IEA Report

28th Apr 2017

MARUTI "Neutral" 28th Apr 2017
Successful new launches in the recent past have kept Maruti on the driving seat with the market share of 47%. With the commissioning of Gujarat
facility in the 4QFY17 waiting period for Baleno will reduce going forward. However, we expect that it will ramp up only by the second half of FY18
and till then the company has to incur high depreciation and fixed cost on the plant which may result in negative operating leverage for Maruti.
We expect 120 bps deterioration in RoE from 20.2% in FY17 to 19% in FY19E. Going ahead lower PAT growth compared to previous years gives us
a very little cushion on the valuation front and at the present price level valuation is little stretched. Hence, we change our rating from BUY to
Neutral with the target price of Rs. 6450 . ......................................... ( Page : 2-6)

GODREJCP "HOLD" 27th Apr 2017

Recent commentary by management is very encouraging which indicates better recovery after demonetization in Q4FY17E. GODREJCP is present
in less penetrated segment as compared to other FMCG players such as Hair color and Home Insecticide. It will give it enough room to grow
further. As far as international business in concern, we expect better revenue growth from Indonesian market going forward as company is
expanding its distribution reach and launching new products. GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As GODREJCP
is one of fastest growing company with stable ROE of ~ 20% and now it is recovering after demonetization, Hence before revising our estimates
we need to go through Q4FY17 result which is due on 9May, 2017. At present we recommend `HOLD on this stock.
.................................................. ( Page : 7-11)

S CHAND AND COMPANY LIMITED "AVOID" 26th Apr 2017

S Chand and Company is raising funds to retire its debts in its subsidiaries . The company is being offered at post IPO valuations of 2.3 times P/b
and Return on Equity of 5.5% while its comparable peer Navneet Education Limited is being traded at 5times P/b and has return on Equity of 20%.
We recommend AVOID. .................................................. ( Page : 12-14)

ULTRACEMCO "Neutral" 26th Apr 2017

Major negative came from contraction in EBITDA margin which declined by 186bps YoY led by rise in power and fuel cost. Although
managements tone was bullish and is expecting above than industry growth going forward but we need to see how management maintains
margins going forward. On the other hand, company clocked better volume growth (20% QoQ) in this quarter but it will be too early to draft
conclusions based on that, so we will be watchful about volume growth in upcoming quarters to get more clearer view. Presently company is
trading at 4.5x times of FY18E book value of Rs 950. Considering a slightly stretch valuation we hold Neutral view on this stock with TP of Rs 4260.
................................................... ( Page : 15-18)

RELIANCE "HOLD" 25th Apr 2017

Commissioning of Ethane project and commercialization of Jio has paved a way for long term growth of the company. With the rapid growing
customer base of jio by adding 6 mn customers daily to its network, Jio ha successfully added 100 million customers and it is continuously adding
new customers. Jio can improve the revenue of the company upto a large extent. Growing demand of petro-chemicals products and re-
commissioning of petroleum outlets will further improve the volume of refining segment. Reliance has also added 63 stores across various store
concepts. At the end of the year, Reliance Retail operated 3,616 stores across 702 cities with an area of over 13.5 million square feet which will
improve revenue of organized retail.We expect company to maintain ROE of 13% in FY18. Currently, the stock is trading at 1.89x FY17 P/BV. We
maintain HOLD' with the target price of Rs. 1680. .................................................................. ( Page : 19-23)

SUNPHARMA "HOLD" 24th Apr 2017

US FDA import alert on Dadra unit may dwindle the companys revenue from the US business. In the meanwhile the Synergies from the Ranbaxy
acquisitions are gaining momentum and the company is on track to achieve the targeted benefits. Company has strengthened the branded
ophthalmic pipeline further through acquisition of Ocular Technologies. The management has maintained its guidance of 8-10% sales growth for
FY17E, we are optimistic for healthy growth in the long-term. Considering above arguments we recommend HOLD rating on this stock while
maintaining our previous recommended target price of Rs. 795. We are analysing the financial viewpoint of Mohali and Dadra plant and will
update as more clarity will emerge. .......................................... ( Page : 24-26)

Narnolia Securities Ltd IEA Edition No.- 1003

 INDUSTRY - AUTOMOBILE
BSE Code - 532500
NSE Code - MARUTI
28-Apr-17 NIFTY - 9342

Comapany Data Key Highlights of the Report:

CMP 6371 Higher fixed cost and depreciation on Gujarat plant will lead to further
Target Price 6450
deterioration in the margins because of gradual ramp up in the volumes.
Previous Target Price EBITDA margin contracted by 300bps in last 3 quarters.
Upside 1% Continued support from higher other income has helped company to post
52wk Range H/L 6444/3730 over 9% PAT margin.
Mkt Capital (Rs Cr) 1,92,460 We expect 120 bps deterioration in RoE in FY19E from 20.2% in FY17.
Av. Volume (,000) 39 Going ahead lower PAT growth compared to previous period gives us
very little cushion on the valuation front and at the present price level
RoE to decline by 120bps
valuation is little stretched. Hence, we change our rating from BUY to
25% Neutral with the target price of Rs. 6450 .
20%
19% 19%
20% 18%
16%
15% 13% 13%

10%

5%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
ation
Net Sales 50,801 57,589 68,085 71,496 79,796
0%
EBITDA 6,844 8,768 10,358 10,848 12,231
EBIT 4,329 5,947 7,754 7,878 9,621
Share Holding patterns % PAT 3,807 5,377 7,511 7,449 9,188
4QFY17 3QFY17 2QFY17 EPS (Rs) 126 178 249 247 304
Promoters 56.2 56.2 56.2 EPS growth (%) 33% 41% 40% -1% 23%
Public 43.8 43.8 43.8 ROE (%) 16% 19% 20% 18% 19%
Total 100.0 100.0 100.0 ROCE (%) 18% 21% 21% 19% 20%
BV 805 919 1,227 1,384 1,598
Stock Performance % P/B (X) 4.6 4.0 5.2 4.6 4.0
1Mn 3Mn 1Yr P/E (x) 29.3 20.9 25.6 25.8 20.9
Absolute 6.6 7.6 64.7
Rel.to Nifty 4.0 (0.5) 47.3 RECENT DEVELOPMENT: Commencement of Gujarat Plant
170
MARUTI NIFTY Gujarat plant has started production of first phase from February 2017
160 with total capacity of 250000 units per annum and initially, it will produce
150 20,000 units per month.
140 Suzuki Motor Corporation had plans to spent around Rs.8500 crore on the

130 Gujarat plant. The plant will become operational in three phases.
120 Suzuki Motor Corporation will sell the production on cost to Maruti once its

110 gets completed.
100 Baleno will be first model to be produced and later on depending on the
90 demand scenario other models can also be produced from same
80 plateform.
The plant will take care of new models and exports. It will also reduce the

Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16

Nov-16
Apr-16

Apr-17
Mar-17

logistics cost of Maruti.

NAVEEN KUMAR DUBEY

Naveen.dubey@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Total Volumes ('000) 360 348 418 387 414 15% 7% 1,429 1,568 10%
Higher other
Realization(Rs./ car) 424372.8 428400.1 426381.8 435500.5 442420 4% 2% 402932.2 434062.5 8%
income
supporting PAT Net Sales 15,294 14,927 17,843 16,865 18,333 20% 9% 57,589 68,085 18%
Other Income 537 483 813 592 445 -17% -25% 1,481 2,290 55%
COGS 10,095 10,125 12,074 11,674 12,767 26% 9% 38,706 46,742 21%
Employee Cost 603 579 519 617 616 2% 0% 2,000 2,360 18%
Other Expenses 2,258 2,007 2,212 2,085 2,402 6% 15% 8,054 8,728 8%
EBITDA 2,339 2,216 3,037 2,489 2,549 9% 2% 8,768 10,358 18%
Depreciation 761 639 630 635 701 -8% 10% 2,822 2,604 -8%
Interest 20 18 20 29 23 13% -21% 8 9 9%
PBT 2,095 2,042 3,200 2,417 2,270 8% -6% 7,419 10,035 35%
Tax 557 556 802 673 573 3% -15% 2,087 2,616 25%
PAT 1,538 1,486 2,398 1,745 1,709 11% -2% 5,451 7,591 39%

Results in-line, posted strong double digit revenue growth

Maruti reported results in line with our estimates. Net sales stood at Rs.18333 crore in 4QFY17 a
Utility Vehicles growth of 20% over same quarter previous year. This was driven by 15% volume growth and 4.5%
volume grew by realization growth YoY.
72% Domestic volumes grew by 15%YoY to 382618 units during 4QFY17. Compact segment saw a
growth of 21% and utility vehicle segment grew by 72% YoY during the quarter. Fast growing UV
and Compact segment demand is driven by Vitara Brezza and Baleno. These two models enjoys a
waiting period of 5 and 7 months waiting period respectively.

Exports volumes have seen growth of 18%YoY backed by exposure in the new geographies and
increase in the Baleno volumes exported to Japan.
Realization improved by 4.6%YoY to Rs.442000 per car on account of better product mix and price
increases taken during the quarter.
Royalty rate for the quarter stood at Rs.948 crore.

