs.4.3.
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M O RNING INSIG HT A ugust 17, 2010
Hindustan cargo financials
(Rs. mn) Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%)
Revenues 393 270 45.6 296 32.8
EBIDTA 24 14 71.4 5 349.4
PAT 12 7 66.7 1 733.3
EBIDTA (%) 6.1 5.2 1.8PAT (%) 3.1 2.7 0.5
Source: Company
Hindustan cargo Financials
In Q 2CY10 the revenues of Hindustan Cargo are up 45.6% on YoY basis to Rs.393
mn. This was primarily due to pick up in the air freight business on account of recov-
ery in the global economy. It has turned around its operations and reported EBIDTA
of Rs.24 mn up 71.4% YoY and PAT of Rs.12 mn up 66.7% YoY.
Project cargo financials
(Rs mn Q2CY10 Q2CY09 YoY (%) Q1CY10 QoQ (%)Revenues 350 200 75.0 414 (15.5)
EBIDTA 51 49 4.1 77 (33.6)
PBT 48 34 39.7 74 (35.4)
EBIDTA (%) 14.6 24.5 18.6
PBT (%) 13.6 17.0 17.8
Source: Company
Project cargo division
The project cargo division reported revenues of Rs.350 mn in Q 2CY10 up 75.0% on
YoY basis. EBIDTA is up 4.1% YoY and PBT is up 39.7% on YoY basis to Rs.48 mn.
G oing ahead this division has good visibi lity as currently it has order book of Rs.0.8bn to be executed in next 10 to 12 months.
Raised $23.5 mn
ALLCA RG O has successfully completed $23.5 mn Q IP in A pril 2010. It issued 5.66
mn shares @ Rs.184.8 per equity share of face value of Rs.2 each. Thus it raised
Rs.1.0 bn through Q IP. The money would be used to expand the logistics facilities
and some part of the money would also be used to fund the acquisition.
Expansion and acquisition
n ALLCA RG O has incurred capex of Rs.1.3 bn in CY09 and it plans to incur capex
of Rs.2.5 bn in CY10E.
n The company has Rs.2.6 bn cash which would be used for expansion and acqui-
sition in C Y10E. it has already spent Rs.1.1 b in H1CY10.
n O ut of total capex of Rs.2.5 bn in C Y10E, Rs.1.0 bn would be used to acquire
and NVO CC company in C hina, Rs.1.0 bn would be used for buying equipments
like cranes multi axel trailers etc. and balance Rs.500 mn would be used for
building ICD cum warehouses at Dadri, Hyderabad, Nagpur, Bangalore and
Pune.
n A G L is constructing IC D at Dadri, Near Delhi in JV with C O NC O R and this is ex-
pected to be operational by December 2010.
n Then it would develop IC D cum warehouse at Hyderabad and Nagpur in JV with
Hind Terminals which are expected to be operational by M arch 2011.
n AG L owns land at Bangalore and Pune on which it is looking to develop ICD cum
warehouse either on its own or through JV.
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M O RNING INSIGHT A ugust 17, 2010
Not provided for IT liability of Rs.650 mn
ALLCA RG O has not provided for the Income Tax liability of Rs.650 mn. Basically the
IT department has disallowed deductions under section 80-IA for infrastructure in
terms of C FS and ICD operations from AY 2005 onwards. The company has filed an
appeal and is confident of winning the same and thus it has continued to provide
M AT. We have not accounted for this in our earning estimates as we await results
of the appeal being made by the company against the IT authorities.
