RESEARCH

CRISIL IER Independent Equity Research

Bhartiya
International Ltd

Q3FY14 Results First Cut

Enhancing investment decisions

CRISIL IER Independent Equity Research

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis
of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a
five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a fivepoint scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL
Fundamental Grade

Assessment

CRISIL
Valuation Grade

Assessment

5/5

Excellent fundamentals

5/5

Strong upside (>25% from CMP)

4/5

Superior fundamentals

4/5

Upside (10-25% from CMP)

3/5

Good fundamentals

3/5

Align (+-10% from CMP)

2/5

Moderate fundamentals

2/5

Downside (negative 10-25% from CMP)

1/5

Poor fundamentals

1/5

Strong downside (<-25% from CMP)

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Last updated: May, 2013

Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.

Disclaimer:
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Bhartiya International Ltd

Q3FY14 results first cut: Lower-than-expected earnings as margin declines
Fundamental Grade

3/5 (Good fundamentals)

Valuation Grade

5/5 (CMP has strong upside)

Industry

Textiles, Apparels and Luxury Goods

February 07, 2014

Fair Value
CMP

Bhartiya International Ltds (Bhartiyas) Q3FY14 standalone revenues exceeded but earnings
were below CRISIL Researchs expectations due to lower margin. Highlights of the results
are mentioned below; this will be followed by a detailed quarterly update. Our outstanding
fundamental grade is 3/5 and fair value is 285 per share. We may revise our assessment
post our discussion with the management.

Excellent
Fundamentals

Standalone revenues increased by 16.8% y-o-y (down 18.9% q-o-q) to 856 mn.
Historically, Q3 has been a seasonally weak quarter.
Revenues from the leather products business (95% of revenues) increased by 31.5%

4
3
2
1

y-o-y to 836 mn; revenues from the textile apparel business were down to 19.8 mn

Poor
Fundamentals

from 96.8 mn in Q3FY13.

EBITDA margin declined 78 bps y-o-y and 119 bps q-o-q to 6.9% mainly due to increase

lower margin. The company reported EPS of 2.1 in Q3FY14 vs. 1.9 in Q3FY13.

KEY FORECAST (CONSOLIDATED)

( mn)

FY11

FY12

FY13

FY14E

FY15E

Operating income

1,952

2,507

3,039

3,918

4,616

186

270

273

369

443

Adj net income

68

118

104

147

183

Adj EPS ()

7.1

11.3

9.4

12.8

16.0
24.6

EBITDA

EPS growth (%)

NIFTY/SENSEX
NSE/BSE ticker
Face value ( per share)
Shares outstanding (mn)
Market cap ( mn)/(US$ mn)
Enterprise value ( mn)/(US$ mn)
52-week range ()/(H/L)
Beta
Free float (%)
Avg daily volumes (30-days)
Avg daily value (30-days) ( mn)

33.7

58.5

(16.6)

36.1

1.9

2.0

0.6

0.7

0.8

RoCE (%)

9.4

12.3

10.6

12.6

13.9

RoE (%)

6.0

9.4

7.5

9.7

10.9

PE (x)

7.3

4.6

17.4

12.8

10.3

70%

P/BV (x)

0.4

0.4

1.3

1.2

1.1

60%

EV/EBITDA (x)

5.3

4.4

9.9

7.9

6.8

50%

Source: Company, CRISIL Research estimates

KEY STOCK STATISTICS

Dividend yield (%)

NM: Not meaningful; CMP: Current market price

Strong
Downside

PAT recorded a moderate growth of 11.9% y-o-y (down 48.7% q-o-q) to 24 mn due to

Valuations: Current market price has strong upside

Our sum-of-the-parts-based outstanding fair value estimate for Bhartiya is 285 per share. At
the current market price of 164, the valuation grade is 5/5.

Valuation Grade

in employee costs.

Strong
Upside

285
164

CFV MATRIX

Fundamental Grade

The above grades are outstanding ones and are currently under review

RESEARCH

6063/20377
BIL
10
11.1
1,819/29
2,709/44
245/109
1.3
54.0%
10,480
1.8

SHAREHOLDING PATTERN
100%
90%
80%

40%

54.5%

54.5%

54.0%

53.7%

0.03%

0.04%

0.04%

0.2%
0.04%

45.5%

45.5%

46.0%

46.0%

Mar-13

Jun-13

30%
20%
10%
0%
Promoter

Sep-13

FII

DII

Dec-13
Others

PERFORMANCE VIS--VIS MARKET

Bhartiya

1-m
-7%

CNX 500

-2%

Returns
3-m
6-m
-11%
37%
-1%

12%

12-m
-5%
0%

ANALYTICAL CONTACT
Mohit Modi (Director)

mohit.modi@crisil.com

Ravi Dodhia

ravi.dodhia@crisil.com

Bhaskar Bukrediwala

bhaskar.bukrediwala@crisil.com

Client servicing desk

+91 22 3342 3561

clientservicing@crisil.com

For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

CRISIL IER Independent Equity Research

Q3FY14 results summary (Standalone)

