Академический Документы
Профессиональный Документы
Культура Документы
STRATEGY
September 2015
E IN
A K IA
M IND
Cummins India
AIA Engineering
Bharat Forge
Atul Industries
Bajaj Auto
Aarti Industries
PI Industries
Himatsingka Seide Indo Count Industries
INDIAN
EXPORTER
CONTENTS
Indias top light industrial export plays ...3
Stock-specific sections...31
COMPANIES
Bajaj Auto (SELL).33
Indias top light industrial export plays Exhibit A: The profiled exporters
Auto & Auto Ancillaries
Indias manufactured exports sector (excluding Pharma) has grown at a Bajaj Auto
healthy rate (FY10-15 gross exports CAGR of ~18%) and it possesses BJAUT IN Our stance: SELL
formidable competitive advantages not just around cost but also around Mcap (US$ bn): 9.6 ADV - 6m (US$ mn): 14.9
access to engineering talent. In particular, in light industrial manufacturing Bharat Forge
sectors like Auto & Auto Ancillaries, Castings, Chemicals and Textiles India BHFC IN Our stance: NR
seems to have a handful of relatively well-established companies with Mcap (US$ bn): 3.6 ADV - 6m (US$ mn): 20.2
substantial export franchises. In this thematic, we identify 13 promising Balkrishna Industries
manufactured export plays from these four sectors. BIL IN Our stance: SELL
The core thesis for Indias manufactured exports remains the same Mcap (US$ bn): 1 ADV - 6m (US$ mn): 1.3
Sundaram Fasteners
Over the past three years, even as Indias overall export growth has sagged (FY14
SF IN Our stance: NR
growth: 4.7%; FY15 growth: -1.5%) we have published three thematics on
Mcap (US$ bn): 0.5 ADV - 6m (US$ mn): 0.2
manufactured export plays the first on 12 July 2012 (click here), the second on 30
July 2013 (click here) and the third on 30 September, 2014 (click here). Our central Light Engineering
arguments in favour of Indias manufactured goods exporters remain what it was in Cummins India
these thematics, namely: KKC IN Our stance: SELL
Mcap (US$ bn): 4.4 ADV - 6m (US$ mn): 3.7
Over the past eight years, not only has the INR depreciated by over 91% AIA Engineering
against the renminbi, it has also depreciated by 59% against the USD. None of AIAE IN Our stance: SELL
the other Asian currencies has depreciated to such an extent against these two Mcap (US$ bn): 1.3 ADV - 6m (US$ mn): 1.7
currencies, implying that entire swathes of Indian exporters have received a Chemicals
major competition booster (see pages 7-10). PI Industries
Whilst Chinas manufactured exports continue to be 10x the size of Indias, PI IN Our stance: BUY
China is losing its competitiveness due to high wage inflation (in excess of Mcap (US$ bn): 1.4 ADV - 6m (US$ mn): 2.3
20%) and due to rising environmental compliance costs. As a result, Indias Atul Industries
exports growth has exceeded that of Chinas for the past five years. The space ATLP IN Our stance: NR
vacated by China will be distributed amongst various nations, depending on each
Mcap (US$ bn): 0.6 ADV - 6m (US$ mn): 0.8
countrys competitive advantage (see page 12).
Aarti Industries
Indias high cost of capital and weak physical infrastructure make it near ARTO IN Our stance: NR
impossible for, both, heavy engineering companies and labour-intensive Mcap (US$ bn): 0.5 ADV - 6m (US$ mn): 0.7
companies to succeed abroad (the high cost of capital kills the competitiveness of
Textiles
both types of plays). However, India has a natural advantage in the
Indo Count Industries
knowledge-intensive, medium-technology, light industrial plays given the
ICNT IN Our stance: NR
availability of skilled engineers and given the low capital requirements of such
Mcap (US$ bn): 0.5 ADV - 6m (US$ mn): 0.9
companies (see pages 13-16). Note: Indias FY10-15 exports CAGR in light
Kitex Garments
industrial manufacturing sectors such as auto, agrochemicals and castings is
KTG IN Our stance: NR
startlingly strong at 24%, 19% and 29% respectively. Further, capital goods and
Mcap (US$ bn): 0.5 ADV - 6m (US$ mn): 3
textiles (that were net importers in FY10) too have seen robust growth in exports
Vardhman Textiles
over the last five years. As a result, the stocks profiled in all three of our exports
VTEX IN Our stance: NR
thematics have fared remarkably well (see pg 31).