Volume (in No.) Growth YoY Realization (Rs./car) Realization Growth (QoQ)

450,000 18% 20% 450,000 7%

17% 16%
400,000 14% 18% 440,000 6%
15% 430,000
350,000 10% 16%
13% 12% 420,000 2% 5%
300,000 14% 6%
410,000 0% 0% 2% 0% 4%
12% 1%
250,000 400,000
7% 2% 10% 2% 1% 3%
200,000 390,000 2% 1% 2%
4% 3% 8% 380,000 2%
150,000 6% 370,000
401,227

424,373

428,400

426,382

435,500
379,138

382,216

388,243

392,973

393,313

392,013

1%
299,894

323,911

346,712

341,329

353,335

360,402

348,443

418,470

387,251
321,898

374,182

414,389

442420

100,000 4% 360,000
50,000 2% 350,000 0%
- 0% 340,000 -1%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Higher Other income supported PAT
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 34% 32% 32% 31% 30% -0.04 0.00 33% 31% -0.01
EBITDA Margin 15% 15% 17% 15% 14% -0.01 -0.01 15% 15% 0.00
PAT Margin 10% 10% 13% 10% 9% -0.01 -0.01 9% 11% 0.02

Gross Margin contracted by 360bps YoY and 40bps QoQ due to increasing commodity prices and
higher discounts on the mini segment cars during the quarter.
EBITDA Margin also declined by 130bps YoY to 13.9% on account of higher marketing and
promotional expenses. New launches and Ciaz movement to Nexa also led to increase in the other
expenses.
PAT grew by 15.8%YoY to Rs.1709 crore on account of higher other income. PAT margin declined by
40bps YoY and 100bps QoQ in 4QFY17.

EBITDA (Rs. Crore) EBITDA Margin PAT (Rs. Crore) PAT Margin
17%
3,500 16% 16% 16% 18% 3,000 16%
15% 15% 15% 13%
3,000
14% 14% 16% 14%
12% 13%
2,500
12% 14% 11%
10% 10% 10% 12%
2,500 9% 9%
12% 2,000 9%
8% 10%
2,000 10% 7% 7%
1,500 6% 8%
1,500 8%
6%
6% 1,000
1,000
1,284
1,193
1,497
1,183
1,538
1,486
2,398
1,745
1,709
4%
4%
762
863
802
500
1,328

1,521

2,164

2,189

2,245

2,339

2,216

2,489

2,549
1,593

2,145

3,037

500 2%
2%
- 0% - 0%

Concall Highlights:
Confident of double digit growth in next fiscal.
Confident of
The management do not see any kind of slow down in demand for next financial year.
double digit
Exports Revenue in FY17 stood at Rs. 6000 crore.
volume growth
in domestic The company will maintain its market share going forward.
market. Capex plan-Rs.4500 crore; large chunk of it would be for new models and rest is for R&D expenses
and maintenance of old plants.
Gujarat plant started production in 4QFY17 and initially, it will produce 20,000 units per month.
Management expects that the industry is going to benefit hugely from GST.
Maruti have been working with its suppliers and dealers to make sure that they are absolutely ready
for GST.
The company has asked its vendors to work with their tier II and tier III suppliers to make sure that
they also become GST compliant by July 1.

Export There is no improvement in the sales from government employees.

outlook Tax rate will be same as FY17
subdued in Exports outlook remain subdued because of dollar avaiability issue in African countries and change in
FY18. the duty structure in Sri-Lanka which was bigger market for Maruti.
Fleet segment is 6% of overall sales for Maruti.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Higher fixed cost and depreciation on Gujarat Plant- Gujarat plant has already started production
and it will take atleast 6-9 months to fully ramp up. Till the time plant gets ramp up the company has to
incur high fixed cost and depreciation on the plant. Thus the company can get the benefit of operating
leverage from FY19 only.

Increasing Annual Budget on Old Plants- Plants and machineries at Gurugram and Manesar plants
more than 25 years older so the maintenance cost of these plants are high and the manegement has
stated that the capex would be 800 crore for FY18 but it may go up going ahead.
International market to remain subdued- Maruti is facing challenges in establishing its footprint in
the exports. Africa market is facing dollar availability issue from last one and half years and Another
big market for Maruti was Sri-Lanka where the government has changed the duty structure. Japan and
Europe are the two markets where Maruti is exporting significant volumes.

New Launches by rivals in the premium segment- Maruti has taken the benefit of selling preimium
segment cars as a market leader in the Indian market but going forward competitors like Tata Motors,
Honda and Ford will share the pie with Maruti. These companies have been started spending huge
amount on R&D to take advantage of future demand.

Reducing dependency on Yen to improve profitability- Maruti is also aggressively working towards
bringing down the import content in its cars from an average 16% at the end of FY16 to 10% as part of
its vision 2.0 plan. Currently about 14 percent of imports are yen denominated. Management expects
to bring it down to 5 percent and typically, 1% movement in yen leads to around 1% change in the
operating profit of Maruti. The company also have rupee denominated Royalty contracts with the
parent Suzuki Motors for new models.

Mix changes towards Utility Vehicles Capacity and Utilization Trend

Mini Compact Super Compact Mid size Total Capacity(in units) Utilization Trend
Utility Vehicles Vans Export 2000000 120%
1800000 93%
97% 95%
120% 90% 90% 100%
1600000 86%
76%
100% 7% 7% 8%
1400000 80%
10% 9% 8% 8%
10% 10% 10% 10% 10% 10% 9% 10% 1200000
80% 5% 6% 7% 8% 11% 13% 13% 13%
4% 3% 4% 4% 0% 1000000 60%
4% 4% 4% 4%
60% 800000
38% 38% 38% 37% 40%
38% 35% 37% 39% 600000
40%
1260000

1510000

1510000

1650000

1760000
1260000

1510000

400000 20%
20% 31% 31% 30% 30% 27% 27% 27% 25% 200000
0% 0 0%

View & Valuation

Successful new launches in the recent past have kept Maruti on the driving seat with the market
share of 47%. With the commissioning of Gujarat facility in the 4QFY17 waiting period for Baleno will
reduce going forward. However, we expect that it will ramp up only by the second half of FY18 and
till then the company has to incur high depreciation and fixed cost on the plant which may result in
negative operating leverage for Maruti. We expect 120 bps deterioration in RoE from 20.2% in FY17
to 19% in FY19E. Going ahead lower PAT growth compared to previous years gives us a very little
cushion on the valuation front and at the present price level valuation is little stretched. Hence, we
change our rating from BUY to Neutral with the target price of Rs. 6450 .

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17 FY18E FY19E
Revenue from Operation 57,589 68,085 71,496 79,796 ROE 19% 20% 18% 19%
Change (%) 13% 18% 24% 17% ROCE 21% 21% 19% 20%
Other Operating Income Asset Turnover 1.4 1.3 1.3 1.3
EBITDA 8,768 10,358 10,848 12,231 Debtor Days 8.79 6.45 6.45 6.45
Change (%) 28% 18% 24% 18% Inventory Days 20.3 17.5 17.5 17.5
Margin (%) 15% 15% 15% 15% Payable Days 45 45 45 45
Dep & Amortization 2,822 2,604 2,970 2,610 Interest Coverage 0.0 0.0 0.0 0.0
EBIT 5,947 7,754 7,878 9,621 P/E 21 26 26 21
Interest & other finance cost 82 89 156 166 Price / Book Value 4.0 5.2 4.6 4.0
Other Income 1,481 2,290 2,293 2,863 EV/EBITDA 13 19 18 16
EBT 7,345 9,954 10,016 12,318 FCF per Share 1,265 2,517 2,937 2,896
Exceptional Item - - - - Dividend Yield 0.9% 1.2% 1.2% 1.2%
Tax 2,087 2,616 2,739 3,303
Minority Int & P/L share of Ass. 119 173 173 173 Assumptions
Reported PAT 5,377 7,511 7,449 9,188 Y/E March FY16 FY17 FY18E FY19E
Adjusted PAT 5,377 7,511 7,449 9,188 Volume ('000) 1,429 1,569 1,724 1,886
Change (%) 41% 40% 39% 22% Volume Growth 11% 10% 10% 9%
Margin(%) 9% 11% 10% 12% Realization(Rs./vehicle) 4,02,932 4,34,062 4,14,710 4,23,094
Realization Growth 3% 8% -4% 2%
Capex(Rs crore) 3,249 3,500 2,000 2,000

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Share Capital 151 151 151 151 PBT 6,630 9,954 10,016 12,318
Reserves 27,598 36,924 41,647 48,108 (inc)/Dec in Working Capital 9,089 14,348 11,264 15,267
Networth 27,749 37,075 41,798 48,259 Non Cash Op Exp 2,867 2,604 2,970 2,610
Debt 237.8 483.6 484.0 484.0 Interest Paid (+) 94 89 156 166
Other Non Current Liab 900 1,633 1,085 1,085 Tax Paid (1,948) (2,616) (2,739) (3,303)
Total Capital Employed 27,987 37,559 42,282 48,743 others 941 358 (108) 926
Net Fixed Assets (incl CWIP) 13,989 14,563 13,370 12,442 CF from Op. Activities 8,584 11,917 8,243 12,717
Non Current Investments 17,512 26,972 28,950 35,398 (inc)/Dec in FA & CWIP (2,424) (3,178) (1,777) (1,682)
Other Non Current Assets 9 1,603 1,862 1,862 Free Cashflow 6,160 8,739 6,467 11,035
Non Current Assets 32,866 43,162 44,220 49,740 (Pur)/Sale of Investment (4,785) (1,304) (1,551) (1,691)
Inventory 3,200 3,264 3,427 3,825 others (110) (8,095) (1,978) (6,448)
Debtors 1,387 1,203 1,263 1,410 CF from Inv. Activities (7,319) (9,399) (5,306) (9,821)
Cash & Bank 77 24 79 83 inc/(dec) in NW
Other Current Assets 270 1,541 1,583 1,583 inc/(dec) in Debt (226) 246 0 -
Current Assets 7,404 8,798 10,343 12,582 Interest Paid (104) (89) (156) (166)
Creditors 7,127 8,369 8,788 9,809 Dividend Paid (inc tax) (909) (2,727) (2,727) (2,727)
Provisions 2,137 472 491 546 others
Other Current Liabilities 2,408 1,828 1,919 2,142 CF from Fin. Activities (1,239) (2,570) (2,882) (2,892)
Curr Liabilities 11,369 12,753 11,180 12,478 Inc(Dec) in Cash 26 (53) 55 4
Net Current Assets (3,965) (3,955) (838) 104 Add: Opening Balance 43 77 24 79
Total Assets 40,270 51,961 54,563 62,322 Closing Balance 69 24 79 83