Revision in earning estimates and price target
n We have revised the earning estimates to account for higher then expected vol-
umes in the CFS and M M TO business and increase in freight rates which are suc-
cessfully passed on to its customers.
n Due to faster then expected recovery in the EXIM business we expect C FS busi-
ness of A LLCARG O to handle 2.25 lakh TEU (up 12.5% ) in CY10E. However due
to competition we expect the realizations per TEU to fall by 8.2% to Rs.8012 per
TEU.
n We expect the ECULINE to handle 2.1 lakh TEU (up 5.0% ) due to the fact that
certain pockets of the world primarily Asia, are doing good business and haverecovered faster from the recessionary trend.
n O n a consolidated basis for C Y10E we expect A LLCA RG O to report revenues of
Rs.26.0 (up 12.2% ). O perating margin of 11.1% (down 90 bps) and NPAT of
Rs.1.6 bn (up 2.3% ).
n The operating margin is expected to decline due to hike in freight rates which
are passed on to the customers. The absolute profitability is expected to remain
same while the operating profit as a percentage of revenues is expected to come
down.
n Accordingly we expect A LLCA RG O to report higher EPS of Rs.12.1 and CEPS of
Rs.17.4 in C Y10E as against our earlier estimate of Rs.11.9 and Rs.16.4 respec-
tively.
n We have valued ALLCARG O on DCF method of valuation with 13.1% WA CC
and 4.0% terminal growth rate (no change). Due upward revision in earning
estimates the price target is also revised upwards from Rs.196 to Rs.210 per
share.
Cons. Earning Estimates (CY10E)
(Rs mn) Old Revised % Shift
Revenues 23,176 26,013 12.2
EBIDTA (%) 12.0 11.1 (7.1)
Prof it 1,549 1,586 2.3
Eq uit y 261 261 -EPS (Rs.) 11.9 12.1 2.3
CEPS (Rs.) 16.4 17.4 5.8
CFS (la kh TEU) 2.00 2.25 12.5
Avg Rea li (Rs./CFS TEU) 8,725 8,012 (8.2)
MMTO (TEU) 28,750 28,750 -
ECULINE (La kh TEU) 2.0 2.1 5.0
WACC (%) 13.1 13.1 -
Termina l g ro w th (%) 4.0 4.0 -
Price Ta rg et (Rs./sha re) 196 210 7.2
Source: Kotak Securities - Private Client Research
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M O RNING INSIG HT A ugust 17, 2010
Recommendation and Valuation:
n At the current market price of Rs.171, the stock trades at attractive valuation of
1.8x book value, 14.1x earnings and 9.9x cash earnings based on CY10E.
n We continue to remain positive on the medium to long term growth prospects of
ALLCARG O primarily due to focus on high margin integrated logistics services.
The company is also expanding its operations in areas like cargo consolidation,
warehousing, CFS, ICD, equipment hiring, and project cargo business.
n Due to good long term potential, attractive valuation and 22% upside potential
from the current levels we upgrade ALLCA RG O to BUY with increased price tar-
get of Rs.210.
We upgrade Allcargo to BUY
with an increased price target ofRs.210
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M O RNING INSIGHT A ugust 17, 2010
SESAGOA
PRICE: RS.322 RECOMMENDATION: ACCUMULATETARGETPRICE: RS.352 FY11E P/E: 7.2X; EV/EBIDTA: 6.5X
Cairn Strategic Investment - unrelated, unwanted but maynot be that bad
Sesa G oa has announced acquisition of a strategic stake in C airn India Limited
What's the deal?
n Sesa Goa would be acquiring 20% stake in Cairn India for a total consideration
of ~ $3 to 3.5bn, as part of a transaction with Vedanta. Purchase of shares
would happen either through (i) O pen offer for 20% to Cairn India shareholders
or (i i) purchases from Vedanta/Cairn Energy
n O ffer likely to be funded by mix of cash resources and new debt in the ratio of ~
2:1
n Vedanta plc (promoter group of Sesa Goa) to separately acquire 31% - 40% of
Cairn India from Cairn Energy resulting in a total acquisition of between 51% -
60% by Sesa G oa and Vedanta put together and thus getting management con-
trol of Cairn India.
n Deal is expected to close by Q1 2011 subject to necessary shareholder and regu-
latory approvals.
n Deal might not be immediate EPS accretive but it is unlikely to be much EPS
dilutive as well.
n Cairn India has (i ) 2P reserves and 2C resources of 890mm boe and is India's
third largest upstream oil company by reserves and resources (ii) is a low cost
producer with operating expenditure of just ~ $5/bbl and low cost F& D platform
of $5/bbl and (iii) has long life assets with ability to increase production plateau.
