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MID CAP STOCKS
VALUE INVEST
2019
Karvy Stock Broking Research is available on Thomson Reuters & Bloomberg (Code: KRVY<GO>)
Vivek Ranjan Misra
040 - 3321 6296
vivekr.misra@karvy.com
VALUE INVEST
Company Name NSE Symbol Sector
Market Cap
(Rs. Bn.)
CMP*
Rs.)
Target Price
(Rs.)
Upside (%)
Bajaj Electricals Ltd BAJAJELEC Electrical Equipment 51 497 670 35
Finolex Cables Ltd FINCABLES Electrical Equipment 70 459 600 31
Jain Irrigation Systems Ltd JISLJALEQS Farm Machinery & Equipment 35 69 101 46
K.P.R. Mill Ltd KPRMILL Textiles 41 565 716 27
Menon Bearings Ltd MENONBE Auto Ancillary 4 79 120 52
Relaxo Footwears Ltd RELAXO Footwear 88 732 911 24
Sunteck Realty Ltd SUNTECK Real Estate 51 348 497 43
Take Solutions Ltd TAKE IT 22 148 226 53
The Phoenix Mills Ltd PHOENIXLTD Real Estate 85 557 735 32
Visaka Industries Ltd VISAKAIND Construction Materials 7 426 750 76
*As on Dec 28, 2018
Bloomberg Code: BJE IN
BAJAJ ELECTRICALS LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 46267 42983 47164 56860 66270
EBITDA 2642 2445 2935 3696 4639
EBITDA Margin (%) 5.7 5.7 6.2 6.5 7.0
Adj. Net Prot 1103 1093 1730 2023 2720
EPS (Rs.) 10.9 10.8 17.1 20 26.9
RoE (%) 14.6 12.5 18.3 18.2 20.1
PE (x)* 17.4 28.8 29.9 24.8 18.4
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Consumer and EPC Business Both on a Strong Footing
Q2FY19 Update: The revenues came in at Rs. 1598 mn growing
by 70.9% YoY beating our expectations. Both the segments have
peormed strongly to drive growth. EPC has posted strong growth
of 126.9% YoY majorly driving the huge revenue growth. Consumer
durable segment has shown consistent growth of 25% with major
sub-segment growth in fans and appliances. PBT was at Rs. 533 mn showing a
growth of 73.8% and PAT was at Rs. 341 mn for a growth of 79.6%. Considering
YoY, the margins have shown an improvement but QoQ there is a decline in
margins. The margins declined QoQ due to increase in commodity prices and
depreciation of rupee.
Consumer Durables: With the implementation of RREP the company was able
to establish a strong distribution network of 180,000 touch points. It is in the
process of bringing new products and expanding its existing product range.
BJE motivates and encourages the distributors by bringing new incentive
schemes and training session. It has taken a price hike due to increase in
commodity prices and its margin and working capital cycle has improved a
lot.
Nirlep Acquisition: Bajaj has expanded its consumer segment pofolio and
has acquired 79.85% of Nirlep appliances which is majorly into the business of
non-stick cookware. The management expects the acquisition to be revenue
accretion in the coming years. The management expects Nirlep revenues to
grow at CAGR of 30% over the next 3 years.
Healthy Order book: The improvement in execution and being selective about
projects has helped the company revenue to grow. In order to improve the
execution and supply chain, the company has used Theory of Constraints.
Margins can fall in UP orders due to increase in commodity price and slightly
higher execution cost. Management expects revenue to be around Rs. 40 bn
in FY19.
Valuation and Risks: With a very positive scenario for both consumer
and EPC segment, we expect the revenue to grow at CAGR of 14% during
Fy18-20E and EBITDA margin to improve to 7.0%. We rate “BUY” valuing the
company at 25x on FY20E EPS for a target price of Rs. 670 representing an
upside potential of 35%.
Relative Performance*
Source: Bloomberg; *Index 100
Shareholding Pattern (%)
1M 3M 6M 12M
Absolute 6 (1) (6) 1
Relative to Sensex 4 (1) (9) (6)
Source: Bloomberg
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 497
Target Price
670
Upside(%)
35
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 51.0 / 0.7
52-wk High/Low (Rs.) 706 / 400
3M Avg.daily value (Rs. Mn) 37.7
Beta (x) 1.1
Sensex/Niy 36077 / 10860
O/S Shares(mn) 102.4
Face Value (Rs.) 2.0
Stock information
Promoters 62.8
FIIs 9.6
DIIs 5.3
Others 22.3
80
95
110
125
140
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
BJE
Sensex
KARVY VALUEINVEST REPORT 2019
3
Company Background
Bajaj Electricals Ltd is a agship company under Bajaj Group, one of the oldest conglomerates
in India. Bajaj Electricals Ltd, established in 1938, is a pioneer in electrical home appliances, lighting
and luminaries business. Over the last 75 years, it has progressively diversied into turnkey project
contracts involving Power Distribution and Transmission Line Towers (TLT) by establishing a new SBU
(Strategic Business Unit) for Engineering and Projects (E&P). While the power distribution projects are
working on rural electrication, the TLT projects cater to connecting power transmission grids across
India - connecting power generating plants or sub-stations. The company majorly follows asset-light
model as it procures products from the market and sells it under the brand name of Bajaj. In November
2002, the company entered into a technical collaboration and brand licensing agreement with Morphy
Richards, United Kingdom for the sales and marketing of electrical appliances under the brand name of
“Morphy Richards” in India.
BAJAJELEC: Technical View
BAJAJELEC has been trading with bullish bias from past few quaers making higher highs and
higher lows on the weekly chas. The counter has clocked all-time high of 692 in April 2018 and
witnessed a round of correction which dragged the counter towards the lower suppo area of
450-500 where an unlled gap is acting as a strong suppo on the daily chas. At the current
juncture, the stock is trading in the sideways consolidation mode with bullish bias and is on the
verge of breakout above 520-525 levels on the sho term chas. On the levels specic data, the
counter is having suppo around 470 followed by 450 level while resistance is pegged around
525 followed by 580-600 levels where the unlled gap is placed. The counter is currently trading
in the cluster of moving averages on the daily chas with Bollinger band (20,2) expanding in the
nohward direction. We expect the stock to move higher in the coming weeks and may test 560-
580 levels in the medium term perspective with strong suppos pegged around 450 level. Medium
to long-term investors may buy the stock from current levels and may accumulate more around
the mentioned suppos.