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - Con. Staples
BSE Code - 532424
NSE Code - GODREJCP
27-Apr-17 NIFTY - 9352

Company Data Key Highlights of the Report:

CMP 1725 GODREJCP is one of the fasted growing company in our FMCG universe
Target Price HOLD
with 28% CAGR revenue growth and 22% PAT growth in last 6 years.
Previous Target Price GODREJCP is present in less penetrated segment as compared to other
Upside FMCG players such as hair color.It will give it enough room to grow
further.
52wk Range H/L 1771/1286 Recent commentary by management is very encouraging which indicates
Mkt Capital (Rs Cr) 58,766 better recovery after demonetization in Q4FY17E.
Av. Volume (,000) 165 GODREJCP has achieved our price target of Rs 1760 on 26 April 2017.
As it is one of fastest growing company with stable ROE of ~ 20% and
RoE & ROCE now it is recovering after demonetization, Hence before revising our
estimates we need to go through Q4FY17 result of it which is due on
ROE ROCE
9May, 2017. At present we recommend `HOLD on this stock.
25% 22%
21% 21%
20% 19%
20%
20% 20% 21%
19%
15% 18%

10%
Financials/Valu FY15 FY16 FY17E FY18E FY19E
5%
ation
Net Sales 8,276 8,968 9,523 10,592 11,853
FY15 FY16 FY17E FY18E FY19E EBITDA 1,365 1,639 1,857 2,050 2,235
EBIT 1,275 1,536 1,714 1,886 2,075
Share Holding patterns % PAT 907 1,119 1,251 1,413 1,590
3QFY17 2QFY17 1QFY17 EPS (Rs) 27 33 37 41 47
Promoters 63.3 63.3 63.3 EPS growth (%) 19% 23% 12% 13% 13%
Public 36.7 36.7 36.7 ROE (%) 21% 22% 21% 20% 19%
Total 100.0 100.0 100.0 ROCE (%) 20% 20% 18% 19% 21%
BV 127 150 177 210 246
Stock Performance % P/B (X) 6.4 9.7 9.2 7.8 6.7
1Mn 3Mn 1Yr P/E (x) 30.2 44.3 44.6 39.5 35.1
Absolute 3.6 11.9 26.2
Rel.to Nifty 0.9 3.2 7.8 RESULT PREVIEW:
Overall revenue is expected to grow by 9%YoY to Rs 2473 cr whereas
140 GODREJCP NIFTY PAT will remain to Rs 352.
130
We expect 1% overall volume growth and 3.5% realization growth for
120
GODREJCP in Q4FY17.
110 We expect deterioration in gross margin by 14 bps YoY and 46 bps QoQ

100 in Q4FY17E. Gross margin is expected to remain 57% in Q4FY17E.
EBITDA margin will remain 19.9% in Q4FY17E, an improvement of 6 bps
90
YoY led by better cost management.
80
PAT margin is expected to improve by 55 bps YoY to 14.2%on the back

of lower Tax out go in Q4FY17E.

RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ% FY15 FY16 YoY %
Net Sales 2,286 2,269 2,123 2,439 2,486 9% 2% 8,276 8,968 8%
Other Income 17 14 14 17 19 10% 13% 92 67 -27%
COGS 992 973 982 1,059 1,057 7% 0% 3,842 3,846 0%
Ad & P Expenses 172 215 168 203 192 12% -6%
Employee Cost 236 246 249 241 256 8% 6% 777 960 24%
Other Expenses 345 386 343 391 381 10% -3% 2,293 2,523 10%
EBITDA 455 449 381 466 517 14% 11% 1,365 1,639 20%
Depreciation 26 29 33 36 36 41% 1% 91 103 14%
Interest 30 24 33 35 40 34% 13% 100 100 0%
PBT 427 410 330 412 447 5% 9% 1,266 1,503 19%
Tax 94 98 75 91 99 4% 9% 272 317 16%
PAT 368 310 244 318 352 -4% 11% 907 1,119 23%

International Better revenue growth led by robust international business performance

business grew
by 19% YoY.
Revenue for Q3FY17 grew by 9% YoY to Rs 2486 cr led by 19% YoY growth in the international
business.
Africa business including Strength of Nature grew by strong 54% in constant currency term.
Indonesian business which contributes approx. 17% of total revenue remained flat while Latin
America and Europe grew by 24% and 16% in Constant currency terms in this quarter.
Domestic sales remained flat YoY due to demonetization and domestic volume declined by 3%
YoY.
Gross margin improved by 88 bps YoY to 57.5% supported by lower input prices.

EBITDA for this quarter grew by 14% YoY to Rs 517 cr. EBITDA margin improved by 91
bps YoY 20.8%.
PAT declined by 4% YoY to Rs 352 cr and PAT margin contracted by 194 bps in Q3FY17.

3000 400
Sales(in cr) 368 PAT(in cr) International Business Revenue(in cr.)
352350
2500 1400
310 318
300
1200
2000 264 266
244 250
235 1000
222
1500 200 800

143 150 600

1000
117 400
100
1018

1078

1120
1029

1013

1028

1086

1220

500 200
920

910
889

50
1889

2060

2236

2092

1988

2197

2286

2269

2123

2439

2486

0
0 0

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Margin % 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(+/-) QoQ(+/-) FY15 FY16 YoY(+/-)
Gross Margin 56.6% 57.1% 53.8% 56.6% 57.5% 0.9% 0.9% 53.6% 57.1% 3.5%
EBITDA Margin 19.9% 19.8% 17.9% 19.1% 20.8% 0.9% 1.7% 16.5% 18.3% 1.8%
PAT Margin 16.1% 13.7% 11.5% 13.0% 14.2% -1.9% 1.1% 11.0% 12.5% 1.5%

Gross margin improved by 88 bps YoY to 57.5% supported by lower input prices.

EBITDA grew by 14% YoY to Rs 517 cr in Q3FY17.EBITDA margin improved by 91 bps YoY to 20.8%
on the back of lower COG and employee cost.
PAT de-grew by 4% YoY to Rs 352 cr. PAT margin for this quarter remained 14.2% ,declined by 194
bps YoY.

Domestic Soap Revenue growth YoY Segments Penetration

Domestic Soap Revenue growth YoY Penetration

20% 120%
15% 100%
15% 13% 13% 100%
11%

10% 80%

5% 2%
3%
2%
60% 48%
1% 38%
40%
0%
-6% -6% 20%
-5%
-10%
0%
-10%
Hair colour Household Soap
-15% Insecticides(HI)

Concall Highlights(Q3FY17):
Indonesian business: Non HI (Home Insecticide) portfolio performed better. Improved market share in HI
business. Management is hopeful for better growth from Indonesia next year.
The management is Confident to outpace industry growth going forward(domestic market).
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 month.
Took price hike
of 2% in Ad&P Expenses will be in the range of 11%.
domestic soap Going forward, the company will maintain innovation, launch new products, intensify introduction on Lower
Unit Pack(LUP), expand direct reach and work for brand building.
business.
Price hike of 2% taken in the domestic soaps business in 3QFY17.Gained market share in Cinthol.
Scope of Margin improvement in International Market: for Indonesia still chance of some margin expansion,
LA(Latin America) scope of more margin expansion and for African business potential of significant margin
improvement in next 3-5 years.
SON supply issue will be short term issue. The company will localize its factory there in CY2017.Capex in
Africa will be very low.
MT(Modern Trade) grew by 33% in this quarter.
Margin expansion: Gross margin will not as good as this quarter going forwards.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Innovation and new product launches: The Company gets 25% to 40% of sales growth from launch
of new products historically. Going forward, the company will maintain innovation, launch new
products, intensify introduction on Lower Unit Pack (LUP) which will deliver better growth going
forward.

Lower penetration gives opportunity: GODREJCP is present in less penetrated segment as

compared to other FMCG players like Hair Colour(38%) and HI(48%). It will give it enough room to
grow further.
Relatively less impacted by Patanjali: If we see our FMCG basket, GODREJCP has minimum
overlap of products with Patanjali than any other players. Hence we expect very less impact on the
volume of GODREJCP due to expansion of Patanjali.
Expectation of better revenue from Indonesian market: Indonesian market contributes approx.
17% of companys revenue. We expect it to improve going forward as company has plans to launch
several hair care and personal care products in Indonesian market in next 6-12 months which will
improve companys volume going forward. Secondly company is planning to ramp up its distribution
reach to double in next 3-5 year which will translate into better volume growth from Indonesia going
forward.

African business (Potential growth driver): African business grew by 19% YoY in constant currency
(CC) terms and 54%YoY including Strength of Nature in Q3FY17. We expect similar growth in
Q4FY17.Although African business is facing some currency headwinds but by localizing production
facility and increasing prices company is expected to counter it.Going forward management sees
continuous margin improvement from African business in next 3-5 years.