It has 11 blocks in total, out of which 3 are producing operated blocks (2 off-
shore and 1 onshore) while 8 are exploration blocks - 5 operated (4 in India, 1 in
Sri Lanka) and 3 non-operated in India
Positives
n Vedanta management has excellent proven track record of inorganic growth for
assets acquired in India. Cairn India's core operations are in Rajasthan nearby to
location of Hind Zinc operations so management understanding of territory would
be of advantage. Vedanta G roup has several times in past successfully multiplied
production volume by capex investment and timely project execution along with
aggressive exploration and resource enhancement. So, if the Vedanta manage-
ment is able to replicate the same for the newly acquired oil & gas assets, inwhich they do not have prior experience, it can create significant value for Sesa
G oa shareholders in coming years.
n Sesa G oa massive cash resources are deployed in Cairn India, an asset which is
(i) reasonably understood by Indian investors (ii) has excellent production growth
profile for near, medium and long term (ii i) has low operating costs of ~ $5/bbl
and likely to generate strong cash flows (iv) the product demand is unquestion-
able for at least a decade or two. So, though big inorganic expansion in iron ore
would be unlikely now, the investment has gone into a reasonably sound asset.
This might be less risky then if any acquisition would have been made in iron ore
wherein prices are near all time highs and demand supply tightness might not be
sustainable.
Conolidated summ ary Table
(Rs m n) FY10 FY11E FY12E
Sa les (Rs. mn ) 58,031 86,577 96,148
Gro w th (%) 17.8 49.2 11.1
EBITDA (Rs. m n) 31, 448 49, 402 53, 855
EBITDA Ma rg ins (%) 53.7 56.6 55.6
Ne t P ro f it (Rs. m n) 2 6, 29 1 3 9, 848 4 5, 32 1
EPS (Rs.) 31.6 44.8 50.9
Gro w th (%) 25 42 14
ROE (%) 33.2 29.3 25.5
ROAE(%) 41.6 37.0 28.9
EV/Sa le s (x) 3.8 3.7 2.9
EV/ EBITDA (x) 6.9 6.5 5.2
P/E (x) 10.2 7.2 6.3P/B (x) 3.4 2.1 1.6
BVPS (x) 95.3 152.9 200.0
Source: Company, Kotak Securities - Private
Client Research
COMPANY UPDATE
Saurabh Agrawal
agrawal .saurabh@kotak.com
+91 22 6621 6309
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M O RNING INSIG HT A ugust 17, 2010
Negatives
n Sesa G oa would be required to buy any shortfall in purchase of 20% stake inCairn India through purchase of shares from Vedanta Resources or Cairn PLC at
a significant 14.3% premium of Rs.50/share. As per our understanding, it is not
Sesa Goa which is getting management control of Cairn India but its promotergroup and to treat both at par might not be apt if high corporate governance
standards are chosen to be maintained. It is to be noted that the premium is
being paid for non competing of Cairn PLC in similar domain in India, Pakistan,Sri Lanka and Bhutan for the duration of just 3 years which might not be reason-
able timeframe to commensurate the non-competing premium consideration
would be varying between Rs. 38.3bn - 48.9bn.
n Sesa G oa would be having just 20% stake in Cairn India, which means contribu-
tion would be coming in form of dividend income and share of profits of associ-
ates (mere line item) in consolidated accounts of the company. Sesa G oa wouldnot be able to benefit from free cash flow generation in Cairn India which it
could have used for either growth expansion or reward to investors in case of
other acquisition. So the strategic investment might be treated similar to holdingcompany investment which might bear a valuation discount of > 20% by inves-
tors.