Mcap (US$ bn): 0.8 ADV - 6m (US$ mn): 0.9
13 promising plays on manufactured exports Himatsingka Seide
Auto & Auto Ancillaries: Our export plays are Bajaj Auto, the poster boy of India HSS IN Our stance: NR
manufactured exports; Bharat Forge, the global leader in forgings; Balkrishna Mcap (US$ bn): 0.3 ADV - 6m (US$ mn): 2.2
Industries, Indias largest tyre exporter; and Sundaram Fasteners, the leading Source: Bloomberg, Ambit Capital research. NR
player in its sector. stands for Not Rated.
Light Engineering: We focus here on two companies which have built meaningful
export franchises Cummins India, the Indian subsidiary of the dominant American Analyst Details
genset manufacturer; and AIA Engineering, the #2 player globally in high-chrome
Saurabh Mukherjea, CFA
grinding media.
+91 22 3043 3174
Chemicals: We highlight the two most appealing export plays in Specialty Chemicals saurabhmukherjea@ambitcapital.com
PI Industries, the best-positioned listed company in agrochemicals; Aarti
Nitin Bhasin
Industries, one of the leading suppliers of Specialty Chemicals to global
+91 22 3043 3241
manufacturers, and Atul Industries which is at a potent confluence of manufacturing
nitinbhasin@ambitcapital.com
capabilities alongside strong process chemistry knowledge
Textiles: Kitex Garments, Himatsingka Seide and Indocount industries are key Sumit Shekhar
export plays have built strong competitive advantages through innovation led product +91 22 3043 3229
sumitshekhar@ambitcapital.com
differentiation in their niche categories as also is Vardhman Textiles which is one of
the largest yarn manufacturers
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Economy & Strategy
Exhibit 1: Indias merchandise exports are less than a Exhibit 2: Even as a percentage of GDP, Indias
seventh of Chinas merchandise trade is half of that of Koreas
Merchandise trade
Merchandise exports in
80%
(as % of GDP)
2,000
60%
(in US$ bn)
1,500
CY14
40%
1,000 20%
684
573
0%
500 317
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-
China Japan Korea India Korea India
Source: CEIC, Ambit Capital research Source: CEIC, Ambit Capital research
Exhibit 3: Manufactured exports share in total exports in Exhibit 4: Indias exports franchise currently is far more
India remains low developed than Koreas was when it had similar per capita
income levels
1070.4
(as % of total in CY14
1200
90% 88%
86% 1000
85% 800
600
80% 270
400
75% 200 0.5
70% 0
64% India (2010-14) Korea (1966-70)
65%
Avg per capita income (at constant prices, in USD)
60%
China Japan Korea India Avg exports (in USD bn)
Source: CEIC, Ambit Capital research Source: CEIC, Ambit Capital research
The Japanese economist, Kaname Akamatsu postulated the flying geese paradigm
The Japanese economist,
(FGP) to explain patterns of exports growth in Asian economies. The paradigm
Kaname Akamatsu postulated the
postulated that Asian nations align themselves like wild geese flying in a V-shaped
flying geese paradigm (FGP) to
pattern, where the production of complex goods as well as the sheer quantum of
explain patterns of exports
goods exported continuously moves from the more advanced countries (that are closer
growth in Asian economies
to the tip of the V-shaped formation) towards the less advanced ones (that form the
rear guard of the formation).
The FGP emerges as the countries that are able to produce high value-add
manufactured products (such as complex machines and engineering goods) at the
most competitive cost are more likely to have a leadership position in the FGP. On the
other hand, countries that are able to produce low value-add manufactured products
(such as say steel parts or textiles) typically form the rear guard of the formation.
This theory is useful in building a framework around the beginning of the end of
Chinas leadership position in the global exports market, a trend that began to
emerge from CY07 onwards.
The regional hierarchy in Asia until the late 1980s is shown in the exhibit below.