( mn)

Q3FY14

Q2FY14

Q3FY13

q-o-q (%)

y-o-y (%)

9MFY14

9MFY13

y-o-y (%)

Net sales

856

1,056

733

(18.9)

16.8

2,590

1,883

37.6

Raw materials cost

519

704

478

(26.2)

8.7

1,588

1,171

35.5

60.7%

66.7%

65.2%

-600bps

-456bps

61.3%

62.2%

-92bps

Raw materials cost (% of net sales)

Employees cost

49

40

33

21.6

49.5

125

86

45.7

Other expenses

229

226

166

1.1

38.0

682

455

49.7

59

86

56

(30.7)

5.1

196

170

15.0

6.9%

8.1%

7.7%

-119bps

-78bps

7.6%

9.0%

-149bps

EBITDA
EBITDA margin
Depreciation

(20.3)

(12.5)

18

15

14.4

EBIT

54

79

51

(31.6)

7.1

178

155

15.0

Interest and finance charges

26

26

23

(0.3)

12.7

74

63

17.7

Operating PBT

28

53

27

(47.1)

2.4

104

92

13.2

Other Income

(22.0)

48.8

18

15

22.8

PBT

34

60

31

(44.1)

8.1

122

107

14.6

Tax

10

14

10

(28.6)

31

30

3.3

PAT

24

46

21

(48.7)

11.9

91

77

18.9

Adj PAT
Adj PAT margin
No of equity shares (mn)
Adj EPS ()

24

46

21

(48.7)

11.9

91

77

18.9

2.8%

4.4%

2.9%

-161bps

-12bps

3.5%

4.1%

-55bps

11.1

11.1

11.1

11.1

11.1

2.1

4.2

1.9

(48.7)

11.9

8.3

6.9

18.9

Source: Company, CRISIL Research

Revenue increased y-o-y but margin was under pressure...

( mn)

( mn)

8%

35

6%

25

5.6%
600

4%

200

2%

10

0%

429

722

733

590

679

1,056

856

Q3FY14

Q2FY14

Q1FY14

Q4FY13

Q3FY13

Q2FY13

Q1FY13

Q4FY12

Net Sales

Source: Company, CRISIL Research

EBITDA Margin (RHS)

1.4%

4%
2.8%

3%
2%

1.0%

1%

15

0%
17
6

39

21

21

46

24

-1%
-2%

Q4FY12

397

2.9%

20

400

30

3.1%

PAT

Source: Company, CRISIL Research

PAT Margin (RHS)

Q3FY14

6.9%

5%

3.9%

40

Q2FY14

7.5%

6.7%

10%

8.1%

6%

4.4%

Q1FY14

7.7%

45

Q4FY13

1,000

5.4%

50

Q3FY13

10.1%

Q2FY13

9.5%

12%

Q1FY13

1,200

800

... which led to moderate growth in PAT

Bhartiya International Ltd

RESEARCH

Share price movement

Fair value movement since initiation

()

('000)

300

600

250

500

200

400

150

300

200

100

200

100

50

100

600
500

Bhartiya

CNX 500

Total Traded Quantity (RHS)

CRISIL Fair Value

Feb-14

Jan-14

Dec-13

Sep-13

Nov-13

Jul-13

Aug-13

Jun-13

Apr-13

May-13

Mar-13

Feb-13

Jan-13

Dec-12

Oct-12

Feb-14

Aug-13

Mar-13

Oct-12

May-12

Dec-11

Jun-11

Jan-11

Aug-10

Mar-10

Sep-09

300

Nov-12

400

Bhartiya

-Indexed to 100
Source: NSE, CRISIL Research

Source: NSE, BSE, CRISIL Research

CRISIL IER Independent Equity Research

Annexure: Financials (Consolidated)

Income statement
( m n)
Operating incom e
EBITDA
EBITDA margin
Depreciation
EBIT
Interest
Operating PBT
Other income
Exceptional inc/(exp)
PBT
Tax provision
Minority interest
PAT (Reported)
Less: Exceptionals
Adjusted PAT