Risks
n Sesa G oa's shareholders would no longer enjoy a rare advantage of balancesheet strength cushion in an environment wherein sustenance of global eco-
nomic recovery is still not very certain.
n Sesa G oa might have to acquire shares in C airn India through open offer at aprice of Rs.405/share and not at as Rs 355/shares if SEBI decides that significant
non-competing premium being paid to Cairn PLC is unjustified and that it is just
part of valuation of C airn India whose benefit should be enjoyed by all share-holders.
n Sesa G oa valuation would now be correlated with commodity prices of crude oil
in addition to iron ore. This could have been de-risking if the strategic investmentwas done when crude oil traded at closer to its average over last few years. But
the valuation assumptions of $80/bbl might be risky in the present global macrosetup.
Valuation
Sesa G oa EPS estimates for FY11E is revised marginally to Rs.44.7 vs. Rs.44.8 earlier
while FY12E EPS estimate is revised upward to Rs.50.9 vs.47.9 earlier. We are now
valuing Sesa Goa on 7x (vs.5x) EV/EBITDA for FY11E. H igher multiple is given tocapture value of strategic investment in C airn India wherein there would be signi fi-
cant earnings generation which would not be captured in Sesa Goa' s EBITD A calcu-
lation. We arrive a target price of Rs.352. We maintain our accumulate rating as webelieve the valuation are reasonable for Sesa Goa @ 6.5x EV/EBITD A and 7.2x P/E
for FY11E whose organic expected growth story remain intact and there is likely up-
side from announced strategic investment in C airn India.
Assumptions - With Key Changes
Old estimates New estim ates
FY10 FY11E FY12E FY10 FY11E FY12E
Sa les Vo lume (mn to nnes) 20.5 23.0 28 20.5 23.0 28
Co ntra ct Prices (US$/t ) 44.6 84.6 67.7 44.6 84.6 67.7
Spo t Prices (US$/t ) 56.0 75.6 69.9 56.0 75.6 69.9
Excha ng e Ra t e (US$/INR) 47.0 45.0 45.0 47.0 45.0 45.0
Rea lisa t io ns in USD/to n 53.7 77.9 69 53.7 77.9 69
Rea lisa t io ns in Rs/to n 2524 3504 3107 2524 3504 3107
EBITDA Ma rg ins (%) 53.7 56.6 55.6 53.7 56.6 55.6
EPS (Rs.) 31.6 44.8 47.9 31.6 44.7 50.9
Source: Kotak Securities - Private Client Research
We maintain ACCUMULATE on
Sesa Goa with a price target of
Rs.352
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M O RNING INSIGHT A ugust 17, 2010
Target price based on FY11E consolidated earnings
EBITDA Multiple Valuation Value
(Rs mn) (x) (Rs mn) (Rs/Share)
Enterprise Va lue 49402 7.00 345812 388.7
Add : Net Ca sh (a t end o f FY11E) -32341 -36.4
Ta rg et Ma rket Ca pit a liza t io n 313471 352.3Target Price 352.0
Source: Kotak Securities - Private Client Research
Appendix
Cairn India Core Assets
Source: Sesa Goa PPT
Cairn India Today
Source: Sesa Goa PPT
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M O RNING INSIG HT A ugust 17, 2010
Rajasthan Reserve and Resource Potential
Source: Sesa Goa PPT
Cairn India Exploration Portfolio outside Rajasthan
Source: Sesa Goa PPT
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M O RNING INSIGHT A ugust 17, 2010