KARVY VALUEINVEST REPORT 2019
4
Bloomberg Code: FNXC IN
FINOLEX CABLES LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 24610 26707 28842 32361 36047
EBITDA 3390 3714 4223 4854 5407
EBITDA Margin (%) 13.8 13.9 14.6 15.0 15.0
Adj. Net Prot 2488 3159 3583 3711 4170
EPS (Rs.) 16.3 20.7 23.4 24.3 27.3
RoE (%) 17.0 16.8 16.3 15.9 15.6
PE (x)* 20.7 25.0 27.7 18.9 16.8
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Volume Impacted But Set to Recover in H2FY19
Q2FY19 Update: Finolex top line grew marginally by 3.8% YoY on the back of
strong peormance from communication cables which grew by 14.3%. The
growth was lower due to the tepid peormance of the electrical segment.
The electrical segment was impacted due to transpo disruption in July and
oods in Kerala which is one of the prominent places for electrical cables
business. The absolute EBITDA has shown a growth of 6.6% with margins at
12.0% showing a decline of 234 bps YoY. Prot for the quaer has declined
by 6.8% due to a higher incidence of taxation because of expiry of tax
exemption period of Roorkee facility. The net prot margins were lower at
13.0% showing a fall of 147 bps.
Growth in Cables Segment: Communication cables can grow with 20%
sales CAGR over FY18–20E led by government’s investments in Bharat Net,
electrical cables’ growth has been muted over the past ve years—2% CAGR
over FY13-18. The electrical cables segment has given a at peormance
due to transpo issues at its Roorkee facility and oods in Kerala. The EBIT
margins for electrical cables segment declined by 210 bps due to commodity
prices variation.
Consumer durable business: The new segment mainly comprises of electrical
consumer durables like Fans, Switchgear and Water heaters which the
company forayed into last year. The products have been well received by the
market on the back of strong brand name Finolex, with a strong supply chain
system. The revenue from other segment has shown a growth of 28.0% YoY.
The management expects higher protability in the coming quaers.
Valuation and Risks: At CMP of Rs. 459, FCL is trading at 16.8x to FY20E
EPS. FCL is expected to generate healthy free cash ows over time. Due
to the recent price correction, we recommend “BUY” rating by valuing the
company at 22x (3 years avg) on FY20E EPS for a target price of Rs. 600
representing an upside potential of 31%.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 459
Target Price
600
Upside(%)
31
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 70.1 / 1.0
52-wk High/Low (Rs.) 758 / 402
3M Avg.daily value (Rs. Mn) 18.7
Beta (x) 0.8
Sensex/Niy 36077 / 10860
O/S Shares(mn) 152.9
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 37.3
FIIs 6.5
DIIs 20.6
Others 35.6
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 1 (14) (18) (34)
Relative to Sensex (0) (13) (21) (38)
Source: Bloomberg
60
80
100
120
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec
-18
FNXC
Sensex
KARVY VALUEINVEST REPORT 2019
5
Company Background
Finolex Cables Limited is a manufacturer of electrical and communication cables and copper rods. The
Company’s business segments include Electrical Cables, Communication Cables, Copper Rods and
Others. The Electrical Cables segment includes 1,100 Volts polyvinyl chloride (PVC) insulated cables,
motor winding PVC insulated cables and approximately three core at cables, automotive/baery
cables and elevator cables. The Communication Cables segment includes jelly lled telephone cables
(JFTCs), local area network cables, coaxial cables, speaker cables, optic ber cables and closed-circuit
television (CCTV) cable. The Copper rods segment oers continuous cast copper (CCC) rods of over
eight millimeters diameter. The other segment includes Electrical Switches, which include switches,
sockets & regulators. In addition to this also includes lamps, which include retrot and non-retrot
compact uorescent lamps (CFL), as well as T5 Tube Lights ings and light-emiing diode base
lighting switches.
FINCABLES: Technical View
The stock is in an uptrend and making higher highs and higher lows on monthly chas and made the
all-time high of 744.47 levels in February 2018. The stock has seen prot taking from the lifetime
high which has dragged the stock to the low of 442.80 levels. The stock has corrected around
55% from its previous rally from 197.55 to 744.47 and trading near the suppo 448 levels which
is 200 EMA on the weekly cha. The stock is trading in the range of 442-477 levels from last one
month. The immediate suppo is placed around 437 levels which is the 50 EMA moving average on
monthly cha and below that is 406 levels which is 61.80% retracement level of the said rally. The
stock is trading below its 50/200 DEMA moving averages on daily chas suggesting sho-term
weakness in the counter. Among the indicators and the oscillators, the 14 period RSI is pointing
nohwards aer giving positive crossover with signal line. On the higher side, resistance is placed
around 490 levels followed by 530 levels. Hence, we recommend investors with a longer time
horizon to go long in the counter around current levels, average on declines towards 437 levels.
KARVY VALUEINVEST REPORT 2019
6
Bloomberg Code: JI IN
JAIN IRRIGATION SYSTEMS LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 63222 67698 79468 90427 102540
EBITDA 8183 9402 10554 13233 15979
EBITDA Margin (%) 12.9 13.9 13.3 14.6 15.6
Adj. Net Prot 487 1762 2213 3764 5470
EPS (Rs.) 1.1 3.3 4.3 7.3 10.6
RoE (%) 1.3 4.3 5.2 8.3 11.1
PE (x)* 57.7 28.5 25.1 9.5 6.5
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Revenue Growth Visibility
Jain Irrigation Systems Limited is the largest in domestic and 2nd largest in
global Micro Irrigation System business. The company has well-diversied
product pofolio comprising of Hi-tech Agri Input Products (MIS i.e., drip &
sprinkler and Tissue Culture), Plastic Division (PE/PVC Pipes & sheets), Agro
Processing Division (De-hydrated Onions/ Garlic, Spices and Processed
Foods) and Other Business Division (Green Energy). The company registered
consolidated revenue of Rs. 79468 Mn (excluding other income and net of
excise duty) up 17.4% in FY18 on the back of strong growth it registered in
all business segments. The company posted EBITDA growth of 12% and PAT
growth of 26% over FY17 on YoY basis.
Strong Segmental Peormances: The Company recorded growth of 28% in
Hi-tech Agri Input Products Division, 12% in Plastics Division and 0.5% in Agro
Processing Division in FY18 on YoY basis. It continued with good segmental
peormance during H1FY19 having registered growth of 21% in Hi-tech Agri
Input Products Division, 24% in Plastics Division and 26% in Agro Processing
on YoY basis.
Government Irrigation Initiatives to be Growth Stimulator: Central
Government initiatives like adding at least 1 million hectares of land under
micro irrigation every year, Building 100 Sma Cities, Housing for All, Swachh
Bharat, etc. and resolve of state governments to bring more hectares of land
under irrigations to provide big llip to MIS and plastic pipes & sheet business.
Fast Growing Agro Processing Business: Food-processing is largely expo-
oriented. It has some domestic business as well. Much higher level of growth
in overseas markets helped the company to register growth of 26% during
H1FY19 on YoY basis.