Indonesian Market Constant Currency(CC) growth Africa Constant Currency(CC) growth

Indonesian Market (CC) growth YoY Africa (CC) growth YoY
75%
25% 80%
70%
21%
20% 54%
19% 60% 52%

15% 15%
50%
36%
13% 40% 32% 33%
26%
10% 30% 23%
8% 15% 16%
7% 20% 12%
6%
5%
3% 3% 10%
0% 0% 0%
-2%
-5%

View & Valuation

Recent commentary by management is very encouraging which indicates better recovery after
demonetization in Q4FY17E. GODREJCP is present in less penetrated segment as compared to other
FMCG players such as Hair color and Home Insecticide. It will give it enough room to grow further. As
far as international business in concern, we expect better revenue growth from Indonesian market
going forward as company is expanding its distribution reach and launching new products.
GODREJCP has achieved our price target of Rs 1760 on 26 April 2017. As GODREJCP is one of
fastest growing company with stable ROE of ~ 20% and now it is recovering after demonetization,
Hence before revising our estimates we need to go through Q4FY17 result which is due on 9May,
2017. At present we recommend `HOLD on this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Revenue from Operation 8,968 9,523 10,592 11,853 ROE 22% 21% 20% 19%
Change (%) 8% 6% 11% 12% ROCE 20% 18% 19% 21%
Other Operating Income Asset Turnover 0.9 0.8 0.8 0.9
EBITDA 1,639 1,857 2,050 2,235 Debtor Days 45.50 45.50 45.50 45.50
Change (%) 20% 13% 10% 9% Inventory Days 53.2 53.2 53.2 53.2
Margin (%) 18% 20% 19% 19% Payable Days 42 42 42 42
Dep & Amortization 103 143 165 160 Interest Coverage 15.34 13.19 17.85 25.52
EBIT 1,536 1,714 1,886 2,075 P/E 44 45 40 35
Interest & other finance cost 100 130 106 81 Price / Book Value 9.7 9.2 7.8 6.7
Other Income 67 52 61 71 EV/EBITDA 31 32 28 25
EBT 1,503 1,636 1,841 2,065 FCF per Share 19 34 45 48
Exceptional Item (27) - - - Dividend Yield 0.4% 0.4% 0.4% 0.5%
Tax 317 345 388 436
Minority Int & P/L share of Ass. 39 39 39 39 Assumptions
Reported PAT 1,119 1,251 1,413 1,590 Y/E March FY16 FY17E FY18E FY19E
Adjusted PAT 1,140 1,251 1,413 1,590 Volume Growth(domestic) 10% 2% 6% 7%
Change (%) 24% 10% 13% 13% Realization Growth(domestic) -1% 0% 4% 5%
Margin(%) 13% 13% 13% 13% Capex(Rs crore) 391 262 100 100

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Share Capital 34 34 34 34 PBT 1,503 1,557 1,762 1,986
Reserves 5,064 6,007 7,137 8,357 (inc)/Dec in Working Capital (482) (21) (40) (47)
Networth 5,098 6,041 7,171 8,391 Non Cash Op Exp 116 143 165 160
Debt 2631 3517 2617 1717 Interest Paid (+) 100 130 106 81
Other Non Current Liab 37 37 37 37 Tax Paid (336) (345) (388) (436)
Total Capital Employed 7,729 9,558 9,788 10,108 others (41) - - -
Net Fixed Assets (incl CWIP) 1,780 3,495 3,401 3,312 CF from Op. Activities 839 1,459 1,657 1,748
Non Current Investments 34 34 34 34 (inc)/Dec in FA & CWIP (208) (286) (126) (127)
Other Non Current Assets 4,792 4,845 4,845 4,845 Free Cashflow 631 1,173 1,531 1,622
Non Current Assets 6,606 8,375 8,281 8,192 (Pur)/Sale of Investment (330) (147) (150) (200)
Inventory 1,307 1,388 1,544 1,727 others 43 (61) (1) (2)
Debtors 1,118 1,187 1,320 1,478 CF from Inv. Activities (495) (2,059) (222) (273)
Cash & Bank 746 569 688 812 inc/(dec) in NW - - - -
Other Current Assets 376 537 714 945 inc/(dec) in Debt 157 886 (900) (900)
Current Assets 3,547 3,681 4,266 4,962 Interest Paid (119) (130) (106) (81)
Creditors 1,037 1,101 1,225 1,371 Dividend Paid (inc tax) (225) (263) (297) (334)
Provisions 65 69 77 86 others - (70) - -
Other Current Liabilities 1,202 1,276 1,419 1,588 CF from Fin. Activities (187) 424 (1,302) (1,315)
Curr Liabilities 2,303 2,446 2,721 3,044 Inc(Dec) in Cash 157 (177) 133 124
Net Current Assets 1,244 1,235 1,546 1,917 Add: Opening Balance 404 746 569 688
Total Assets 10,153 12,056 12,547 13,154 Closing Balance 561 569 702 812

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 "AVIOD "
S CHAND AND COMPANY LIMITED
25th Apr 2017

IPO Note
Issue Detail Company Overview
Type 100% Book Building S Chand And Company Limited was incorporated in 1970 which operates as an education content
Issue Size Rs. 700 Crore company in India. The company develops and delivers content, solutions, and services in the
Offer Price *Rs (660-670)/Equity Share education K-12, higher education, and early learning segments
Company is involved in publishing, printing, sale, purchase, export, and import of various books
Min App Size 22 Shares
and other literary work; agency ship and distribution of publishers for books and other literary
Issue Open 26-Apr-17 work; selling of educational toys; and publishing books for children, schools, colleges, and
Issue Close 28-Apr-17 universities, as well as digital content and interactive learning systems to schools and running pre-
Shares Offer 1.05 Cr. schools.
Face Value Rs 5 The company also provides digital data management services and digital content books to schools
JM Financial Institutional and colleges; solutions for higher education in colleges, universities, and technical institutes; and
Securities Ltd , Axis Capital Ltd DTP printing, DTP jobs, page making, editing and proof reading, and cover designing services of
Lead Mgrs
, Credit Suisse Securities (India) books, journals, tabloids, magazines, bulletins, brochures, and periodicals in the form of hard copy,
Pvt Ltd compact disks, and e-forms. S Chand And Company Ltd offers 53 consumer brands across
Listing BSE, NSE knowledge products and services including S.chand, Vikas, Madhubun, Saraswati, Destination
Registrar Link Intime India Pvt Ltd Success and Ignitor. The company also exports its printed and digital content to Asia, the Middle
East, Africa, and internationally.
Market Cap
2304.1 Company Strategies
(Post Issue)
> Company has strong presence in the CBSE/ICSE affiliated schools and increasing presence in the
No of shares ( Post & Pre Issue) state board affiliated schools across India. It works closely with the educators and authors, and
No of Shares (Pre Issue) 298,44,496 regularly integrates feedback received from authors, educators and students Company
Comprehensive consumer focused education content player with touch points across education
Offer for Sale 60,23,236 lifecycle
Fresh Issue made 4545455 > Company has Strong integrated in-house printing and logistic capabilities . The printing
capacity was enhanced from 15 tons to 55 ton paper per day from in FY 14 to FY16. By integrating
No of Shares (Post Issue) 34389951
and expanding the printing capabilities, they reduced dependence on third-party vendors, thereby
achieving cost savings and operational efficiencies.
Bid allocation pattern > Company has Pan-India sales and distribution network which driving deep market reach. They
QIB 50% sold their content in 29 states and 7 union territories through their distribution channels. Its
Non-Institutional 15% acquisition of NSHPL enhanced its distribution network in southern India, and acquisition of VPHPL
added to its distribution network in north India
Retail 35% > Company Focused digital and technology platform . The digital offerings are focused on
supplementing our existing strengths in the K-12 and higher education businesses.

Objects of the Issue:

Particulars
Repayment of loans availed by the Company and one of their Subsidiaries, EPHL, which were
utilized towards funding the acquisition of Chhaya
Rubi Burman Repayment/prepayment in full or in part, of certain loans availed of by the Company and their
rubi.burman@narnolia.com Subsidiaries, VPHPL and NSHPL
General corporate purpose

Recommendation
S Chand and Company is raising funds to retire its debts in its subsidiaries . The company is being offered at post IPO valuations of 2.3
times P/b and Return on Equity of 5.5% while its comparable peer Navneet Education Limited is being traded at 5times P/b and has return
on Equity of 20%. We recommend AVOID.

Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report.

 S CHAND AND COMPANY LIMITED

S Chand Organization Structure

Competitive Risks
> The high degree of seasonality of our K-12 business materially affects operating revenue, margins and cash
flow from quarter to quarter. Company business and the newly acquired business of Chhaya is linked to the
academic cycle. Chhayas sales season has traditionally been across first and fourth quarters of the financial
year with the main sales season starting in December. The the working capital cycle for print content in the
CBSE/ICSE K-12 education industry tends to be unduly high at the fiscal year end on account of high sales in the
last quarter
> Company operate in a highly-competitive and fragmented industry, and our business, results of operations
and financial condition may be adversely affected if we are not able to compete effectively.

> For the past two years, CBSE has issued an advisory circular advising CBSE schools to use only NCERT print
content for all classes and may issue similar advisory circulars in the future. These circulars may reduce
demand for its educational content amongst the CBSE affiliated schools and, accordingly, may adversely affect
its business, results of operations, cash flows and financial condition.

> A significant portion of the companys revenues are derived from titles of its top authors. The loss of all or
any of its top authors could adversely affect its business, results of operation, cash flows and financial
condition.

Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report.