Consolidated financials
Profit and Loss Statement (Rs mn)
(Year-end March) FY10 FY11E FY12E
Net Sales 58,031 86,577 96,148
EBITDA 31,448 49,402 53,855
Ot her Inco me 3,050 3,886 1,147
Deprecia t io n 745 968 1,123
Interest 517 870 3,750
PBT 34,446 51,450 50,129
Ta xes 8,056 12,477 12,658
PA T 26,291 39,848 45,321
Sha res Outst a nd ing mn 831 890 890
EPS (Rs) 31.6 44.8 50.9
Source: Company, Kotak Securities - Private Client Research
Balance sheet (Rs mn)
(Year-end March) FY10 FY11E FY12E
LIABILITIES
Eq uit y Sha re Ca pit a l 831.0 889.7 889.7
Reserves & Surplus 78,346.1 135,127.9 177,066.3
Net Worth 79,177 136,018 177,956
Sho rt Term Lo a ns 0 0 0
Lo ng Term Lo a n s 19,606 50,000 50,000
Deferred Ta x Lia b ilit ies 750 800 664
Total Liabilities 99,966 186,818 228,620
ASSETS
Gro ss Blo ck 27,510 32,048 37,048
Less Deprecia t io n 5,741 6,709 7,831
Net Blo ck 21,770 25,339 29,216
CWIP 787 1,250 1,250
Invest ments 45,649 140,000 177,451
o f w hich f ina ncia l invest ments 45,649 0 37,451
Tota l Current Asset s 44,160 32,087 33,818
To ta l Current Lia bilit ies 12,400 11,859 13,115
Net Current Assets 31,760 20,229 20,703
Total Assets 99,966 186,818 228,620
Source: Company, Kotak Securities - Private Client Research
Key ratios
(Year-end March) FY10 FY11E FY12E
EBITDA Ma rg ins (%) 53.7 56.6 55.6
NPM Ma rg ins (%) 45.0 44.7 38.7
ROE o n yr-end eq uit y (%) 33.2 29.3 25.5
ROAE (%) 41.6 37.0 28.9
EPS g ro w th (%) 24.9 41.6 13.7
P/E 10.2 7.2 6.3
EV/sa les 3.8 3.7 2.9
EV/EBITDA 6.9 6.5 5.2
P/B 3.4 2.1 1.6BVPS 95.3 152.9 200.0
Source: Company, Kotak Securities - Private Client Research
8/13/2019 Sunil Hitech
19/19
M O RNING INSIG HT A ugust 17, 2010
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N t f t hi t i l b d li t d i f d / di t ib t d ith t K t k S iti i i t t t
Ga ine rs & Lo sers Nifty Gainers & LosersPrice (Rs) chg (%) Index points Volume (mn)
Gainers
ITC 158 1.3 3.6 2.9
Hindust a n Unilever 270 1.5 1.5 1.8
PNB 1,171 2.8 1.5 0.4
Losers
ICICI Ba nk 957 (2.0) (7.4) 3.2
L&T 1,790 (1.0) (3.4) 0.8
Ca irn Ind ia 333 (6.4) (3.4) 37.2
Source: Bloomberg
Research TeamDipen ShahIT, Me d iadipen.shah@kotak.com
+ 91 22 6621 6301Sanjeev ZarbadeCapital Goods, Engineering
sanjeev.zarbade@kotak.com+ 91 22 6621 6305
Teena VirmaniConstruction, Cement, Mid Cap
teena.virmani@kotak.com
+ 91 22 6621 6302
Apurva DoshiLogistics, Textiles, Mid Capdoshi.apurva@kotak.com
+ 91 22 6621 6308Saurabh AgrawalMetals, Mining
agrawal .saurabh@kotak.com+ 91 22 6621 6309
Saday SinhaBanking, Economy
saday.sinha@kotak.com
+ 91 22 6621 6312
Sarika LohraNBFCssarika.lohra@kotak.com
+ 91 22 6621 6301Arun AgarwalAutomobiles
arun.ag arw al@kotak.com+ 91 22 6621 6143
Ruchir KhareCapital Goods, Engineering
ruchir.khare@kotak.com
+ 91 22 6621 6448
Jayesh KumarEconomykumar.jayesh@kotak.com
+ 91 22 6652 9172Shrikant ChouhanTechnica l ana lyst
shrikant.chouhan@kotak.com+ 91 22 6621 6360
K. KathirveluProduction
k.kathirvelu@kotak.com
+ 91 22 6621 6311
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