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May-16
DEEPAK KUMAR
Deepak.kumar@narnolia.com
Narnolia Securities Ltd 2
Please refer to the Disclaimers at the end of this Report
BANKBARODA
Assets Quality stabilize but delayed recovery to keep credit cost at higher levels.
Assets Quality of BankBaroda seems to stabilize now. GNPA and NNPA were at 11.40% and 5.43% against 11.35% and
5.43% QoQ respectively. Slippages increased by 45% QoQ and remained at elevated level. However management
maintained its slippage and recovery guidance in FY17 of Rs 15000 Cr and Rs 10000 Cr respectively. On 9 month
slippages and recovery were at Rs 13000 Cr and Rs 7800 Cr respectively. Standard restructured assets stand at Rs
14000 Cr. Sequentially the Stressed assets increased to 15.16% against 15.02%. Credit cost remained high at 2.4%
(annualised).
Going forward we expect the slippages and stress assets to decline, but the recovery of large stressed accounts seems to
take more time which will keep the credit cost at elevated level.
Profitability Metrix
Ratios 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-)
Yield On Advances 8.1 7.7 7.9 7.6 7.0 6.9 7.2 7.3 7.2 0.19 -0.03
Cost of Deposits 5.2 5.2 5.1 5.1 5.0 5.0 4.7 4.8 4.8 -0.26 -0.03
NIM% (Overall) 2.2 2.2 2.3 2.1 1.7 2.2 2.2 2.3 2.1 0.34 -0.23
NIM% (Domestic) 2.9 2.8 2.9 2.7 2.1 2.7 2.8 2.9 2.5 0.38 -0.36
NIM% (Overseas) 0.9 1.0 0.9 0.9 0.9 0.9 1.0 1.0 1.0 0.11 0.00
NII Growth % 7.5 1.5 3.9 (4.6) (17.7) 5.0 (2.6) 5.6 15.9 33.53 10.26
C/I Ratio 46.6 39.7 50.3 46.7 55.4 49.6 44.6 46.1 47.1 -8.23 1.08
Other Inc./Net Inc. % 24.9 29.0 21.8 26.1 29.1 34.8 30.0 31.3 36.2 7.01 4.85
Tax % 69.0 31.7 34.3 72.0 25.1 24.6 36.3 38.3 51.0 25.93 12.74
PAT to Total Income% 7.6 13.4 23.8 2.8 (87.5) (63.3) 8.8 11.1 5.1 92.67 -5.92
Concall Highlights:
>> FCNR Deposits that redeem during the quarter was Rs 11000 Cr and loans linked to this that matured was
Rs 10000 Cr.
>> Slippage has no concentration. The slippage accounts has the range of Rs 10 Cr to 100 Cr mostly.
>> Slippage from watchlist was Rs 2700 Cr. Management has maintained the slippage guidance of Rs 15000 Cr
in FY17 and recovery of Rs 10000 Cr. Expects slippages to improve in FY18.
>> CET 1 ratio declined due to some statutory reclassification of number. (Which was earlier included in CET 1
was not allowed from this quarter.)