 S CHAND AND COMPANY LIMITED
Financials Snap Shot
INCOME STATEMENT RATIOS
31 March 31 31 March 31 Dec 31 March 31 31
2014 March 2016 2016 2014 March March
Revenue (Net) 370.0 476.7 537.8 149.5 EPS 12.2 9.8 14.1
Other Income 0.9 1.8 2.9 1.3 Book Value Per share 6.0 6.7 9.7
Total Revenue 371.0 478.5 540.6 150.8 Valuation(x)
Raw materials Cost 149.2 178.2 175.7 98.7 P/E ( Upper Band ) 54.7 68.2 47.4
Purchase and implementation cost 0.3 1.7 4.9 3.7 P/E ( Lower Band ) 53.9 67.1 46.7
Publicationdecrease
Increase)/ expensesin 42.3 48.2 50.3 22.3 Price / Book Value 112.6 100.4 69.3
inventories of finished goods, -13.8 -24.3 -27.9 -68.1 EV 2337 2463 2438
Selling and distribution expenses 34.4 45.6 52.7 40.6 EV/Sales 6.3 5.2 4.5
Employee benefit expenses 52.7 80.3 94.2 83.6 EV/EBITDA 8.0 6.6 5.9
Other expenses 26.2 44.7 62.6 53.5 Profitability Ratios
Total Expenses 291.2 374.5 412.4 234.4 RoE 11% 8% 8%
EBITDA 79.8 104.0 128.2 -83.6 RoCE 18% 20% 17%
Depreciation 12.3 22.5 25.9 20.3 Liquidity Ratios
EBIT 67.5 81.5 102.3 -103.8 Net Debt/Equity 0.043 0.285 0.113
Finance Costs 9.5 28.3 30.6 22.7 Interest Coverage Ratio 6.5 4.6 4.9
Profit before Tax 58.0 53.2 71.7 -126.6 Current Ratio 1.86 1.75 1.87
Total Tax 16.0 19.5 23.3 -39.5
PROFIT AFTER TAX 42.0 33.7 48.4 -87.0
31 March 31 31 March 31 Dec 31 March 31 31 31 Dec
2014 March 2016 2016 2014 March March 2016
Share Capital 0.2 0.2 0.2 14.9 Net Profit/(loss) before tax 58.6 53.7 72.7 (126.3)
Reserves 367.5 394.1 599.0 494.2 Adjustments for:
Minority Interest 3.0 21.5 3.1 8.8 Depreciation and Amortisation 12.3 22.5 25.9 20.3
Net Worth 370.8 415.9 602.3 518.0 Interest expense 9.1 27.4 29.3 20.5
Long-term borrowings 16.0 118.5 67.9 59.5 Amortisation of ancillary borrowing cost 0.0 0.5 0.6 1.8
Trade payables 0.0 0.2 0.9 1.3 Interest income (0.6) (0.4) (0.9) (0.2)
Other non-current liabilities 0.3 0.3 0.1 0.0 Loss/(profit) on sale of fixed assets (0.1) 0.0 0.2 0.5
Long-term provisions 2.1 4.6 5.0 7.0 Loss/(profit) on sale of investments (0.1) (0.0) (1.7) (1.4)
Non - current liabilities 389.1 539.5 676.2 585.7 Provision for sales return 0.0 1.6 4.6 0.0
Short-term borrowings 69.5 96.5 125.8 183.1 Employee stock options expense 0.0 0.0 0.5 0.9
Trade payables 99.2 135.8 151.1 140.1 Provision for bad debts and advances 1.9 1.0 4.6 6.8
Other current liabilities 14.9 40.9 23.2 200.0 Operating profit before working capital 81.2 106.2 135.7 (77.2)
Short-term provisions 4.3 13.3 17.2 31.0 Movements in working capital
Current liabilities 187.9 286.5 317.3 554.1 (Increase)/ decrease in loans and advances 30.3 1.7 (5.7) (10.8)
Total Liabilities 576.9 826.0 993.5 1139.9 (Increase)/ decrease in trade receivables (59.2) (113.5) (59.7) 195.3
Fixed assets 197.5 278.9 337.4 492.9 (Increase)/ decrease in inventories (23.9) (36.0) (20.1) (110.8)
Non Current Investments 7.4 13.0 25.4 25.4 Decrease in other assets 0.0 (0.0) 0.0 (0.0)
Deferred tax assets 5.4 10.4 12.4 56.3 Increase/ (decrease) in provisions 0.5 11.7 (10.2) (2.2)
Loans and advances 15.9 18.7 17.8 25.8 Increase/ (decrease) in trade payables 32.3 36.9 16.0 (10.6)
Other non-current assets 1.7 2.3 3.3 1.2 Increase/ (decrease) in other liabilities 1.1 4.4 (0.5) 10.2
Non-current assets 227.8 323.4 396.2 601.7 Cash flows from operations 62.2 11.4 55.5 (6.0)
Current investments 0.6 4.7 16.4 4.3 Direct taxes paid (net of refunds) 19.8 29.3 18.0 28.5
Inventories 83.9 119.7 139.8 250.6 Net cash flows from operating activities (39.5) (101.6) (136.1) (159.4)
Trade receivables 230.9 341.7 395.1 195.6 Cash flows from investing activities 0.5 122.7 100.9 190.7
Cash and bank balances 17.6 21.3 24.4 24.4 Net cash generated financing activities 5.1 1227.1 1009.3 1906.7
Short-term loans 16.0 13.2 18.5 62.4 Net in cash and cash equivalents (33.9) 1248.2 974.1 1937.9
Current assets 349.0 500.7 594.2 537.4 Cash & cash equivalents at the beginning 13.6 17.4 20.9 23.8
TOTAL Assets 576.8 824.1 990.4 1139.1 Cash & cash equivalents at the end of Year (20.2) 1265.6 995.1 1961.8
 INDUSTRY - CEMENT
BSE Code - 532538
NSE Code - ULTRACEMCO
26-Apr-17 NIFTY - 9307

Company Data Key Highlights of the Report:

CMP 4,235
Target Price 4260
The EBITDA margin contracted by 186bps YoY from 18.9% to 17.04% led by
155bps increase in Power & Fuel cost and 83bps increase in other expenses.
Previous Target Price
Upside 1% The company reported 20% QoQ growth in sales volume in 4QFY17 due to low
52wk Range H/L 4260/3050 base, demand recovery and capacity additions.
Mkt Capital (Rs Cr) 1,16,249 White cement and wall care putty volumes were at 3.86 lakh tonnes against 3.85
Av. Volume (,000) 235 lakh tonnes in same quarter last year. Grey Cement volumes increased 0.2% to
13.35 MT against 13.32 MT YoY.
ULTRACEMCO is trading at its higher
range of P/B Presently company is trading at 4.5x times of FY18E book value of Rs 950.
Considering a slightly stretch valuation we hold Neutral view on this stock with TP
P/B(x)
6.0
of Rs 4260.
5.2
4.8 5.0
5.0 4.3

4.0

3.0

2.0
Financials/Valuation FY14 FY15 FY16 FY17 FY18E
1.0
Net Sales 21,652 24,349 28,392 28,646 25,941
- EBITDA 4,035 4,425 4,901 5,212 5,010
FY14 FY15 FY16 FY17
EBIT 2,896 3,222 3,524 3,864 4,002
Share Holding patterns % PAT 2,206 2,098 2,478 2,715 3,023
4QFY17 3QFY17 2QFY17 EPS (Rs) 76 73 84 94 110
Promoters 62.2 62.3 62.3 EPS growth (%) -21% -3% 15% 11% 17%
Public 37.8 37.8 37.8 ROE (%) 13% 11% 11% 13% 13%
Total 100.0 100.1 100.1 ROCE (%) 14% 14% 13% 16% 19%
BV 624 687 756 850 950
Stock Performance % P/B (X) 5.2 4.8 4.3 5.0 4.5
1Mn 3Mn 1Yr EV/Ton (Cap-USD) 240 217 200 194 183
Absolute 4.3 10.0 29.9
Rel.to Nifty 3.1 6.5 14.4 Acquisition of JP Associates
The company is in process to acquire 21.1 MT of cement capacity. It is at its last
130 ULTRACEMCO NIFTY stage. All approval is done. Once completed it will have capacity expansion
125 of :
120 6.5 MT in UP and Uttrakhand (Infrastructure development will pick up
115 momentum)
110 5 MT in Coastal Andhra Pradesh (well positioned)
105
4.9 MT in Central India
100
5 MT in Himachal Pradesh
95
90 The company is setting up 3.5 MTPA integrated cement plant at Dhar, Madhya
85 Pradesh is on track and commercial production is expected to commence from
80 Q4FY19. During the year, it has commissioned grinding units in Maharashtra and
Bihar.
Jul-16
Apr-16

Feb-17

Apr-17
Sep-16

Mar-17
Dec-16
Jan-17
Jun-16

Aug-16

Oct-16
May-16

Nov-16

With this expansion and the acquisition of cement plants of Jaiprakash

Bineeta Kumari Associates, company's cement capacity will stand augmented to 95.4 MTPA,
bineeta.kumari@narnolia.com including its overseas operations in FY19.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Quarterly Performance
It includes Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Rs.138 crore of Net Sales 7,700 7,400 6,446 6,690 7,924 3% 18% 28,392 28,646 1%
provisions Other Income 141 151 159 97 241 71% 147% 464 648 40%
which is no COGS 1,244 1,209 931 1,047 1,308 5% 25% 4,418 4,493 2%
longer required. Employee Cost 365 373 384 392 373 2% -5% 1,445 1,522 5%
Other Expenses 979 982 987 938 1,066 9% 14% 3,837 3,972 4%
EBITDA 1,464 1,475 1,219 1,182 1,336 -9% 13% 4,901 5,212 6%
Depreciation 379 323 334 336 356 -6% 6% 1,377 1,348 -2%
Interest 128 180 150 144 167 30% 16% 566 640 13%
PBT 1,097 1,124 894 800 1,054 -4% 32% 3,421 3,872 13%
Tax 279 344 280 206 329 18% 59% 942 1,159 23%
PAT 819 763 614 673 682 -17% 1% 2,478 2,715 10%

Reported Net sales for the quarter stood at Rs 7924 Cr (Up 3% YoY) as compared to Rs 7700 Cr in
4QFY16, and Rs 6690 Cr (Up 18% QoQ) in 3QFY17.
Other income for the quarter stood at Rs 241 Cr (71% up YoY & 147% up QoQ). It includes Rs 138
Cr of provisions which is no longer required. This provision was related to royalty on limestone for
AP for last several years for conversion factor.
On the volume front, white cement and wall care putty volumes were at 3.86 lakh tonnes against
3.85 lakh tonnes in same quarter last year.
Grey Cement volumes increased 0.2% to 13.35 MT against 13.32 MT YoY.
Other expenses for the quarter was Rs 1066 Cr (Up14% QoQ) driven by sales volume (20% up
sequentially). The YoY growth of 9% was due to variable expenses.
Tax rate for the quarter stood 329 Cr as compared to Rs 279 Cr in the same quarter of the previous
year. Expected tax rate for FY18 is 32%.
PAT for the quarter declined 17% QoQ to Rs 682 Cr as compared to Rs 819 Cr in the same quarter
of the previous year.