Overseas Business: The recent acquisitions of Agri Valley Irrigation (AVI) and
Irrigation Design and Construction (IDC) amidst stabilization of economic
and political situations in Turkey, Brazil and Mexico ensures increased order
inows from these regions.
Valuation and Risks: We have valued the stock on 1 year forward PE 9.5x of
FY20EPS and have arrived at TP of Rs. 101 with 46% upside potential. Greater
dependence on government irrigation policy and seasonal nature of business
are potential risks to the call.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 69
Target Price
101
Upside(%)
46
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 35.3 / 0.5
52-wk High/Low (Rs.) 150 / 55
3M Avg.daily value (Rs. Mn) 417.9
Beta (x) 1.5
Sensex/Niy 36077 / 10860
O/S Shares(mn) 496.4
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 28.6
FIIs 30.8
DIIs 7.2
Others 33.3
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 5 13 (13) (46)
Relative to Sensex 4 14 (15) (49)
Source: Bloomberg
40
60
80
100
120
Dec-17
Jan-18
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May-18
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Aug -18
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JI
Sensex
KARVY VALUEINVEST REPORT 2019
7
Company Background
Jain Irrigation Systems Limited, incorporated in the year 1986 is a Indian multinational company engaged in
the business of Hi-tech Agri Input Products, Plastic Piping & Products Agro Processing and Other Business
divisions (Solar thermal products, solar photovoltaic grid and o-grid products, Bio-gas and Solar Power
generation). The micro irrigation system (MIS) is the agship product of the company wherein company
oers end-to-end water solution projects. The company has manufacturing plants in 30 locations and
more than 11000 associates worldwide. Such large distribution network has helped company to hold
40% market share in domestic MIS industry and around 20% market share in domestic PVC piping.
Fuher, the company has in-house R&D to capitalize on oppounities arising in MIS, tissue culture and
agro-processing industries.
JISLJALEQS: Technical View
JISLJALEQS has gained more than 14% during the third quaer of 2019 Financial Year ending 3
quaers of losses. The stock seems to be ending its downtrend as it is nding strong suppo as
it is nearing its previous swing lows of 55 and witnessed a bounce back from these levels. The
stock is currently trading above its sho-term moving averages like 21 and 100 days moving
averages. However, on a broader trend, the stock is stuck in the range of 245-325 levels over last
few quaers. Adding to it, Heiken candlesticks is signaling positive trend on the daily chas as well
as weekly chas reecting the stock is well placed to move higher in the coming days. 14 periods
RSI is trading at 44.01 above the 9 period averages trading at 41.41 on weekly cha indicating
positive momentum. The stock has good suppo around Rs. 55-57 levels below which the next
levels of meaningful suppo lie around Rs. 44-46 levels. As far as the technical setup of the stock
is concerned, the ADX is clearly indicating that the stock is gaining strength of its current up move
on daily chas. Investors with a medium-term horizon can sta accumulating the stock in bits
and pas with a provision to add more on dips towards 58-60 levels and may hold with a stop loss
placed below Rs. 55 on a closing basis for potential upside technical targets of Rs.90-95 in the next
few quaers.
KARVY VALUEINVEST REPORT 2019
8
Bloomberg Code: KPR IN
K.P.R. MILL LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 26005 28166 30245 34687 37314
EBITDA 4696 5633 5753 6466 7181
EBITDA Margin (%) 18.1 20.0 19.0 18.6 19.2
Adj. Net Prot 2107 2726 2925 3450 4018
EPS (Rs.) 28.0 36.3 39.6 46.7 54.4
RoE (%) 17.1 17.7 19.1 20.4 20.6
PE (x)* 29.7 18.1 14.3 12.1 10.4
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Expos Continue to Improve
Expos excel, capex plans on track: Garment expo
business thrives as volumes increased by 15.36% (Rs. 44.5
Mn vs Rs. 37.6 Mn) and the realization by ~6% (Rs. 137.75 vs
Rs. 129.78 in H1FY19). Expos contribution has increased to ~ 43% of consol.
Revenues as of H1FY19 vs ~40% in previous scals as more of the yarn and
fabric is now being consumed internally for the garment manufacture. With
private consumption (domestic) on the rise, improvement in realization for
both - yarn & fabric division and garment, we revise our revenues estimates for
FY19E and FY20E upwards by ~9% and 10% and PAT by 2.4% for FY19E and 6%
for FY20E. We revise our rating upward to ‘BUY’, with a Target price of Rs. 716.
Garment division gets fuher boost: KPR is also on track to begin
manufacture at its new plant in Ethiopia (capacity of 10 mn units) by Q4FY19.
The plant will provide impo duty benets between 10% and 18% and fuher
improve competitiveness. The company in principle has an agreement for
the manufacture of garments with 2 clients from this unit and is positive
of ramping up seed capacity in 6 months. Currently, the expo order book
stands at Rs. 6,000 Mn for the garment business. The depreciation of rupee
has provided levy for the company to improve boomline and also pass on
the benets to its clients.
Coon price outlook: Coon prices are higher on YoY basis on the
back of rise in MSP (by 28% and 26% for medium and long staple coon)
and increased impo by China. India already garners about 25%
coon sales to China and with continued tari war scenario between
China and the US is expected to fuher increase the expo percentage
to China. Coon prices are expected to stabilize at ~Rs. 45,000 to
Rs. 46,000 per quintal (vs ~Rs. 40,000 per quintal in the same period last year).
Valuation and Risks: Owing to good numbers in the last few quaers and
expectations of steady peormance in FY19E and FY20E, valuations have
remained fairly stable despite the overall correction within the sector and
markets in general. Major trigger for the stock will increase garment revenue
in the overall mix and improvement in margins on the back of commencement
of Ethiopia plant. We value the stock at 13.2x (5 year average 1yr forward P/E)
on FY20E EPS of Rs. 54.4. Key risks to the call are higher than expected coon
prices due to global factors and lower growth from US market.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 565
Target Price
716
Upside(%)
27
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 41.0 / 0.6
52-wk High/Low (Rs.) 850 / 552
3M Avg.daily value (Rs. Mn) 15.1
Beta (x) 1.0
Sensex/Niy 36077 / 10860
O/S Shares(mn) 72.6
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 75.0
FIIs 1.7
DIIs 14.1
Others 9.2
Relative Performance*
Source: Bloomberg
Stock Performance (%)
1M 3M 6M 12M
Absolute (5) (7) (11) (28)
Relative to Sensex (6) (6) (14) (32)
Source: Bloomberg; *Index 100
70
80
90
100
110
120
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
KPR
Sensex
KARVY VALUEINVEST REPORT 2019
9
Company Background
KPR Mill Ltd. is an apparel manufacturing company engaged in the production of yarn, knied fabric
and readymade garments. It has one of the largest veically integrated manufacturing capacities in
India, enabling the company to utilize and customize the products as per client specications. Building
on its maiden business in 1984, the company currently has 0.35 Mn spindles to produce 90,000 MT of
yarn per annum, kniing facility to produce 27,000 MT per annum and garmenting facility to produce
95 Mn pieces per annum (one of the largest garment manufacturers in India). The power requirements
are met through the company owned 66 wind mills and through green power through a Co-gen Cum
Sugar Factory with capacity of 30 MW and 5000 Tons Crushed per Day (TCD).