8.0 15.0
50.0
10.0
6.0 40.0
5.0
4.0
- 30.0
2.0 (5.0)
20.0
- (10.0)
10.0
(15.0)
(20.0) -
12.00 70
10.00 60
8.00 50
6.00 40
30
4.00
20
2.00
10
- -
Advances 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Net Advances (Rs in Cr) 393630 428065 408388 414900 384272 383770 362766 354150 349960
Advances Growth YoY % 11.69 7.82 6.97 7.55 -2.38 -10.35 -11.17 -14.64 -8.93
>> Growth QoQ % 2.04 8.75 -4.60 1.59 -7.38 -0.13 -5.47 -2.38 -1.18
Advances Break Up % 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
>>Domestic 66.28 68.18 67.54 66.92 67.45 68.60 69.09 69.60 71.45
>>International 33.72 31.82 32.46 33.08 32.55 31.40 30.91 30.40 28.55
Deposits 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Deposits (Rs in Cr) 564600 617560 593087 612458 589687 574038 562174 567531 589859
>> Growth YoY % 12.07 8.55 7.51 8.03 4.44 -7.05 -5.21 -7.34 0.03
>> Growth QoQ % -0.41 9.38 -3.96 3.27 -3.72 -2.65 -2.07 0.95 3.93
CASA % (Domestic) 32.42 33.01 31.89 31.95 29.97 33.57 33.83 34.23 40.46
CASA Growth YoY % 12.93 11.25 10.76 4.11 -5.11 -7.14 -1.16 1.72 38.70
>> Growth QoQ % 0.75 9.27 -5.78 0.37 -8.17 6.93 0.29 3.29 25.18
Credit Deposit Ratio 69.72 69.32 68.86 67.74 65.17 66.85 64.53 62.40 59.33
Result Update KNR has reported healthy revenue growth of 75% YoY to Rs. 382 Cr
CMP 177 compared to Rs. 218 Cr but lower than our expectation. Lower executions
Target Price NA on Madurai road project due to delay in some approval hurt the revenue
growth. EBITDA for the quarter has clocked 23.8% growth YoY to Rs. 58 Cr
Previous Target Price
as against Rs. 47 Cr in Q3FY16. During the quarter KNR has signed share
Upside NA purchase agreement for sale of the equity stake in two annuity BOT project
Change from Previous and correspondingly impaired Rs. 11 Cr as impairment in value of an
investment. Hence, it resulted in negative growth in bottom line.
Market Data
Delay in approval will hurt Revenue Growth:-
BSE Code 532942
NSE Symbol KNRCON Currently, KNR executes 2 major projects in state of Tamil Nadu namely (i)
52wk Range H/L 201/85 Madurai -Ramanathpuram and (ii) Dindigul-Bangalore. Tamil Nadu
Mkt Capital (Rs Cr) 2414 government has kept some approval for the project due to current instable
political situation. In Q3FY17 execution on Mudurai project has come down
Av. Volume 46337
by 9% QoQ due to delay in approval and management expect it to continue
Nifty 8725 for one and half month going ahead. Dindigul Bangalore project was
delayed due to tree cutting permission. However the project has started, but
Stock Performance considering the current situation we expect slow execution going forward.
1Month 3 Month 1 Year Management has guided to close year with 1300 Cr top line, which implies
Absolute 2.3 17.0 93.8 subdued revenue growth in Q4FY17.
Rel.to Nifty -2.4 8.6 67.7
Eyeing on HAM Model:-
Share Holding Pattern%
3QFY17 2QFY17 1QFY17 Initially, KNR was not interested in HAM model but considering the higher
Promoters 58% 58% 61% competitive intensity and decreasing opportunity in EPC space, now
Public 42% 42% 39% management is willing to take up HAM projects. This decision will open up
new opportunity in infra space but subsequently it will increase burden on
Other 0% 0% 0%
the balance sheet. Current net debt is Rs. 149 Cr and 624 Cr on Standalone
Total 100% 100% 100% and consolidated books respectively
Company Vs NIFTY
Outlook and Valuation
180 KNRCON NIFTY
160 KNR is the one of the best and fastest growing company in infra space.
140
Revenue growth in last 3 quarters was 70% above with strong balance
sheet position. Current debt to equity position is 1.06 times. But considering
120
the near-term headwinds of an unstable political condition in a state of Tamil
100 Nadu, where KNR having a significant share of its current order book.
80 Hence, we are NEUTRAL on the stock.
60
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
40
Sales 382 373 218 75% 2%
EBITDA 58 56 47 23% 4%
Net Profit 31 44 34 -9% -30%
Sandip Jabuani EBIDTA% 15.1% 15.0% 21.3% (620) bps 1 bps
sandip.jabuani@narnolia.com PAT % 8.0% 11.7% 15.6% (760) bps (370)bps
Narnolia Securities Ltd 7
Please refer to the Disclaimers at the end of this Report
Q3FY17 Result Update :-
KNR reported robust revenue growth of 75% YoY to Rs.382 cr as against Rs.219 Cr. This was the straight 3rd quarter
where KNR has achieved 70% plus revenue growth
EBITDA has clocked 23.8% of growth to Rs.58 cr as against Rs.47Cr in corresponding period last year led by higher
revenue growth. However EBITDA margin decline by 620 bps YoY to 15.1% on account 14.80 Cr of higher other operating
income reported in Q3FY16.