Margins Dissapointed
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 81.8% 81.7% 83.9% 82.5% 81.4% 0% -1% 84% 84% 0%
EBITDA Margin 21.5% 22.4% 21.1% 19.7% 19.0% -2% -1% 17% 18% 1%
PAT Margin 12.0% 11.6% 10.6% 11.2% 9.7% -2% -2% 9% 9% 1%

Gross Margin declined by 39bps YoY to 81.4% from 81.8% due to inflation in input prices.
The EBITDA margin contracted by 186bps YoY from 18.9% to 17.04% led by 155bps increase in
Power & Fuel cost and 83bps increase in other expenses.
PAT margin deteriorated by 230bps on the back of higher tax provisioning of 577bps (31.2% Vs
25.4%).

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 EBITDAM% PATM%
23.0% 22.4% 14.0%
12.0% 11.6% 11.2%
22.0% 21.5% 12.0% 10.6%
21.1% 9.7%
10.0%
21.0%
19.7% 8.0%
20.0%
19.0% 6.0%
19.0%
4.0%
18.0% 2.0%

17.0% 0.0%
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

View & Valuation

Major negative came from contraction in EBITDA margin which declined by 186bps YoY led by rise
in power and fuel cost. Although managements tone was bullish and is expecting above than
industry growth going forward but we need to see how management maintains margins going
forward. On the other hand, company clocked better volume growth (20% QoQ) in this quarter
but it will be too early to draft conclusions based on that, so we will be watchful about volume
growth in upcoming quarters to get more clearer view. Presently company is trading at 4.5x times
of FY18E book value of Rs 950. Considering a slightly stretch valuation we hold Neutral view on
this stock with TP of Rs 4260.

Concall Highlights:

Housing sector has started coming back (Correction in prices of real estate sector, reduction
in interest rate has also made housing finance attractive, 1st home buyer are getting in
investment mode again).
Infrastructure segment continues to grow at robust. However overall demand driver remained
to be small (contributing 20% of overall demand). Roads (3-4%) growing robustly. Irrigation
picking up, Metro, Rail, Inland waterways picking up.
Region Split :
Tamil Nadu, Kerala : Due to Drought it remain under pressure. Also political uncertainties
there. Not positive.
Western market : Demand seen, volume picking up.
North Market : Slow demand, Pressure of liquidity crisis followed by eastern market.
Rural market up due to good monsoon, good crops, Pay commission disbursement.
Affordable Housing Scheme: Very positive move for cement industry.
Commitment of Zero debt: The year ended with negative debt of 2004 Cr and cash surplus
of 2004 Cr. Robust Working capital Management anf prudence capex plan has helped to
achieve the goal. Helped in reducing leverage position from day 1 of acquisition.
Indian economy to grow 70% in coming years. Cement industry to sustained this growth and
ultratech is well positioned to take advantage of this growth.
Capex for Dhar project : 2600 Cr.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Sales break up : For 4QFY17 White cement: 500 Cr Ready concrete mix: 480 Cr and For
FY17 White cement: 1700 Cr Ready concrete Mix: 2000 Cr.
JP Associates operating at 42% of capacity utilization. Target for 1st 12 months is to cross
60% utilization and for next 12 months is to cross 75% utilization.
Expected Tax rate for FY18 is 32%.
Andhra Pradesh & Telangana can show double digit growth.
Ultratech to grow higher than industry growth.
Incremental capacity for next 3 Years : 40MT
North : In FY17 it is 145 MT will be reaching to 160 MT by FY21
South : In FY17 it is 147 MT will be reaching to 155 MT by FY21
East : In FY17 it is 72 MT will be reaching to 88 MT by FY21
West : In FY17 it is 54 MT will be reaching to 65 MT by FY21

White Putty & cement sales in Cr (14% up QoQ) RMC Sales in Cr (1% up QoQ)
700 560 550

600 575 540

500
500 440 440 520
500 500
400 375 500
480
300 480 475

200 460

100 440

0 420
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

20% QoQ growth in sales volume Realization declined 2% sequentially

Volume (MT) Realisation (INR/ton)

16 5350 5314
13.6 13.68
14 12.9 5300 5257
5242
11.4 5250
12 10.9
5200
10 5127
5150
8 5100
6 5050 5014
4 5000
4950
2
4900
0 4850
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - OIL & GAS
BSE Code - 500325
NSE Code - RELIANCE
25-Apr-17 NIFTY - 9217

Company Data Key Highlights of the Report:

CMP 1417 Reliance commenced commercial production from its Coal Bed Methane
Target Price 1680
(CBM) block Sohagpur (West) and it will gradually ramp-up in the next 15-
Previous Target Price 18 months.
Upside 19% Continuing to re-commission Petroleum outlets improves the marketing
52wk Range H/L 1448/925 volume of Petroleum products.
Mkt Capital (Rs Cr) 4,60,518 Reliance out-performed Singapore GRM by 5.1 USD/BBL and reported
Av. Volume (,000) 409 GRM of 11.5 USD/BBL.

RoE to maintain over 13%

Reliance Retail added 63 stores across various store concepts and now it
is operating 3616 stores in 702 cities.
ROE(%) Currently, the stock is trading at 1.89x FY17 P/BV. We maintain HOLD'
14.0% 13.1% 13.0%
with the target price of Rs. 1680
12.9%
13.0%
11.5% 11.3% 11.3%
12.0%
10.8%
11.0%
10.0% Financials/Valu FY15 FY16 FY17 FY18E FY19E
9.0% ation
Net Sales 3,75,435 2,93,298 3,30,180 4,43,483 4,93,634
8.0%
EBITDA 37,364 41,704 46,194 68,392 76,153
FY13 FY14 FY15 FY16 FY17 FY18E FY19E
EBIT 31,114 33,927 40,142 54,437 60,833
Share Holding patterns % PAT 23,566 29,861 29,833 40,049 44,755
4QFY17 3QFY17 2QFY17 EPS (Rs) 73 92 92 124 138
Promoters 46.3 46.5 46.5 EPS growth (%) 5% 27% 0% 34% 12%
Public 53.7 53.5 53.5 ROE (%) 11% 13% 11% 13% 13%
Total 100.0 100.0 100.0 ROCE (%) 8% 8% 8% 11% 11%
BV 675 715 814 941 1,062
Stock Performance % P/B (X) 1.2 1.5 1.5 1.3 1.2
1Mn 3Mn 1Yr P/E (x) 11.3 11.3 13.5 10.1 9.0
Absolute 10.1 36.4 42.6
Rel.to Nifty 8.9 19.7 34.8 RECENT DEVELOPMENT: Commencement of Ethane Project
Reliance commissions ethane receipt & handling facilities , at its Dahej
140 RELIANCE NIFTY
Manufacturing Facility in Gujarat in a world record time of less than three
130
years
120 RIL commissions final phase of Jamnagar paraxylene project at a cost of $

16 million
110

100 Commercial production of natural gas from coal seams or CBM from its
Madhya Pradesh blocks.Company is targeting 3.5 million SCM per day of
90 peak output from two adjacent CBM blocks in Sohagpur
Reliance Retail may spend Rs 2,500 cr for business expansion in next 3
80
years.The company also has plans to add 500 to 600 fuel stations.
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Apr-17
Mar-17

Reliance Industries has completed sale of its entire 76 percent interest in

its East African company GAPCO to Total SA of France for an undisclosed
sum.
ADITYA GUPTA
aditya.gupta@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Total Volumes ('000) 18 17 18 18 18 -2% -2% 70 70 1%
GRM(USD/BBL) 10.8 11.5 10.1 10.8 11.5 6% 6% 11 11 2%
Net Sales 59,671 71,451 81,651 84,189 92,889 56% 10% 2,93,298 3,30,180 13%
Other Income 1,953 2,378 2,393 2,736 1,936 -1% -29% 7,479 9,443 26%
COGS 37,309 49,519 59,396 60,486 67,697 81% 12% 2,08,113 2,37,098 14%
Employee Cost 1,838 2,111 2,017 1,894 2,366 29% 25% 7,407 8,388 13%
Other Expenses 9,321 8,598 9,062 10,257 10,593 14% 3% 36,074 38,500 7%
EBITDA 11,203 11,223 11,176 11,552 12,233 9% 6% 41,704 46,194 11%
Depreciation 3,110 2,725 2,774 2,793 3,354 8% 20% 11,565 11,646 1%
Interest 842 1,206 893 1,209 556 -34% -54% 3,691 3,849 4%
PBT 9,204 9,670 9,902 10,286 10,259 11% 0% 33,927 40,142 18%
Tax 2,351 2,581 2,708 2,719 2,201 -6% -19% 8,876 10,201 15%
PAT 6,930 7,113 7,206 7,506 8,053 16% 7% 29,861 29,833 0%

Robust volume growth accompanied by highest GRM of 11 USD/BBL

Reliance Reliance reported Rs.92889 crore of net sales in 4QFY17 a growth of 56% over same quarter
previous year. This was driven by growth across all business segments.
outperformed
Singapore GRM EBITDA for 4QFY17 is Rs. 12233 Cr. a growth of 9% over same quarter previous year.EBITDA
by 5.1 USD/BBL margin in 4QFY17 stood at 13.2%
Reliance has reported Gross refining margin of 11.5 USD/BBL in 4QFY17 vs 10.8 USD/BBL as
compared to the same quarter previous year.
Profit after tax for 4QFY17 is Rs. 8053 Cr a growth of 16% over same quarter previous year.
Exports increased by 25.2% to Rs. 38,718 crore in 4QFY17.
The capital expenditure for the year ended 31st March 2017 was Rs. 114,742 crore
Reliance Jamnagar refineries processed 17.5 MMT crude in 4Q FY17, vs 17.8 MMT crude processed
in the previous quarter..
Reliance operated 1,221 petroleum retail outlets in the country in 4QFY17