The board, including Chairman Mr. K.P. Ramasamy and Mr. K.P.D. Sigamani, the Managing Director,
have vast experience in the textile industry, which has aided in the company’s evolution into fabric and
garment segments.
KPRMILL: Technical View
The stock is in a secular uptrend making higher highs and higher lows on the monthly cha. The
stock witnessed a strong rally from the lows of 310 levels registered in February 2016 to the highs
of 878 levels registered in June 2017. The stock formed a double top on the daily chas in January
2018 when the stock re-visited levels near the highs that it had registered previously. As far as the
technical setup of the stock is concerned, the stock has re-traced more than 50% since and is
trading near a conuence of suppos. The 200 period exponential moving average on the weekly
cha for the stock is placed around 547 levels and the 50 period exponential moving average on
the monthly cha for the stock is placed around 533 which also coincides with the 61.8% Fibonacci
retracement levels of its previous rally. The stock is currently placed below all the major moving
averages on the daily cha which indicates that the stock may see weakness in the near term.
Hence investors with medium to long-term time horizon can sta accumulating the stock on dips
towards the immediate suppo zone of 533-547 levels and may hold with a stop loss placed below
its swing suppo placed around 450 levels for the potential upside of 690-700 levels, breaching
which the stock might surge fuher towards 830-850 levels.
KARVY VALUEINVEST REPORT 2019
10
Bloomberg Code: MEN IN
MENON BEARINGS LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 1109 1228 1449 1609 1964
EBITDA 286 324 364 425 512
EBITDA Margin (%) 25.7 26.4 25.1 26.4 26.1
Adj. Net Prot 149 191 211 246 280
EPS (Rs.) 3.2 3.4 3.8 4.4 5.0
RoE (%) 28.7 29.8 27.3 26.4 24.8
PE (x)* 15.5 21.4 26.1 17.9 15.7
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Expansion Plans & Value Unlock in Aluminum Division
Strong revenue growth, healthy prot margins: Menon enjoys a marquee
list of clientele like TATA, VOLVO, Mahindra & Piaggio and state of the a
manufacturing facilities. Menon undeakes designing, testing, validation
& manufacturing of bearings, bushes & thrust washers for a wide range of
applications. We expect the investments made by the rm in new facilities
will sta paying o by FY20E. In view of the order book position, customer
demand, we expect revenue CAGR of 16.5% during FY18-20E. We also expect
EBITDA margins to stabilize around ~26% by FY20E.
Capacity enhancements: Menon has invested Rs. 400 Mn for enhancement
of aluminum division and the facility is expected to be ready by FY20E to
cater to increased customer demand. With enhanced capacities, Menon is in
good place to de-risk its product mix. Considering the strong clientele & new
contracts, we are of the positive view about Menon’s focus on increasing
the aluminum share from the current levels of ~30%. We also expect the
segment to witness a faster growth ahead.
Financial position: Net debt/ equity of 0.1x in FY18, net working capital/ sales
at less than 25% and cash per share of Rs. 3.3 indicate its balance sheet
strength to remain debt free while maintaining operational superiority. The
company is expected to meet its capex through internal accruals & debt.
Historically, Menon Bearings has been recording a healthy protability &
return ratios; we expect the trend to continue in future with RoE reaching
24.0% & RoCE of 32.5% levels by FY20E.
Valuation and Risks: At CMP of Rs. 79, MBL is trading at 15.7x to FY20E
EPS. In view of the capacity enhancements, product mix de-risking and
healthy protability margins coupled with superior return ratios, we ascribe
a multiple of 24.0x to FY20E EPS (5 year average of one year forward PE)
and recommend a “BUY” rating for a target price of Rs. 120 representing
an upside of 52%. We believe that on account of high return on capital at
33.6% over the last 3 years, the company has potential to be re-rated. Threat
of counteeit products which mainly cater to aermarket segment (10% of
Menon revenues) along with slowdown in industrial & automotive segments
especially tractor & CV sales may pose risk to the call.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 79
Target Price
120
Upside(%)
52
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 4.4 / 0.1
52-wk High/Low (Rs.) 127 / 70
3M Avg.daily value (Rs. Mn) 2.5
Beta (x) 1.1
Sensex/Niy 36077 / 10860
O/S Shares(mn) 56.0
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 70.9
FIIs 0.1
DIIs 1.2
Others 27.7
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 4 (5) (9) (18)
Relative to Sensex 3 (4) (12) (23)
Source: Bloomberg
70
80
90
100
110
120
130
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
MEN
Sensex
KARVY VALUEINVEST REPORT 2019
11
Company Background
Incorporated in 1991 & headquaered at MIDC in Kolhapur, Maharashtra, the company is engaged
in manufacturing automobile components like bushes, bearings, thrust washers, aluminum die cast
and bimetal strips. These products are customized according to the clients’ requirements in various
specications. Dierent varieties of bearings supplied by the company include anged bearings,
tri-metal bearings, copper-bronze & aluminum-tin bearings for crankshas. The products nd
applications in light & heavy commercial vehicles, passenger vehicles, compressors, combustion
engines and electrical appliances such as refrigerators and air conditioners. The company caters to
OEMs, replacement market and the expo market. Its products are expoed to countries across the
globe such as USA, UK and Middle East.
MENONBE: Technical View
MENONBE has rallied from 19.93 levels in March 2015 to 125.77 levels in January 2018 and corrected
from there to 70.10 levels, which is around 50% Fibonacci retracement level of the said rally and
bounced back to sele above 38.2% Fibonacci retracement levels of the rally indicating the end
of the correction. The stock was in consolidation mode for very long time followed by a strong
breakout with huge jump in volume indicating a fresh leg of rally from these. Adding to it, the
Parabolic SAR and Heiken candlesticks are signaling positive trend on the daily chas as well as
weekly chas reecting the stock is well placed to move higher in the coming days. 14 periods RSI
is trading at 56.17 above the 9 period averages trading at 44.20 on weekly cha indicating positive
momentum. The stock is trading well above all of its major moving averages on daily as well as
weekly chas indicating strong positive momentum in the counter for all major time frames. On
Bollinger band, weekly cha stock has tested the mean and staed to move towards upper bands
indicating positive momentum. At the current levels, investors with a medium-term horizon can
sta accumulating the stock in bits and pas with a provision to add more on dips towards 80
levels and may hold with a stop loss placed below Rs. 70 on a closing basis for potential upside
technical targets of Rs. 118-120 in the next few quaers.