Profit after tax has down by the 9.8% YoY to Rs. 31 Cr as compared to Rs. 34 Cr in Q3FY16 due to 11 cr of impairment in
investment.
Order book as on 31st Dec 2017 stands at Rs. 4238 Cr (Rs. 3607 Cr in Roads & Highways and Rs.632 Cr in Irrigation).
Timely completion
capabilities will help
KNR construction to
grow higher in
competitive
scenario, comapny
earn bonus of 6Cr on
early completation of
Penchalakona
Yerpedu project.
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
30%
25%
20%
15%
10%
5%
0%
500 50
1552
1756
1793
1812
1787
1975
2033
2064
2019
2209
2220
2211
2197
2456
2355
0 0
16.0%
14.3% 14.7% 14.0% 14.4%
13.7% 13.8%
13.2% 13.3%
14.0% 12.3%
12.0% 11.1% 10.8%
9.9% 10.0% 9.5%
9.2% 9.3% 9.5% 9.4% 9.5% 9.4%
10.0% 8.9% 8.9% 8.6%
8.1%
8.0% 6.4% 6.8%
5.8% 5.6% 5.6% 5.9%
6.0%
0.0%
1QFY142QFY143QFY144QFY141QFY152QFY153QFY154QFY151QFY162QFY163QFY164QFY161QFY172QFY173QFY17
Company Update
Recent Update
CMP 1553
Target Price 1760 GODREJCPs management is hopeful of better FMCG industry growth in
Previous Target Price 1760 FY18. Implementation of GST will lead to improvement in GDP by 1.50 to
2% considering every things being equal. After the headwinds of
Upside 13% demonetization, management is expecting better industrys performance in
Change from Previous NA FY18 supported by a pro-growth budget with adequate government
initiatives. For GODREJCP, management expects strong performance in
Market Data Q4FY17. Management has indicated that recovery after demonetization is
better than expected with approx. 2% of secondary sales growth.
BSE Code 532424 Management is looking for investment in market of Myanmar to expand its
NSE Symbol GODREJCP international footprints.
52wk Range H/L 1710/1138
Mkt Capital (Rs Cr) 52,895 International Business
Av. Volume(,000) 199
Nifty 8,805 Indonesian business posted flat YoY constant currency (CC) growth for
Q3FY17. HI growth impacted due to seasonality and relatively higher
Stock Performance competitive intensity. Africa business (including Strength of Nature)
delivered a strong CC growth of 54% with temporary decline of 160 bps
1M 3M 12M
margin driven by currency depreciation. For Latin American business, CC
Absolute -1.6 7.3 30.8 growth remained robust 24%. Europe business delivered strong CC growth
Rel.to Nifty -6.3 1.2 4.6 of 16% in Q3FY17.
Outlook and Valuation
Share Holding Pattern-%
3QFY17 2QFY17 1QFY17 Company's resilient performance in spite of tough demand scenario and
company's thrust on innovation gives us confidence about better growth
Promoters 63.3 63.3 63.3
going forward. Although Indonesian business was subdued in this quarter but
Public 36.7 36.7 36.7 company has improved Market share in home insecticide (HI) segment and
Others -- -- -- grew double digit in non HI. Management sees better traction from
Total 100 100 100 Indonesian business next year. Going forward, managements initiatives for
expanding direct reach will not only strengthen the brand further but also
improve Market share in less penetrated market. Management indicated that
Company Vs NIFTY there is more headroom for margin improvement from international business
140 GODREJCP NIFTY in medium to long term. Considering strong innovation pipeline, companys
thrust on EBITDA growth better than sales growth and expectation of
130
improvement in international business, we still hold positive view on
120 GODREJCP and recommend BUY with a target price of Rs 1760.
110
Rs,Cr
100 Financials 3QFY17 2QFY17 (QoQ)-% 3QFY16 (YoY)-%
90 Sales 2486 2439 2% 2286 9%
80 EBITDA 517 466 11% 455 14%
Net Profit 352 318 11% 368 -4%
EBITDA% 21% 19% 169 Bps 20% 91 Bps
Rajeev Anand PAT% 14% 13% 111 Bps 16% (194 Bps)
rajeev.anand@narnolia.com
Narnolia Securities Ltd 14
Please refer to the Disclaimers at the end of this Report
Concall Highlights(Q3FY17)
Positive growth in Dec and build momentum from here. Confident to outpace industry growth going forward.