Exhibit 5: The Asian wild-geese-flying pattern until the late 1980s, with Japan being the lead goose
Source: CEIC, Ambit Capital research. Note: Figures in parenthesis indicate per capita incomes of nations in CY80.
Whilst the leading exporter (i.e. the lead goose) in this pattern was Japan, the second-
tier of nations consisted of the newly industrialising economies, namely South Korea,
Taiwan, Singapore and Hong Kong. After these two files of flying geese were
countries like Indonesia, Thailand, Malaysia and China which formed the rear guard
in the formation (see the exhibit above).
Japan cemented its position aggressively as the lead goose owing to a range of Japan cemented its position
factors including Government support to exports and a constant exchange rate over aggressively as the lead goose
the 1960s. As a result, Japan accounted for a tenth of US imports in value terms in owing to a range of factors
the early 1980s but had begun accounting for nearly a fifth of US imports by the late including Government support to
1980s (see the exhibit below). Whilst other nations also expanded their share in US exports and a constant exchange
imports over this period (i.e. 1980-89), the extent was far lower, as the higher value- rate over the 1960s
add products were exported out of Japan.
Exhibit 6: Japan nearly doubled its share in US merchandise imports over the 1980s
25%
Share in US imports (in %)
20%
20%
15% 13%
10% 8%
4% 5%
4%
5%
0%
1980 1989
Source: CEIC, Ambit Capital research; Note: *The second file of nations includes Korea, Singapore and Hong
Kong (with average per capita income in 1980 of US$4,041). **The third file of nations includes Indonesia,
Thailand, Malaysia and China (with average per capita income in 1980 of US$825).
Whilst Akamatsus FGP had Japan at the tip of the wild-geese-flying pattern until the
late 1980s, data suggests that China (which was initially part of the third file of
nations began growing its exports franchise rapidly over the 1990s and finally
overtook Japan by CY02 (see the exhibit below). Besides the Chinese Governments
pro-exporter polices, the undervaluation of the RMB over the 1990s aided a rapid
transition into a lower-cost export destination (or a range of products with a rising
value-add component).
Exhibit 7: China overtook Japan as the largest exporter to Exhibit 8: The new FGP of the noughties shows that China
the US by CY02 replaced Japan as the lead exporter to the US
25%
Share in US imports
USA
20%
15%
(in %)
10%
China
5%
0%
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Rest of Asia
China Japan
(Includes Japan and India)
China was able to overtake Japan in the FGP mainly because it could lower its cost of China was able to overtake
production. China in turn was able to lower its cost of production mainly because Japan in the FGP mainly because
despite running a balance of payments surplus, China resisted an appreciation of its it could lower its cost of
currency - the RMB was near-constant from the early 1990s onwards until 2007. production; China in turn was
However, as the Chinese Government began to revalue its undervalued currency from able to lower its cost of
CY07 onwards, the RMB appreciated by 16% against the USD over the years that production mainly because it
followed (i.e. over FY08-16 YTD). This in turn acted as a catalyst for the beginning of resisted an appreciation of its
the end of Chinas position as the leading exporter into the West. currency
Besides the adverse dynamic in the currency markets, Chinas cost advantage has also
been eroded over the last few years by an uptick in domestic wage inflation. The
Chinese Government has been pushing up minimum wages to better protect the
rights of labourers. Consequently, Chinas comparative advantage in terms of
affordable labour is being eroded. According to Shaun Rein (the author of The end of
cheap China), 21 of Chinas 31 provinces raised the minimum wage by an average of
21.7% in CY10, and the Sichuan province alone raised it by 44%.
Exhibit 9: The pace at which Chinas share in US imports grew has been diminishing
since CY07 Chinas share in US imports grew
historically has been diminishing
12% since CY07
8%
over specified period
share in US imports
Change in country's
8% 5%
4% 3%
(in %)
0%
0%
0% -1%
-4%
-3%
-8% -5% -5%
China Asia ex. Japan & China Japan
1990s 2000-08 2008-13
Source: Ambit Capital research. Note: Asia ex-Japan & China includes India, Korea, Hong Kong, Singapore,
Indonesia, Thailand and Malaysia
Whilst China continues to be the largest exporter to the US, accounting for 19% of US
imports (as is evident from the exhibit below), the pace at which Chinas share in US
imports grew historically has been diminishing since CY07 (see the first cluster of bars
in the exhibit on the previous page).