KARVY VALUEINVEST REPORT 2019
12
Bloomberg Code: RLXF IN
RELAXO FOOTWEARS LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 15000 17332 16520 19644 22984
EBITDA 2006 2399 2309 3021 3482
EBITDA Margin (%) 13.4 13.8 14.0 15.4 15.1
Adj. Net Prot 1031 1160 1200 1611 1947
EPS (Rs.) 8.6 9.7 10.0 13.4 16.2
RoE (%) 31.7 27.4 22.1 23.6 23.1
PE (x)* 37.7 37.7 49.8 48.6 45.3
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Relaxo Continues to Push Forward
Footwear segment has seen various listed players take up dominant share
in the organized space. While Bata and Mirza have focused on value-added
(non-leather) products in recent years and have increased their eos to
penetrate into the domestic market, the competitive nature of the industry
(largely unorganized and smaller players) has limited the pace of growth.
Relaxo – which focuses on providing higher quality than unorganised players
at very competitive prices in the low price region, have managed to widen
their reach and improve volumes (Relaxo’s volumes have improved 8%, over
FY15-18) , suppoed by rural India (for its low priced products) and has also
gained acceptance in urban India in the “home wear category”.
Growth story expected to maintain pace: In the listed space, Relaxo has been
a consistent peormer in the last 5 years. Revenue has grown at 14% and an
improvement of operating margins by 458 bps has led to 29% CAGR growth
in PAT over the same period. With best in class return ratios (average RoE
of 26.2% and RoCE of 32.6% in the last 5 years) and backed by improving
realization and growing customer base, we expect top and boomline to
grow by 16.3% and 21.1% CAGR over FY18-21E.
Focusing on brand building: Channel sales continue to drive major sales growth
for Relaxo. The company is also investing heavily towards brand building.
Since 2012, the company has focused more on celebrity endorsements and
increasing its retail presence. Currently, Relaxo has 311 retail outlets and
spends about 4.5% of its revenues on adveisements, which is higher than
its peers in the listed space. Higher value products such as Sparx are believed
to constitute in the range of 10% to the total volumes and the company is
looking to signicantly improve the revenue mix in the coming scals.
Valuation and Risks: Consistent peormance has led to improvements in
valuations by 4x over the past 5 scals. It currently trades at 2 year forward
P/E of 31x. We believe the company warrants premium valuation, given
the continued high growth prospects and the brand building eos being
undeaken. We value the stock at 38x (a premium to its 5 year average 2 year
fwd P/E of 30x), on FY21E EPS of 24 and arrive at a target price of Rs. 911. Key
risks to the call are diculties in penetrating into the online category, and
intensied competition from unorganized players.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 732
Target Price
911
Upside(%)
24
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 88.1 / 1.3
52-wk High/Low (Rs.) 874 / 550
3M Avg.daily value (Rs. Mn) 21.7
Beta (x) 0.8
Sensex/Niy 36077 / 10860
O/S Shares(mn) 120.4
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 74.3
FIIs 3.9
DIIs 2.2
Others 19.6
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute (4) 0 6 7
Relative to Sensex (5) 0 3 0
Source: Bloomberg
80
90
100
110
120
130
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
RLXF
Sensex
KARVY VALUEINVEST REPORT 2019
13
Company Background
Incorporated in 1984, Relaxo Footwears Ltd. is the largest footwear manufacturer in India, engaged in
the manufacture and trading of footwear and related products. It staed o with the manufacture of
Hawaii slippers and subsequently diversied into manufacturing casuals, joggers, school and leather
shoes. Relaxo has the capacity to manufacture over 100 million pairs, per annum. Relaxo’s capacity to
manufacture 300,000 pairs of Hawaii slippers per day is the highest in the footwear industry.
The pofolio of the company includes 5 brands (Relaxo, Flite, Sparx, Bahamas and Schoolmate) and
sells its products mainly through 50,000 retailers, and also has 311 retail outlets to improve brand
visibility. It sold a total of 157 million pairs in FY18, and is estimated to have a market share in the range
of 5% to 6%. Nearly 90% of the revenue is aained from the domestic market.
RELAXO: Technical View
The stock is in a secular uptrend making higher highs and higher lows on the weekly cha. The
stock is placed above all the moving averages on the monthly cha which suggests large scale
accumulation in the counter. The stock has gained nearly 8.50% this calendar year aer gaining
more than 68% in the previous calendar year which indicates that the stock is sustaining at higher
levels aer a strong rally suggesting that it is one of the preferred picks in the footwear segment
for Medium to Long term investors. As far as the technical setup of the stock is concerned, the
stock is trading near a conuence of suppos. The 200 DEMA for the stock is placed around 725
levels and the 50 period exponential moving average on the weekly cha for the stock is placed
around 713. On the momentum oscillator front, the 14 period RSI is placed below the 9 period signal
line on the daily as well as monthly chas which suggests weakness in the stock in the near term.
Hence investors with medium to long-term time horizon can sta accumulating the stock on dips
towards its 50 period exponential moving average on the weekly cha which also coincides with
the swing suppo near 710-715 levels with a provision of adding more on dips towards its 21 period
exponential moving average on the monthly cha placed around 650-655 levels and may hold
with a stop loss placed below its swing suppo placed around 590 levels for the potential upside
of 860-865 levels.
KARVY VALUEINVEST REPORT 2019
14
Bloomberg Code: SRIN IN
SUNTECK REALTY LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 2434 9522 8883 9418 14825
EBITDA 239 3481 3720 3876 5655
EBITDA Margin (%) 9.8 36.6 41.9 41.1 38.1
Adj. Net Prot 206 2202 2233 2450 3777
EPS (Rs.) 1.4 15.0 15.3 16.7 25.8
RoE (%) 1.3 12.3 8.5 8.6 11.8
PE (x)* 8.4 22.3 25.4 21.3 13.8
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Expanding Product Pofolio; Strong Pre-sales
Sunteck Realty Ltd (SRL) is engaged in the business of developing, designing
and managing high-end and premium residential and commercial propeies
predominantly in the Mumbai Metropolitan Region (the “MMR”). In the last
decade, the company has developed a project pofolio of ~30 mn sq
spread over 25 projects, with ~12 msf to be completed by FY23. SRL has a
strong cash ow visibility on back of strong project pofolio in MMR.