Indonesian business: Management is hopeful for better growth from Indonesia next year.
African business grew by double digit. Facing headwind in terms of currency devaluation in Nigeria. Management is planning to
localize production facility in CY17.
Management is confident of EBITDA growth ahead of the sales growth.
After demonetization, recovery is much faster than what was expected. It will be back to normal in couple of months.
A&P Expenses will be in the range of 11% of the sales.
Modern Trade (MT) grew by 33% in this quarter.
Going forward, the company will maintain innovation, launch new products, intensify introduction on LUP(Lower Unit Pack),
expand direct reach and work for brand building.
Soap volume growth will be better in Q4FY17 than Q3FY17.
Major Margin Drivers GCPL: Product portfolio, Launch of premium products and cost cutting measure.
International Business( Volume growth): Indonesia(3.5%), Africa( early double digit),Latin America (dip ),Europe( early double
digit). Approx. 66% of growth from International business came by volume.
Gained market share in Cinthol.
2060
2236
2092
1988
2197
2286
2269
2123
2439
2486
50
0 0
0%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Result Update
CMP 93 The commercial vehicle giant has posted Rs.4431 crore of net revenue with
Target Price 110 a growth of 7.7% YoY in the 3QFY17. M&HCV volumes grew by 9%YoY on
account of increased infra activity in the country. LCV volumes declined by
Previous Target Price
3% due to the vast presence in rural areas, which were affected most by
Upside 18% demonetization. Realization also declined by 2%QoQ to Rs.1349300
Change from Previous - because of higher discounts in the industry. Discounts have gone up to
Rs.300000 per unit from Rs.225000-250000 per unit but further price
Market Data increases will net off this effect. M&HCV segment market share stood at
33.7% (+370bps YoY) during the quarter despite the demonetization issue.
BSE Code 500477 Exports revenue grew by 11%QoQ to Rs.388 crore for the quarter. The
NSE Symbol ASHOKLEY company has a healthy order book of export orders. Hinduja Foundries
52wk Range H/L 113/74 Limited (HFL), which fulfills casting requirements of Ashok Leyland, has also
shown EBITDA positive for consecutive second quarters. Management
Mkt Capital (Rs Cr) 26,452
anticipates that in two years time the HFL will be accretive to Ashok Leyland.
Av. Volume 1201241 Recently, Ashok Leyland opened a new assembly plant in Bangladesh as it
Nifty 8,794 aims to make further inroads into the neighboring countries.
Stock Performance
1Month 3Month 1Year
3QFY17 Result Highlights
Absolute 9.9 6.4 14.6 Revenue stood Rs.4431 crore with a groowth of 8%YoY on account of
Rel.to Nifty 5.2 0.4 -11.4 6%YoY growth in Volumes and 2%YoY growth in realization in 3QFY17.
EBITDA margin contracted by 60 bps YoY due to 80bps rise in commodity
Share Holding Pattern-% prices during the quarter.
3QFY17 2QFY17 1QFY17 PAT margin declined by 120 bps to 4.1% due to forex loss of Rs.64 crore
Promoter 50.4 50.4 50.4 during the quarter.
Public 49.6 49.6 49.6
Outlook
Others -- -- --
Total 100.0 100.0 100.0
Going forward, We assume that the upcoming emission norms BS-IV to BS-
VI, improvement in demand from infrastructure segment and government's
Company Vs NIFTY initiative to develop defense products in the country can be volume boosters
130
ASHOKLEY NIFTY for the company in FY17. Ashok Leyland is also working towards a renewed
125 thrust in the international markets, with network expansion and dedicated
120 products. We expect that the company will maintain a healthy ROE of over
115 20% going ahead. We maintain 'BUY' on Ashok Leyland considering the
110 huge growth potential going ahead for a target price of Rs.110.
105
100 Rs. In crore
95
90
Financials 3QFY17 2QFY17 3QFY16 QoQ YoY
85 Sales 4431 4622 4114 -4% 8%
80 EBITDA 454 536 449 -15% 1%
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Investment Arguments
The country would be moving to BS-IV norms in April, 2017 and a significant amount of pre-buying expected, especially in the
fourth quarter of FY17. Ashok Leyland's subsidiary, Albonair, holds a significant potential moving forward because Albonair does
exhaust emission systems, selective catalytic reduction emission systems which are necessary for being BS-IV compliant.