Refining EBIT(Rs in CR) EBIT Margins(%) RIL GRM(USD/bbl) Singapore GRM(USD/bbl)

7,000 14% 14.0
6,000 12% 11.5 11.5 11.5
12.0 10.8 10.8
10.1 10.4 10.6 10.1
5,000 10% 10.0 8.7 8.3 8.6
8.0 8.0 7.7
4,000 8% 8.0 7.3
6.3 6.3 6.5 6.7
5.8 6.0
3,000 6% 6.0 4.8 5.1
2,000 4% 4.0
1,000 2% 2.0
- 0% 0.0

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Higher expenses and depreciation pressurizes PAT
Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY15 FY16 YoY(+/-)
Gross Margin 37% 31% 27% 28% 27% -0.10 -0.01 29% 28% -0.01
EBITDA Margin 19% 16% 14% 14% 13% -0.06 -0.01 14% 14% 0.00
PAT Margin 12% 10% 9% 9% 9% -0.03 0.00 10% 9% -0.01

Gross Margin contracted to 27% due to mediocre performance of the Oil & Gas exploration business
in 4QFY17
EBITDA grew by 9%QoQ to Rs.12233 crore. But EBITDA Margin declined by 50bps QoQ to 13.2% on
account of higher purchase cost of raw material.
PAT margin degrew by 30bps to 8.7%QoQ on account of higher depreciation cost in 4QFY17

EBITDA(Rs in CR) EBITDA Margins(%) PAT(Rs in CR) PAT Margins(%)

14,000 20%
12,233 10,000 9,345 14%
11,248 11,223
11,203 11,552
11,176 18%
12,000
9,959 16% 9,000 8,053 12%
10,000 9,301 8,000 7,2456,9307,1137,2067,506
14%
7,000 6,024 10%
8,000 12%
6,000 8%
10%
6,000 5,000
8% 4,000 6%
4,000 6% 3,000 4%
4% 2,000
2,000 2%
2% 1,000
- 0% - 0%

Volume Trend

Petrochemicals volume (MMT) Crude Oil Refined

19 18
6.5 6.4 6.4 18
6.4 18 18 18 18
6.3 18
6.3 6.2 6.2 6.2 18 17
6.2 17
6.1 17
6.1 17 17 17
6.0 17 16
5.9 5.8
5.8 16
5.7 16
5.6
15
5.5

Petro-chemicals volume remain flat QoQ to 6.2 MT in 4QFY17 but it slightly degrew by 2% YoY
primarily due to increase in prices across polymers and polyester chain.
Crude oil refined in 4QFY17 is 17.5 MT vs 17.8 MT in the previous quarter of FY17.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Expanding organised retail base- During the quarter, Reliance Retail added 63 stores across
various store concepts. At the end of the year, Reliance Retail operated 3,616 stores across 702 cities
with an area of over 13.5 million square feet.
Re-commissioning of Petroleum outlets- Reliance continue to re-commission its retail petroleum
network; 1221 outlets are now operational. Further,growing Trans-connect customer base, credit
solutions, and e-cash loading facilities have helped Reliance to more than double sales volume in
FY17.
Strong Petro-chemicals Demand- polymer demand registered growth of 7% during FY17.PVC
demand registered highest growth rate of 10% YoY
Commercialisation of Jio- Jio reached 100 Million subscribers in 170 days. This is the fastest
achieved by any start-up technology company in the world.Reliance Retails device distribution
business sold 2.6 million LYF and JioFi devices during the quarter and nearly 10 million units in the
financial year.
Attractive pricing policy of Jio can boost revenue- Within a month of announcing the Jio Prime
Offer, over 72 million Jio customers signed up for JIO PRIME. Recently Jio launched Jio Dhan Dhana
Dhan. The plans start with the most affordable Rs. 309 , which provides Unlimited SMS, calling and
data (1GB per day at 4G speed) for 3 months on first recharge.

Segment performance

Refining business Petro-chemicals business

EBIT Margins(%) Refining EBIT(Rs in CR) EBIT Margins(%) Petro-chemicals EBIT

7,000 14% 4,000 18%

6,000 12% 3,500 16%
3,000 14%
5,000 10%
12%
4,000 8% 2,500
10%
2,000
3,000 6% 8%
1,500
2,000 4% 6%
1,000 4%
1,000 2%
500 2%
- 0% - 0%

View & Valuation

Commissioning of Ethane project and commercialization of Jio has paved a way for long term growth
of the company. With the rapid growing customer base of jio by adding 6 mn customers daily to its
network, Jio ha successfully added 100 million customers and it is continuously adding new
customers. Jio can improve the revenue of the company upto a large extent. Growing demand of
petro-chemicals products and re-commissioning of petroleum outlets will further improve the
volume of refining segment. Reliance has also added 63 stores across various store concepts. At the
end of the year, Reliance Retail operated 3,616 stores across 702 cities with an area of over 13.5
million square feet which will improve revenue of organized retail.We expect company to maintain
ROE of 13% in FY18. Currently, the stock is trading at 1.89x FY17 P/BV. We maintain HOLD' with the
target price of Rs. 1680.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17 FY18E FY19E FY16 FY17 FY18E FY19E
Revenue from Operation 2,93,298 3,30,180 4,43,483 4,93,634 ROE 13% 11% 13% 13%
Change (%) -22% 13% 34% 11% ROCE 8% 8% 11% 11%
EBITDA 41,704 46,194 68,392 76,153 Asset Turnover 0.5 0.5 0.6 0.6
Change (%) 12% 11% 48% 11% Debtor Days 5.56 5.56 5.56 5.56
Margin (%) 14% 14% 15% 15% Inv Days 57.9 57.9 57.9 57.9
Depr & Amor. 11,565 11,646 17,357 19,861 Payable Days 75 75 75 75
EBIT 30,139 34,548 51,035 56,291 Int Coverage 8.17 8.98 12.96 14.29
Int. & other fin. Cost 3,691 3,849 3,939 3,939 P/E 11 14 10 9
Other Income 7,479 9,443 7,341 8,480 Price / Book Value 1.5 1.5 1.3 1.2
EBT 33,927 40,142 54,437 60,833 EV/EBITDA 11 12 8 7
Exp Item 4,574 - - - FCF per Share (30) (204) 26 39
Tax 8,876 10,201 14,388 16,077 Div Yield 1% 1% 1% 1%
Minority Int & P/L share of Ass. 236 (108) - -
Reported PAT 29,861 29,833 40,049 44,755 Assumptions
Adjusted PAT 26,484 29,833 40,049 44,755 FY16 FY17 FY18E FY19E
Change (%) 27% 0% 34% 12% Crude Refined(Million Tonnes) 70 70 74 80
Margin(%) 10% 9% 9% 9% Petrochemicals Production(MMT) 25 25 25 26
Total Oil volume(PMT+KD-D6)(MMBBL)8 8 8 8
Total Gas volume(PMT+KD-D6)(BCF)208 174 174 174
Balance Sheet Rs in Crores
Y/E March FY16 FY17 FY18E FY19E
Share Capital 2,948 2,959 2,948 2,948 Cash Flow Statement Rs in Crores
Reserves 2,28,608 2,60,750 3,01,918 3,41,128 Y/E March FY16 FY17E FY18E FY19E
Networth 2,31,556 2,63,709 3,04,866 3,44,076 PBT 35,979 40,142 54,437 60,833
Debt 165192 183676 181182 181182 (inc)/Dec in Working Capital 41,285 55,529 75,733 84,633
Other Non Cur Liab 2,249 9,025 3,401 3,785 Non Cash Op Exp 12,916 11,646 17,357 19,861
Total Capital Employed 396748 447385 486047.89 525257.82 Int Paid (+) 3,849 3,939 3,939 -
Net Fixed Assets (incl CWIP) 409353 518471 537523.25 564661.96 Tax Paid (10,201) (14,388) (16,077) -
Non Cur Investments 41,512 25,639 25,639 25,639 others 7,128 9,331 (16,410) (8,942)
Other Non Cur Asst 14,061 8,279 8,279 8,279 CF from Op. Activities 39,811 54,659 44,934 59,614
Non Curr Assets 4,71,212 5,59,989 5,79,041 6,06,180 (inc)/Dec in FA & CWIP (49,662) (1,20,764) (36,409) (47,000)
Inventory 46,486 53,460 70,289 78,238 Free Cashflow (9,851) (66,105) 8,525 12,614
Debtors 4,465 8,177 6,751 7,515 (Pur)/Sale of Inv 6,471 - - -
Cash & Bank 11,028 3,023 6,223 9,352 others 3,775 - - -
Other Curr Assets 16,345 19,871 24,715 27,509 CF from Inv. Activities (38,338) (1,20,764) (36,409) (47,000)
Curr Assets 1,27,785 1,46,813 1,70,536 1,95,316 inc/(dec) in NW 284 - - -
Creditors 60,296 76,595 91,171 1,01,481 inc/(dec) in Debt 13,345 18,484 (2,494) -
Provisons 3,006 4,120 5,035 5,338 Int. Paid (9,115) (3,849) (3,939) (3,939)
Other finicial liabilities 89,533 1,04,543 1,04,543 1,04,543 Div Paid (inc tax) (7,259) (3,697) (4,962) (5,546)
Other Curr Liab 10,005 20,882 15,128 16,839 others (14) - - -
Curr Liabilities 1,61,609 2,03,789 2,13,526 2,25,850 CF from Fin. Activities (2,759) 10,938 (11,395) (9,485)
Net Curr Assets (33,824) (56,976) (42,990) (30,535) Inc(Dec) in Cash (1,286) (55,167) (2,870) 3,129
Total Assets 598997 706802 749577.22 801495.69 Add: Opening Balance 12,476 11,028 3,023 6,223
Closing Balance 11,190 (44,139) 153 9,352