Bandra Kurla Complex (BKC) and Oshiwara District Center (ODC) – core
assets of the company: The company has carved a niche for itself in the
ultra-luxury and luxury segment by dierentiating itself in each micro-
market through brand positioning with a dierent product oering. While
the projects in BKC are residential projects catering to ultimate luxury and
premium customers, ODC project will be a mixed-use development project
with residential, commercial and retail space. A signicant amount of
operating cash ow - Rs. 31 bn - is expected to be realized from these two
projects over a period of 3-4 years.
Consolidated revenue to grow at CAGR 29% over FY18-FY20E: Since last few
quaers, the company has experienced healthy growth in pre-sales and it
delivered ~100% YoY growth in presales in H1FY19 (Rs. 6027 mn pre-sales in
H1FY19 as compared to Rs. 2976 mn in H1FY18) due to overwhelming response
to rst phase of Naigaon project. Going forward, we expect SRL to sustain
its current growth momentum and have forecasted a consolidated revenue
CAGR of 29% over FY18-20E period (Revenue in FY20E).
Forayed into mid-income level segment: The company has launched its
aordable housing project on 100 acres land parcel at Naigaon, Mumbai.
We believe that the government’s push for aordable housing coupled with
conservative pricing by the company will drive the sales. The company has
already sold ~2000 units woh more than Rs. 600 cr (out of 2476 units)
during the launch of the project in September.
Valuation: We have valued SRL using the NAV method, wherein we have
calculated the value of ongoing projects and unsold inventories from
completed projects. We have assumed a cap rate of 8% for rental assets and
a discount rate of 13% for residential projects. We estimate a target price of
Rs. 497/share (post-tax) on FY20E basis.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 348
Target Price
497
Upside(%)
43
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 50.9 / 0.7
52-wk High/Low (Rs.) 527 / 296
3M Avg.daily value (Rs. Mn) 93.2
Beta (x) 1.0
Sensex/Niy 36077 / 10860
O/S Shares(mn) 146.3
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 66.8
FIIs 24.5
DIIs 3.4
Others 5.4
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 0 (13) (4) (17)
Relative to Sensex (1) (13) (7) (22)
Source: Bloomberg
70
80
90
100
110
120
130
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
SRIN
Sensex
KARVY VALUEINVEST REPORT 2019
15
Company Background
SRL is one of the leading real estate development companies of the country with a focus on city-centric
developments well spread-out across Mumbai Metropolitan Region (MMR). The company’s business
focuses on designing, developing and managing premium residential and commercial propeies.
The company has carved a niche for itself in the ultra-luxury and luxury segment by dierentiating itself
in each micro-market through brand positioning with dierent product oering, brand panerships
and having dierent reputed channel paners for each product.
SRL staed the residential development business with its iconic project “Signature Island” in BKC
(Bandra Kurla Complex), Mumbai. The company chose BKC to sta its residential foray at a time when
other industry players were focused on making commercial footprints in the area. Post the successful
launch of Signature Island, the company launched two more projects viz. “Signia Isles” & “Signia Pearl”
in BKC.
SUNTECK: Technical View
SUNTECK witnessed a strong up move from the lower levels of 225 towards 500 plus level within a
sho time frame of around 16 months. The stock is trading around the major moving averages and
is trading near the major suppo area of 320-340 levels and formed a good base around the same
from past few weeks. The stock has been in the sideways consolidation mode from past few weeks
and witnessed reasonable volumes indicating strong hands have staed accumulating the stock at
current levels aer the recent correction. At the current juncture, the stock is looking bullish and
is poised to surge higher towards 400 plus levels with 14 day RSI trading comfoably around 45-
50 levels suggesting positivity in the counter. On the shoer time frame, the stock will enter into
denite bullish trajectory once the price breached its immediate resistance level of 370 followed
by 380 level. On the ip side, the next best suppo for the counter is placed around 315-320 which
may be utilized as a good accumulating oppounity for the long-term period. On the overall front,
we expect the stock to gradually move nohwards in the next few month and may continue to
trade with positive bias. Long-term investors may buy the stock at current levels and accumulate
more if the stock dips towards the suppo zones.
KARVY VALUEINVEST REPORT 2019
16
Bloomberg Code: TAKE IN
TAKE SOLUTIONS LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 10301 13446 15872 19364 23625
EBITDA 2133 2622 3065 3885 4819
EBITDA Margin (%) 20.7 19.5 19.3 20.1 20.4
Adj. Net Prot 1197 1462 1599 2225 2890
EPS (Rs.) 9.9 11.2 12.2 15.3 19.8
RoE (%) 20.6 18.9 14.3 15.4 16.9
PE (x)* 14.3 11.3 12.1 9.7 7.5
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Looks Aractive with Improving Fundamentals
Clinical business to be the growth driver: Take Solutions (TAKE) has been
focusing on Clinical business as total R&D spends is expected to reach
$181 bn by 2022 growing annually at 2.4%. To take advantage of this and to
improve margins, TAKE is leveraging use of technology. It is in the process of
developing OneClinical into plaorm-as-a-service by adding components of
clinical trial business process as pa of its digital transformation. It is fuher
revamping the entire suite of OneClinical plaorm by adding features like
use of mathematical models to suppo site selection, initiation, patient
screening and enrolment modules. It is enhancing the Repoing Module of
OneClinical to facilitate ease of understanding.
Suppo generics rms to gain rst-to-market advantage: TAKE has end-to-
end bioavailability and bio-equivalence services to fast track client’s rst-
to-market strategy. TAKE has thus been helping generics rms with their
state-of-the a facilities in Manipal, Mangalore, Bengaluru and Chennai. The
bio-analytical labs set up at Manipal and Bengaluru are regulatory compliant.
It enables to develop and validate new methods in 4 weeks. Company has a
huge database of volunteers including of 23000 males and 1000 females.
Revenue visibility boosts condence: During Q2FY19 TAKE repoed revenue
growth of 39% which is highest in past 6 quaers. We expect TAKE to
continue to repo higher growth rates going forward and reach historical
levels of ~40% due to strong order book. During end Q2FY19, TAKE’s order
book stood at $228 mn with revenue visibility of 2x-3x of this order book in
the future. While the management has guided for organic growth of 23-24%
in USD terms, we believe it has upside risks due to inorganic component.
Moreover, continuous decline in its conversion rate of order book (45% in
Q1FY17, 39% for Q1 FY18 and 37% in Q1 FY19) implies increasing propoion of
high value-added oerings and increasing mix of long-term deals providing
growth visibility for longer period.