Export is only 12% of total volumes, therefore the company is targeting the African and Middle East countries to expand its
export contribution by setting up own assembly plants in these countries under the company's global expansion project. The
exports is an important part of Ashok Leyland's strategic intent to globalise its product portfolio and derisk itself from supplying
only into India.
The management expects its defence business to log four-fold jump in revenues at over Rs 2,000 crore in next five years as it
gears up to provide an entire range of mobility solutions, including missile carrying vehicles to the armed forces. Ashok Leyland is
the largest supplier of logistics vehicles to the Indian Army.
The management has focused approach towards its core commercial vehicle business. We expect that the company will be
benefitting from recovery in the M&HCV demand and its EBITDA margin will expand on account of operating leverage. The
company is also working on to reduce its debt and generate more cash to fulfill its future expansion requirements.
Concall Highlights
Result Update
Results in-line; with stable EBITDA margin
CMP 3264
Target Price 3830 Hero Motocorp posted 3QFY17 results in-line with our expectation. Net
Previous Target Price 3179 revenue de-grew by 12%YoY to Rs. 6365 crore in 3QFY17. Volumes
Upside 17% declined by 13%YoY because of demonetization issue during the quarter.
Rural areas have witnessed severe hit due to currency crunch which
Change from Previous 20%
accounts for 60% of the Hero Motocorp volumes. Motorcycle sales were
down by 15% in the month of November and December. Realization stood
Market Data flat because the company took price hike during the quarter. In the month of
BSE Code 500182 January, Hero sold 487000 vehicles with a growth of 48% MoM which
NSE Symbol shows a sharp recovery in the demand. Management expects high single
HEROMOTOCO digit growth for the first half and better second half of next financial year in
52wk Range H/L 3740/2440 volume terms. LEAP, the cost cutting initiative, has supported the company
Mkt Capital (Rs Cr) 65,185 to post EBITDA margin over 16% despite rising commodity prices.
Av. Volume 37142
3QFY17 Results Update
Nifty 8778
>>Revenue declined by 12% YoY to Rs.6365 crore in 3QFY17 because of
Stock Performance 13%YoY decline in volumes.
1Month 3Month 1Year >>Gross margin improved by 270 bps YoY to 35.1% driven by cost cutting
Absolute 6.6 3.8 26.5 initiative LEAP and lower commodity price benefit.
Rel.to Nifty 0.7 0.8 6.3 >>EBITDA margin expanded by 130 bps YoY by lower advertising and
promotional expenses.
Share Holding Pattern-% >>PAT margin improved by 115 bps YoY due to higher other income during
3QFY17 2QFY17 1QFY17 the quarter.
Promoter 34.6 34.6 34.6
Outlook and Valuation
Public 65.4 65.4 65.4
Others -- -- -- We expect improvement in demand scenario in the domestic market after
Total 100.0 100.0 100.0 the demonetization, upcoming marriage season, increasing finance
penetration in rural & semi-urban areas and seventh pay commission payout
will drive the volumes and implementation of cost cutting initiative LEAP to
Company Vs NIFTY
boost margins further by 100 bps going ahead. It has a healthy dividend
150
HEROMOTOCO NIFTY payout of 54%, which provides a cushion to the investors to invest in the
140 company for long term. The company is trading at 7 times of FY17 expected
130 book value with a RoE of 36%. We maintain "BUY" rating on this stock with
a target price of Rs.3830.
120
110
Rs. In crore
100
Financials 3QFY17 2QFY17 3QFY16 QoQ YoY
90
Sales 6365 7796 7224 -18.4% -11.9%
EBITDA 1080 1369 1131 -21.1% -4.5%
80
Net Profit 772 1004 793 -23.1% -2.7%
Jul-16
Feb-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
Oct-16
Nov-16
Apr-16
Mar-16
Healthy dividend payout- Hero Motocorp is a debt free and cash rich company. It has a healthy dividend payout of 54%, which
provides cushion to the investors to invest in the company for long term.