Given the large size of Chinas exports to the US, not only is it all but inevitable that
base effects will kick in, history also suggests that once a countrys cost advantage is
eroded, it seldom can re-capture this very quickly. For instance, Japan accounted for
20% of US imports in the late 1980s but once its cost advantage was eroded, its share
in US imports kept shrinking and now it stands at 6%.
This space vacated by China in turn is being captured by Asian nations such as India,
The space vacated by China is
Indonesia, Thailand and Malaysia. In fact, the decline in the share of these nations
being captured by Asian nations
exports to the US came to a complete halt by CY07. As is evident from the exhibit
such as India, Indonesia,
above, Japan too has been reclaiming lost ground of late, as the pace of decline in its
Thailand and Malaysia
share of US imports diminished dramatically post CY07 (refer to the third cluster of
bars in the exhibit above).
An identical trend is evident even in the share of these Asian countries in the total
imports of the European Union (EU) where: (1) the pace at which Chinas share in EU
imports grew previously has been diminishing since CY07, and (2) the pace of the
decline in the share of Asia ex-Chinas exports to the EU has been diminishing (see
the exhibit below).
Exhibit 10: The pace at which Chinas share in the EUs imports grew has been
diminishing since CY07, with other Asian nations including India capturing this share
12%
8%
imports over specified
Change in share in EU
8%
periods (in %)
4%
0%
0%
-1% -1%
-4%
-3% -4%
-8%
China Asia ex. Japan & China Japan
2000-08 2008-12
Source: Ambit Capital research; Note: Asia ex-Japan & China includes India, Korea, Hong Kong,
Singapore, Indonesia, Thailand and Malaysia.
India, in specific, has been increasing its share in US and EU imports since CY07. India, in specific, has been
However, its share in US imports has been rising at an increasing pace whilst its share increasing its share in US and EU
in EU imports has been rising at a diminishing pace (see the exhibits on the next imports since CY07
page).
Exhibit 11: Indias share in US imports rose by 0.6% over Exhibit 12: Indias share in EU imports rose by 0.2% over
2008-13 2008-13
0.6%
0.6%
period (in %)
period (in %)
0.4%
0.4% 0.4%
0.3% 0.2%
0.2%
0.2%
0.0% 0.0%
India India
Source: CEIC, Ambit Capital research Source: CEIC, Ambit Capital research
As highlighted earlier, the Flying Geese Paradigm (FGP) arises because the countries
that are able to produce high value-add manufactured products at the most
competitive costs are more likely to have a leadership position in the FGP.
With China ceding its ground in the formation, each country is occupying this ceded
With China ceding its ground in
space based on its ability to produce specific types of manufactured goods at the most
the formation, each country is
competitive cost. In the subsequent sections, we will explain how Indias light
occupying this ceded space based
industrial goods exporters are likely to be in the best position to benefit from this
on its ability to produce specific
trend.
types of manufactured goods at
Force #2: INRs rapid depreciation against a host of the most competitive cost
competitor currencies
Indias current account balance had swung from positive to negative territory in FY05,
as oil prices jumped by 42% YoY in FY05. Post FY09, Indias current account deficit
(CAD) as a percentage of GDP began exceeding the 2% threshold, as slower global
growth meant that Indias invisibles surplus diminished. The rising demand for gold
imports further exacerbated Indias CAD woes. Indias widening CAD meant that the
INR depreciated by 59% as against the USD over FY08-16 YTD as compared to the
18% appreciation in the INR over FY02-08.
Not only was the extent of the depreciation high by Indias own historical standards,
the extent was greater than that experienced by its Asian peers as well (see the exhibit
below). For instance, whilst the Korean won and Indonesian rupiah depreciated by
20% YoY and 45% YoY over FY08-16 YTD respectively, the Chinese yuan as well as
the Singapore dollar actually appreciated over this period.