Valuation and Risks: While we remain optimistic about TAKE’s future
prospects, recent correction gives a good entry oppounity with a target
price of Rs. 226, based on FY20E EPS of Rs 19.8 and 3 –year historical average
PE of 11.4x. We think regulatory risks and low RoE are key risks to our price
target.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 148
Target Price
226
Upside(%)
53
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 21.9 / 0.3
52-wk High/Low (Rs.) 307 / 127
3M Avg.daily value (Rs. Mn) 44.8
Beta (x) 0.7
Sensex/Niy 36077 / 10860
O/S Shares(mn) 147.9
Face Value (Rs.) 1.0
Shareholding Pattern (%)
Promoters 66.8
FIIs 13.8
DIIs 1.6
Others 17.8
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 10 (3) (35) (8)
Relative to Sensex 9 (3) (37) (14)
Source: Bloomberg
80
110
140
170
200
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul
-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
TAKE
Sensex
KARVY VALUEINVEST REPORT 2019
17
Company Background
Take Solutions (TAKE) delivers domain intensive services in Life Sciences and Supply Chain Management.
In the fast-growing Life Sciences space, TAKE oers clients a unique combination of full-service Clinical,
Regulatory & Safety services, backed by unique technology capabilities. TAKE’s service oerings span
from Clinical trials to regulatory submissions to post-marketing safety, all backed by insights derived
through proprietary industry networks forums. With a team of leading Life Sciences expes, best-in-
class systems and processes, and bespoke, industry-specic technology and analytics, TAKE delivers
successful outcomes for clients. TAKE’s clients include large and small innovator biopharmaceutical
companies as well as generic manufacturers. TAKE’s operations are spread across Noh America, Asia,
Europe and South America, with Americas contributing 81%, followed by APAC with 12% of revenues
and rest contributed by Europe. Within Life Sciences, Clinical contributes 30%, Consulting and Nets,
12% and Regulatory & PV contributing 58%.
TAKE’s Supply Chain business contributes 10% of revenues. In Supply Chain TAKE focuses on high
margin niches, in engineering services, and supply chain collaboration. TAKE’s IP-led approach enables
its clients to automate supply chain processes, track, trace and control and optimize their processes.
TAKE: Technical View
Since Jun’18, TAKE is correcting from the highs at 308 levels and is currently trading close to its
suppo zone around 135-140 levels. We expect the stock to witness a round of consolidation in
the near term before taking the fresh leg of an up move, and medium to a long-term investor may
sta accumulating the stock from current levels and add more on declines towards 135-140 levels
which are a conuence suppo of the counter as the stock has witnessed consolidation at the
mentioned levels in the recent past and nding suppo around that area. On the oscillator front,
the 14 periods RSI is indicating consolidation in the near term and is currently placed around the
oversold region, indicating a pause in the counter. On the weekly cha, the stock is nearing its
upward slope trend line connecting the higher lows since Jul’15 which would act as strong suppo
at 130 levels. Going ahead key suppo is placed around 135 levels followed by 125 levels while
resistance is placed around 180 levels followed by 210 levels. In the current scenario, considering
all the data mentioned above, one may go long in the counter on any dip towards the mentioned
suppo zone.
KARVY VALUEINVEST REPORT 2019
18
Bloomberg Code: PHNX IN
THE PHOENIX MILLS LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 17795 18246 16198 17816 20680
EBITDA 7869 8469 7774 8615 10207
EBITDA Margin (%) 44.2 46.4 48.0 48.4 49.4
Adj. Net Prot 1289 1679 2422 2814 3701
EPS (Rs.) 8.4 11.0 15.8 18.4 24.2
RoE (%) 6.4 7.8 8.5 8.2 9.9
PE (x)* 55.4 34.5 37.4 32.9 25.0
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Doubling Pofolio and Increased Consumption at
Existing Malls
As India’s largest mall owners and operators, the Phoenix Mills Limited (PML)
is evolving into a trusted proxy for the consumption trends of India’s urban
middle class. India’s retail infrastructure has come a long way and PML is at
the forefront of creating fully integrated recreational centers on a pan India
basis. The company operates 8 malls, close to 6 Mn sq. in total, across 6
Tier-1 cities in India.
Higher Occupancy levels across Malls: According to a JLL repo, Occupancy
level in malls across India is hovering around 85%. PML has been consistently
able to maintain occupancy level for all its stabilized malls at more than 90%
compared to industry standards of 85%. With higher occupancy level, PML
has achieved rental CAGR of 11% over FY13-18. MarketCity Malls at Pune
and Bangalore have achieved a higher rental CAGR of 16% over the same
period. The growth in rentals can also be aributed to PML’s superior mall
management skills of churning, relocating and resizing of retailers on a
continuous basis.
Retail pofolio to double by FY22-23: PML has ~6msf of rentable area
spread across 8 malls in 6 cities. It has panered with Canada Pension Plan
Investment Board (CPPIB) and has acquired 2 land parcels – one each in Pune
and Bengaluru – and an under construction retail asset at Indore. Outside
of the alliance, PML has acquired also an under construction retail asset at
Lucknow and has entered into JV with Bsafal Group to develop a mall in
Ahmedabad. These 5 acquisitions will be operational by FY22-23 and has a
retail development potential of ~4.8 msf.
PAT to grow at 23.6% over FY18-20E: PML’s PAT grew at 17% CAGR over
FY14-18. Over FY18-20E, PAT is expected to grow by 23.6% CAGR driven by
1) Revenue growth with 3 year CAGR of 12.2%. 2) Renewals - Major area in
HSP Mumbai (44%) and MarketCity Pune (36%) is coming up for renewal in
next 2 years 3) Improved realizations at MarketCity Mumbai.
Valuation: We have valued PML using the NAV method, wherein we have
calculated the value of ongoing projects and unsold inventories from
completed projects. We have assumed a cap rate of 8% for rental assets and
a discount rate of 13% for residential projects. We estimate a target price of
Rs. 735/share (post-tax) on FY20E basis.
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 557
Target Price
735
Upside(%)
32
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 85.3 / 1.2
52-wk High/Low (Rs.) 732 / 489
3M Avg.daily value (Rs. Mn) 50.4
Beta (x) 0.6
Sensex/Niy 36077 / 10860
O/S Shares(mn) 153.3
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 62.8
FIIs 27.9
DIIs 4.2
Others 5.1
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute (7) 1 (14) (14)
Relative to Sensex (8) 2 (17) (19)
Source: Bloomberg
70
85
100
115
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
PHNX
Sensex
KARVY VALUEINVEST REPORT 2019
19
Company Background
Phoenix Mills have an operational history of more than 100 years. It staed o as a textile manufacturer
and later on reinvented itself as a retail mall developer. PML specializes in the ownership, management
and development of iconic large format retail led mixed-use propeies that include shopping,
enteainment, commercial, residential and hospitality assets. All the Phoenix malls enjoy the leadership
position in their respective cities.