Seventh Pay commission to boost demand- We expect approx.4.7mn government employees will be benefited in this
seventh pay commission pay-out. This will improve the living standard and will drive urban and rural demand for two wheelers
going forward. We expect as a market leader Hero can be bigger beneficiary after the implementation of 7th pay commission.
Concall Highlights
Management expects good single digit growth for first half and better second half for next financial.
Capex guidance for FY17: Rs 1200-1500 crore and Rs.1000-1100 crore for FY18.
Rs.350-400 crore of capex for Andhra Pradesh plant in FY18.
Rs.2000 crore of capex in FY18 for phase-II & III of Halol Plant, If the robust demand comes in.
Price hike in Janauary 2017 in the range of Rs.500-1500 covering rising commodity prices and BS-IV compliance.
EBITDA margin guidance above 15% in FY17.
Target of Rs.255 crore benefit from cost cutting program LEAP in FY17.
Other income for FY17 would be higher by 8-9 percent on an average.
The tax benefit for plants in Rajasthan and Gujarat will last for 7 years; and the benefit is restricted to the extent of investment
Scooters to continue outpace motorcycle growth going forward in FY17. Market share is 14%.
Dealer Inventory remained at 6-7 weeks.
Effective tax rate for FY17 will be slightly higher than FY16
Advertising and Promotion expenses stood 2.4-2.5% of total sales.
Plant Details
Plant Location Capacity
Haridwar 3060000
Gurgaon 2340000
Dharuhera 2340000
Neemrana 450000
Halol 1800000
Gujarat Plant- capacity expansion will include an initial capacity of 1.2 million (mn) units (phase 1: 0.75 mn units by Q3FY17;
phase 2: 0.45 mn units by FY17 end) & a final addition of 0.6 mn (phase 3) by FY18 beginning.
The Haridwar operations currently contribute towards 38% of HMCLs volumes. Once the excise benefits expire in FY18 end,
there will be a 100 bps impact on the EBITDA margins.
Narnolia Securities Ltd 21
BALANCE SHEET
FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17
Share Capital 40 40 40 40 OP/(Loss) before Tax 2864 3329 4312 4806
Reserves 5,583 6,500 7,913 9,477 Depreciation 1107 540 447 571
Net Worth 5,623 6,540 7,953 9,517 Direct Taxes Paid (649) (1000) (1104) (1377)
Long term Debt 24 12 146 146 Op before WC 3557 3586 4508 5330
Short term Debt - 88 84 85 CF from Op. Activity 2963 2250 3796 3981
Deferred Tax - - 228 228 Purchase of investment (9) 1354 26973 (142)
Total Capital Employed 5,647 6,552 8,099 9,663 Capex (941) (1156) (1708) (1151)
Net Fixed Assets 3,102 3,671 4,689 5,270 CF from Inv. Activity (1618) 12 (2286) (1780)
Capital WIP 855 719 653 653 Repayment of Borrowings
Debtors 921 1,372 1,282 1,291 Interest Paid (12) (11) (11) (6)
Cash & Bank Balances 120 216 179 510 Divd Paid (incl Tax) (1403) (2219) (1682) (1864)
Trade payables 2,291 2,855 2,792 2,811 CF from Fin. Activity (1414) (2231) (1561) (1870)
Total Provisions 1,594 801 884 890 Inc/(Dec) in Cash (69) 32 (50) 330
Net Current Assets 1,135 1,481 1,999 2,790 Add: Opening Balance 135 66 155 179
Total Assets 10,122 10,654 12,672 14,212 Closing Balance 69 98 104 510
Market Data IRB has collected Rs. 2880 Cr till November 2016 against the projection of
BSE Code 532947 Rs. 2869 Cr on Mumbai-Pune Expressway. But as per the concession
NSE Symbol IRB agreement, IRB has right to collect toll till August 2019. There is no such
clause in concession agreement to terminate the contract. Hence, it will not
52wk Range H/L 266/177
change our revenue estimate.