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 HOLD
SUN PHARMACEUTICAL INDUSTRIES LTD
24th April 2017

Company Update Recently company has received 11 observations from the US FDA for its
CMP 638 Dadra unit. In the inspection US FDA stated that company fails to produce
appropriate master or control record for each batch of drugs and failure to
Target Price 795
properly investigate batches that don't meet specifications. Dadra unit is
Previous Target Price the second largest manufacturing facility of the company, supplying drugs
Upside 25% to US market. Another unit of company at Halol is already under US import
Change from Previous alert which contributes about 40% of revenue from the US market. Earlier
in the month of March, US FDA indicated that it will lift import ban from its
Mohali unit. Lift of ban will clear the path for Sun Pharma to supply
Market Data approved products from the Mohali facility to the US market.
BSE Code 524715
News Update
NSE Symbol SUNPHARMA
52wk Range H/L 854/571 Sun Pharma opens first production unit in Egypt, total investment of USD
Mkt Capital (Rs Cr) 153562 12.5 million was inaugurated on 21 feb 2017, signalling growing bussines
ties between India and the key Middle East nation.
Av. Volume(,000) 459
Nifty 9,119 On 17 Feb 2017, Sun Pharma gets European Medicines Agency nod for
Tobramycin.
Stock Performance Sun Pharma recalls 2.7 lakh bottles of antidepressant in US.The tablets
1M 3M 12M have been manufactured by Sun Pharma at its Halol plant in India.
Absolute -9.1 -23.1 -23.7 Sun Pharma recalls anti-depressant drug Bupropion Hydrochloride.The
Rel.to Nifty -9.4 -38.4 -30.4 recall is classified as class-III, which means the products are unlikely to
cause any adverse health reactions, but violate FDA labelling or
manufacturing rules.
Share Holding Pattern-% Sun Pharma to sell Ohm Labs site at New Jersey
3QFY17 2QFY17 1QFY17
Promoters 54.4 55.0 55.0 Outlook

Public 45.6 45.0 45.0 US FDA import alert on Dadra unit may dwindle the companys revenue
from the US business. In the meanwhile the Synergies from the Ranbaxy
Others 0.0 0.00 0.00
acquisitions are gaining momentum and the company is on track to
Total 100.0 100.0 100.0
achieve the targeted benefits. Company has strengthened the branded
Company Vs NIFTY ophthalmic pipeline further through acquisition of Ocular Technologies. The
125 SUNPHARMA NIFTY management has maintained its guidance of 8-10% sales growth for
120 FY17E, we are optimistic for healthy growth in the long-term. Considering
115 above arguments we recommend HOLD rating on this stock while
110 maintaining our previous recommended target price of Rs. 795. We are
105 analysing the financial viewpoint of Mohali and Dadra plant and will update
100
as more clarity will emerge.
Rs,Cr
95
Financials 2012 2013 2014 2015 2016
90
85 Sales 8019 11300 16080 27433 27219
80 EBITDA 3204 4896 7002 8064 7431
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Apr-17
Mar-17

Net Profit 2657 2983 3141 4541 3665

EPS 26 29 15 22 18
Aditya Gupta ROE 22% 20% 17% 17% 12%
aditya.gupta@narnolia.com
Narnolia Securities Ltd 2
Please refer to the Disclaimers at the end of this Report
 Segmental Revenue

Latest Events
16 Dec 2016- The necessary formalities for closure of acquisition transaction have been concluded and we have successfully
completed the acquisition of Ocular Technologies.
12 dec 2016- Sun Pharma, Moebius Medical ink pact to develop pain management product.Moebius Medical will conduct
requisite pre-clinical studies and will assume responsibility for product development and manufacturing through the end of Phase-
II studies, as per the pact
7 Dec 2016- Company has undergone an inspection by USFDA recently and post that the health regulator issued a Form-483
observation letter For Halol Plant. The company is in the process of responding to the letter.

Financial Performance

EBITDA EBITDA Margins

50% 46% 44% 46% 46% 3000

44% 44% 44% 44% 44%
45% 41%
40% 2500
31% 33% 32%
35% 31%
27% 28% 27% 2000
30% 26%
25% 1500
20% 14%
15% 1000
10%
1551

1843

2180

2165

2520

1768

1873
1242

1175

1275

1275

2001

1801

1733

1850

1934

2169

2246

500
892

5%
0% 0

About the Company

Sun Pharmaceuticals (SUNP) is one of the fastest growing companies in India as well as globally. It has a highly impressive
track record of organic and inorganic growth. Various US acquisitions augment SUNPs pipeline with differentiated products, and
SUNP has turned around business in a highly profitable manner Taro/ TDPL/ Natcos brands/ etc. It has one of the highest
margins/ return ratios amongst global peers. In Apr 14, SUNP announced its biggest M&A deal ever Ranbaxy (RBXY). SUNP
currently is the second largest player in the domestic market, while the merged entity will become the largest player. Its API
business footprint is strengthened through 11 world class API manufacturing facilities across the globe. Sun Pharma fosters
excellence through innovation supported by strong R&D capabilities comprising about 1800 scientists and R&D investments of
over 7% of annual revenues.

Narnolia Securities Ltd 3

Please refer to the Disclaimers at the end of this Report
 Financials Snap Shot
INCOME STATEMENT RATIOS
FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Revenue 11300 16080 27433 27219 EPS 29 15 22 18
Other Income 388 552 452 459 Book Value 145 89 128 152
Total Revenue 11688 16633 27885 27678 DPS 5 3 2 2
COGS 2,073 2,779 6,739 6,483 Payout (incl. Div. Tax.) 17% 19% 8% 10%
GPM 18% 17% 25% 24% Valuation(x)
Other Expenses 2,796 4,225 8,201 8,508 P/E 14 38 47 58
EBITDA 4896 7002 8064 7431 Price / Book Value 3 6 8 7
EBITDA Margin (%) 43% 44% 29% 27% Dividend Yield (%) 1% 1% 0% 0%
Depreciation 336 409 1295 1014 Profitability Ratios
EBIT 4,560 6,592 6,769 6,417 RoE 20% 17% 17% 12%
Interest 43 44 579 477 RoCE 30% 35% 24% 19%
PBT 4,905 7,101 6,642 6,399 Turnover Ratios
Tax 846 702 915 935 Asset Turnover (x) 1 1 1 1
Tax Rate (%) 17% 10% 14% 15% Debtors (No. of Days) 78 50 71 91
Reported PAT 2983 3141 4541 3665 Inventory (No. of Days) 83 71 75 86
Dividend Paid 512 606 363 363 Creditors (No. of Days) 34 30 42 47
No. of Shares 104 207 207 207 Net Debt/Equity (x) 0.0 0.0 0.1 0.1

BALANCE SHEET CASH FLOW STATEMENT

FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16
Share Capital 104 207 207 241 OP/(Loss) before Tax 4,315 4,581 6,403 6,765
Reserves and surplus 14,886 18,318 26,252 31,164 Depreciation 336 409 1,195 1,014
Shareholders' funds 14,990 18,525 26,459 31,404 Direct Taxes Paid 1,073 789 1,740 1,988
Long term Debt 115 49 1,368 3,117 Operating profit before working
4,475capital4,541
changes 7,101 8,492
Total Borrowings 198 2,489 7,596 8,338 CF from Op. Activity 3,357 3,959 5,322 6,769
Non Current liabilities 1,001 2,886 2,817 2,365 Purchase of Non Current investments
(15,672) (28,265) (28,802) (40,089)
Long term provisions 787 2,602 2,532 2,080 Capital expenditure on fixed assets
(845) including
(906)capital
(2,366)
advances
(3,382)
and capital w
Short term Provisions 1,482 1,961 3,336 3,417 CF from Inv. Activity (2,635) (2,367) (2,671) (4,455)
Current liabilities 2,758 3,549 9,256 8,026 Repayment of Long Term Borrowings
(111) (89) (6,662) (9,076)
Total liabilities 20,583 29,371 49,028 54,220 Interest Paid 38 23 251 300
Net Fixed Assets 5,077 5,824 11,020 13,361 Divd Paid (incl Tax) 512 606 363 869
Non Current Investments 1,106 788 599 593 CF from Fin. Activity (665) 507 (1,087) (1,924)
Other non Current assets 8 0 55 96 Inc/(Dec) in Cash 57 2,099 1,563 390
Current assets 11,503 18,686 29,122 30,865 Add: Opening Balance 2,013 2,260 4,479 7,729
Total Assets 20,583 29,371 49,028 54,220 Closing Balance 2,069 4,359 7,286 8,120

Narnolia Securities Ltd 4

Please refer to the Disclaimers at the end of this Report

 N arnolia Securities Ltd
201 | 2nd Floor | Marble Arch Build ing | 236B-AJC Bose
Road | Kolkata-700 020 , Ph : 033-40501500
em ail: narnolia@narnolia.com ,
w ebsite : w w w .narnolia.com

Risk Disclosure & Disclaimer: This report/message is for the personal information of
the authorized recipient and does not construe to be any investment, legal or taxation
advice to you. Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any
action based upon it. This report/message is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or
redistributed to any other person in any from. The report/message is based upon publicly
available information, findings of our research wing East wind & information that we
consider reliable, but we do not represent that it is accurate or complete and we do not
provide any express or implied warranty of any kind, and also these are subject to change
without notice. The recipients of this report should rely on their own investigations,
should use their own judgment for taking any investment decisions keeping in mind that
past performance is not necessarily a guide to future performance & that the the value of
any investment or income are subject to market and other risks. Further it will be safe to
assume that NSL and /or its Group or associate Companies, their Directors, affiliates
and/or employees may have interests/ positions, financial or otherwise, individually or
otherwise in the recommended/mentioned securities/mutual funds/ model funds and
other investment products which may be added or disposed including & other mentioned
in this report/message.