Balance Sheet
FY11
1,952
186
9.5%
28
158
82
76
22
(4)
94
30
64
(4)
68

FY12
2,507
270
10.8%
30
240
103
137
23
(3)
157
41
115
(3)
118

FY13
3,039
273
9.0%
32
241
119
123
22
(3)
141
40
101
(3)
104

FY11

FY12

FY13

Grow th
Operating income (%)
EBITDA (%)
Adj PAT (%)
Adj EPS (%)

(5.7)
4.2
46.0
33.7

28.4
45.2
75.3
58.5

21.2
1.2
(11.8)
(16.6)

Profitability
EBITDA margin (%)
Adj PAT Margin (%)
RoE (%)
RoCE (%)
RoIC (%)

9.5
3.5
6.0
9.4
14.5

10.8
4.7
9.4
12.3
16.6

9.0
3.4
7.5
10.6
13.8

Valuations
Price-earnings (x)
Price-book (x)
EV/EBITDA (x)
EV/Sales (x)
Dividend payout ratio (%)
Dividend yield (%)

7.3
0.4
5.3
0.5
14.8
1.9

4.6
0.4
4.4
0.5
9.6
2.0

17.4
1.3
9.9
1.0
11.5
0.6

B/S ratios
Inventory days
Creditors days
Debtor days
Working capital days
Gross asset turnover (x)
Net asset turnover (x)
Sales/operating assets (x)
Current ratio (x)
Debt-equity (x)
Net debt/equity (x)
Interest coverage

177
52
28
167
3.6
5.0
4.3
4.1
0.5
0.4
1.9

169
54
39
159
3.9
5.4
4.8
3.9
0.6
0.5
2.3

154
46
49
165
4.0
5.4
5.0
4.5
0.7
0.6
2.0

FY11
7.1
10.1
126.1
1.0
9.5

FY12
11.3
14.2
127.0
1.1
10.5

FY13
9.4
12.3
130.0
1.1
11.1

Ratios

Per share
Adj EPS ()
CEPS
Book value
Dividend ()
Actual o/s shares (mn)

Source: CRISIL Research

( mn)
Liabilities
Equity share capital
Reserves
Minorities
Net w orth
Convertible debt
Other debt
Total debt
Deferred tax liability (net)
Total liabilities
Assets
Net f ixed assets
Capital WIP
Total fixed assets
Investme nts
Current assets
Inventory
Sundry debtors
Loans and advances
Cash & bank balance
Marketable securities
Total current assets
Total current liabilities
Net current assets
Intangibles/Misc. expenditure
Total assets

FY11

FY12

FY13

95
1,099
1,194
627
627
13
1,835

105
1,224
1,329
767
767
17
2,113

111
1,328
1,438
1,038
1,038
23
2,499

455
28
483
389

478
91
569
411

647
2
649
412

777
137
218
96
38
1,267
310
956
6
1,835

949
251
198
83
33
1,515
388
1,126
7
2,113

1,081
381
221
121
27
1,831
403
1,428
9
2,499

Cash flow
( mn)
Pre-tax profit
Total tax paid
Depreciation
Working capital changes
Net cas h from operations
Cash from investments
Capital expenditure
Investments and others
Net cas h from investments
Cash from financing
Equity raised/(repaid)
Debt raised/(repaid)
Dividend (incl. tax)
Others (incl extraordinaries)
Net cas h from financing
Change in cash position
Closing cash

FY11
98
(25)
28
(275)
(175)

FY12
160
(38)
30
(188)
(37)

FY13
144
(34)
32
(270)
(128)

(87)
22
(65)

(116)
(17)
(133)

(115)
5
(110)

34
162
(11)
29
215
(25)
96

50
140
(13)
(20)
156
(13)
83

36
271
(14)
(17)
276
38
121

Q1FY14
679
15%
51
54%
7%
21
21
247%
3%
1.9

Q2FY14
1,056
56%
86
69%
8%
46
46
118%
4%
4.2

Q3FY14
856
-19%
59
-31%
7%
24
24
-49%
3%
2.1

Quarterly financials (standalone)

( mn)
Net Sales
Change (q-o-q)
EBITDA
Change (q-o-q)
EBITDA m argin
PAT
Adj PAT
Change (q-o-q)
Adj PAT margin
Adj EPS

Q3FY13
733
2%
56
-23%
8%
21
21
-45%
3%
1.9

Q4FY13
590
-19%
33
-42%
6%
6
6
-71%
1%
0.6

RESEARCH

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