Mkt Capital (Rs Cr) 8,208
Av. Volume 287591
Nifty 8769
Strong Performance, nullify Demonetization Impact :-
Stock Performance IRB has reported better number than our expectation in Q3FY17. Net sales
1Month 3 Month 1Year grew by 5.8% YoY to Rs. 1411 Cr as compared to Rs.1333 Cr in the
Absolute 8.9 10.1 -0.5 corresponding quarter previous year despite of demonetization which led to
suspension of toll collection for 23 days. But on the contrary, average daily
Rel.to Nifty 2.4 6.1 -17.6
toll collection for December month (from 3rd Dec to 31st Dec) has grown by
3% to 7.79 Cr compare to 7.53 in October month. Total income from toll
Share Holding Pattern-% collection grew by 16% YoY (including 150 Cr of claim against toll loss during
3QFY17 2QFY17 1QFY17 the suspension of 23 days) compared to Q3FY16. While EPC revenue has
Promoters 57% 57% 57% grown by 3% YoY to Rs. 834 Cr. Things are improving faster post the
Public 43% 43% 43% demonetization and management has envisaged 5-6% traffic growth in next 3-
6 months which provides strong recovery in toll collection. We expect robust
revenue growth in EPC segment based on healthy order book (3.45x of TTM
construction revenue).
Company Vs NIFTY Actual toll collection for the Q3FY17 was Rs. 517 Cr and company has raised
130 a claim of Rs. 150 Cr for the revenue loss during the suspension period.
IRB NIFTY
120 Revenue and profitability loss on the state highways will compensate in cash
110 by the respective state authorities but NHAI compensates only for interest
100 and O&M expenses incurred during the period in cash for national highways.
90 Principal and profitability on national highways will compensate by way of
80 extension of the concession period.
70 In Rs. Cr
60 Financials Q3FY16 Q2FY17 Q3FY17 YoY (+/-) QoQ (+/-)
50 Sales 1333 1291 1411 6% 9%
40
EBITDA 688 709 743 8% 5%
PAT 170 142 184 8% 30%
EBIDTA% 51.6% 54.9% 52.7% 110 bps (220) bps
Sandip Jabuani PAT 12.7% 11.0% 13.1% 40 bps 210 bps
sandip.jabuani@narnolia.com
Narnolia Securities Ltd 23
Please refer to the Disclaimers at the end of this Report
Investment Argument:-
Robust construction revenue visibility:-
Currently, 5 projects are under construction and in next 8-10 months time period another 3 projects in Rajasthan namely
Gujarat/Rajasthan, Kishangarh - Udaipur and Kishangarh - Gulabpura will come under execution. Order book stands at Rs. 12011
Cr i.e. 3.45x of TTM EPC revenue. All the projects are well on track and management confident to complete projects on time.
Current on-going projects will drive the revenue growth and we expect revenue growth of 40-45% in FY18E.
Concall Highlights :-
Traffic growth is encouraging despite demonization.
December toll collection is up by 3% compare to October month.And management expect 5-6% traffic growth in next 3-6 months
Suspension of toll collection led to low depreciation and amortization as the company follows revenue pattern based policy.
One of the road projects reported 10% reduction in traffic growth due to demonization.
IRB is pre- qualified for the 11738 Cr worth of projects.
Q4FY17 will be much more promising than Q3FY17 in terms of traffic growth.
IRB has raised claim of Rs.150 Cr as toll collection was suspended for the 23 days.
Sufficient cash surplus for funding equity requirement of on-going and up-coming projects
Equity requirement is Rs.1700 Cr including 3 new projects over period of 4 years. ( Rs.170 cr in FY17, 500 cr each in
FY18,FY19 and FY20)
No major impact of demonization on EPC segment.
Work on Udaipur to Rajsthan/Gujarat border project will start from April, on Kishangarh Udaipur- Ahemdabad from June and
recently won project Kishangarh Gulabpura by October
Current average toll collection of 30lakh/day on Agra- Ethwah
IRB has received 139 Cr grant in Yedeshi Aurngabad during the quarter and it will complete before monsoon.
Waiting for SEBI approval for InvIT and expect to launch it before March 2017.
20,000 17,321 20
5,000 5
- -
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Yedeshi Aurangabad
6% 4%
9%
2% Kaithal Rajasthan Border
12% 2%
Solapur Yedeshi
Sindhudurg Airport
Agra Etawah
15% 17%
Gulabpura -Chittorgarh
Udaipur -Gj Border
O & M Contracts
17% 16% Kishangarh Gulabpura
Goa Kundapur
Revenue Mix
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