The company has a 6msf retail pofolio spread across 8 malls. PML has a presence across Mumbai,
Chennai, Bengaluru, Pune, Lucknow and Bareilly.
During FY13-18, consumption at all its malls has grown at a CAGR of 20%. Rental income during the
same period grew at a CAGR of 15%. During FY18, PML completed stake purchases of private equity
paners across the pofolio and has reached majority stake in key assets.
PHOENIXLTD: Technical View
The stock is in an uptrend and making higher highs and higher lows on monthly chas and made
the all-time high of 723.11 levels in May 2018. The stock has seen prot taking from the life-time high
which has dragged the stock to the low of 489 levels which is around 50% of previous rally from
234.70 to 723.11 levels. The stock has found the buying interest around 489 levels and resumed its
up move. The immediate suppo is placed around 510 levels and below that is 465 levels which is
the 200 day EMA moving average on weekly cha. The stock is trading below its all major moving
averages on daily chas suggesting sho-term weakness in the counter. Among the indicators
and the oscillators, the 14 period RSI is pointing southwards on daily cha and weekly cha as well
aer giving negative crossover with signal line. The parabolic SAR is placed above the price on daily
chas as well which indicates weakness in the stock will remain intact in near term. As far as the
long-term moving averages are concerned, the 200 day exponential moving average on weekly
cha is placed around 465 levels and the stock is comfoably trading above it. On the higher side,
resistance is placed around 600 levels followed by 640 levels. Hence we recommend investors
with a longer time horizon to go long in the counter around current levels, average on declines
towards 510 levels.
KARVY VALUEINVEST REPORT 2019
20
Bloomberg Code: VSKI IN
VISAKA INDUSTRIES LTD
Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 10049 9606 10123 10960 12145
EBITDA 952 1172 1502 1578 1804
EBITDA Margin (%) 9.5 12.2 14.8 14.4 14.9
Adj. Net Prot 244 428 666 685 803
EPS (Rs.) 15.4 26.9 41.9 43.1 50.6
RoE (%) 7.0 10.9 14.9 13.7 14.1
PE (x)* 6.9 10.0 15.4 9.9 8.5
Source: Bloomberg, Karvy Research, *Represents multiples for FY16 - FY18 are based on historic market price
Recommendation (Rs.)
CMP (as on Dec 28, 2018) 426
Target Price
750
Upside(%)
76
Stock information
Mkt Cap (Rs.Bn/US$ Bn) 6.8 / 1.0
52-wk High/Low (Rs.) 840 / 360
3M Avg.daily value (Rs. Mn) 18.3
Beta (x) 1.3
Sensex/Niy 36077 / 10860
O/S Shares(mn) 15.9
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 41.5
FIIs 3.9
DIIs 0.6
Others 54.0
Improved Capacities & Volumes, Margins to Expand
Diversied product pofolio & enhanced capacities: Visaka enjoys a strong
position in cement asbestos, V-board and yarn business. It has a market
share of 18% in cement asbestos segment while boards and panels segment
enjoys a market share of 26%.
During FY18-19 Visaka has made capex towards enhancing the capacities in
boards & panels segments. Management is positive about the commencement
of operations from H2FY19 onwards at its new plant in Jhajjar, Haryana. The
facility has a potential of Rs. 650 Mn revenue addition if operated at full
capacities. The facility is expected to improve the protability margins by
75-100 bps due to reduced transpoation costs. Also the management
is expecting its innovative product, ATUM-solar roong product,
commercialization to sta in FY19E and expecting a revenue addition of
Rs. 150 Mn from for FY19E. While we do not account for revenue from the
product, we believe it to be an upside catalyst in near future.
Non-Asbestos revenue contribution, improved protability margins: Current
revenue mix is in favour of asbestos segment with a 68% contribution;
however, management is focusing on bringing a proper balance due to its
improved protability from boards & panels segment. Management is of the
view to bring about equal balance between asbestos & non-asbestos which
will help improve margins in future.
Improvement in working capital: Historically, VIL’s working capital cycle has been
ranging from 100-125 days due to high inventory from asbestos segment due
to its products dynamics. Considering the management’s focus to increase the
non-asbestos revenue (boards & panels), which enjoys higher margins are
expected to have a dual eect in terms of reduced working capital cycle
along with higher protability at the consolidated level. We expect the NWC
to reach 95 days by FY20E.
Valuation and Risks:
In view of the management’s focus on increasing the
non-asbestos revenue, enhanced capacities and anticipated improvement
in working capital cycle along with reduced transpoation costs, we value
the company at 15x (5 year average of one year forward PE) to FY20E EPS
and recommend a “BUY” rating with a target price of Rs. 750 with an upside
potential of 76%. Competition from alternate products along with potential
ban on asbestos products may pose a threat to the call.
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute (3) (4) (12) (33)
Relative to Sensex (4) (3) (14) (37)
Source: Bloomberg
50
70
90
110
130
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug -18
Sep-18
Oct-18
Nov-18
Dec-18
VSKI
Sensex
KARVY VALUEINVEST REPORT 2019
21
Company Background
Hyderabad based Visaka Industries Ltd was founded by Dr. G. Vivekanand in 1981. The company has
two main business veicals i.e., Building Products (including cement asbestos and ber cement boards
like V-Boards and V-Panels) and Synthetic Yarn. The company has 36 depots and more than 6000
dealer outlets pan India to ensure smooth & timely supply of products. The company is the second
largest manufacturer of cement ber roong sheet and is the largest player in V-Board business. It is
the market leader in twin Air Jet technology in the textile synthetic yarn business. The company has 11
manufacturing facilities and 13 marketing oces across India.
VISAKAIND: Technical View
The stock is in consolidation mode since its lifetime high of 838 levels clocked in January 2018
and currently found suppo around 370-390 levels and rallied from there on. The stock is trading
below its 200 - days Simple moving average while is trading above its 200-week simple moving
averages indicating that long-term investors are present at lower levels. We expect the stock to
witness a round of consolidation in the near term before taking the fresh leg of an up move, and
medium to a long-term investor may sta accumulating the stock from current levels and add
more on declines towards Rs. 380-400 zone which is a retracement zone of its current swing low
of 367.20 levels to the high of 448 levels. On the oscillator front, the 14 daily periods RSI is indicating
a pause and is placed near the oversold region, while the weekly cha is trading above the 9 period
EMA indicating a bullish bias in the medium term. Going ahead key suppo is placed around 400
levels followed by 380 levels while resistance is placed around 540 levels followed by 630 levels.
KARVY VALUEINVEST REPORT 2019
22
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The 10 midcap companies in this product in our opinion reects superior businesses with
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The stock peormance will be assessed on an ongoing basis and the composition of
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KARVY VALUEINVEST REPORT 2019
23
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