Exhibit 13: The INR has depreciated more against the USD compared to its Asian peers
40%
26%
20%
period
(in %)
9%
0%
-1%
-20% -8%
-18%
-40%
RMB/USD SGD/USD THB/USD HKD/USD IDR/USD KRW/USD INR/USD
Exhibit 14: The INR has depreciated by a greater extent against the RMB as compared
to its Asian peers
100%
Change over specified
80% 81%
80%
56%
60%
?(in %)
perios
40%
23% 25%
20% 13%
0%
SGD/RMB THB/RMB HKD/RMB IDR/RMB KRW/RMB INR/RMB
From a practical perspective, the export growth of any country is known to be a A survey of available literature
function of two factors, namely, the strength of foreign demand and the price of the
shows the importance of currency
product in foreign currency terms. However, a survey of available literature shows the
competitiveness in driving export
importance of currency competitiveness in driving export growth in the long run (see growth in the long run
the exhibit below).
Exhibit 15: The importance of currency competitiveness in driving export growth
Title Key relevant findings Authors Year
Exports growth is sensitive to prices with a lag (typically 4-6 months) in two ways: firstly,
What happened to Asian relative to destination countries, and secondly, relative to its competitors. The latter effect Duttagupta and
2000
exports during the crisis? means that the positive effects on export demand of currency depreciation are enhanced if Spilimbergo
the currency of the country under study depreciates by more than its competitors' currency.
Whilst currency competitiveness drives exports growth in the early stages of development of
Export performance and its the export sector, the quality of institutions as well as an increase in capital intensity of
determinants: Supply and manufactured products is critical to propel exports growth in the later stages. The quality of Fugazza 2004
demand constraints internal infrastructure and level of technology involved in production are two other drivers of
exports growth.
Results for all periods indicate that an overvalued real exchange rate is detrimental to export
Determinants of export
performance. Moreover, on average, a 1% real depreciation could increase exports growth UNCTAD 2004
performance
by 6-10% YoY.
Export promotion through
Depreciation encourages exports but more profoundly so when the volatility is low. Fang and Miller 2005
exchange rate policy
India exports: Is the bull run Potential demand, price competitiveness, trade barriers, infrastructure and procedural
Banik 2007
over? bottlenecks affect exports growth.
The exchange rate elasticity of exports is estimated to be greater than 1 in the case of
Are Chinese exports
China. The paper also suggests that if the trade-weighted real renminbi had appreciated at
sensitive to changes in the Ahmed 2009
an annual rate of 10% per quarter since mid-2005, Chinese real exports would have been
exchange rate?
roughly 30% lower today.
Whilst world GDP growth is a more profound determinant of exports' volume growth in the
Indian economy: Selected
short run, real exchange rate movements are the more critical determinants of exports ICRIER 2011
methodological advances
growth in the long run.
Source: Various, Ambit Capital research
In fact some of the leading exporter nations of the world today established their
position in the manufactured goods export market by consciously devaluing their
currencies or by resisting appreciation in the early stages of their export growth story. Throughout the 1960s, the
Japanese yen (JPY) was sustained
Japan was the first large country to apply this formula in the 1960s, and Japan at a constant level of
successfully revved up its exports engine by the 1970s. Throughout the 1960s, the ~361JPY/USD, which in turn led
Japanese yen (JPY) was sustained at a constant level of ~361JPY/USD (see the exhibit to an uptick in exports volume by
below), which in turn led to an uptick in export volume by 4x by the 1970s. 4x by the 1970s
Exhibit 16: Japan held its currency constant over the 1960s and experienced a steep
rise in export growth in the 1970s
400 60
200 30
150 20
100
50 10
0 0
01-1960
03-1961
05-1962
07-1963
09-1964
11-1965
01-1967
03-1968
05-1969
07-1970
09-1971
11-1972
01-1974
03-1975
05-1976
07-1977
09-1978
11-1979
JPY/USD (Left Scale) Export Volume Index (Right Scale)
Source: CEIC, Ambit Capital research
South Korea also adopted the same strategy over the 1960s, whereby its currency
value was kept more or less constant, and thus, it experienced high export growth in
the subsequent decade (see the exhibit below).
Exhibit 17: South Korea also resisted a currency appreciation to support its exports South Korea also adopted the
franchise in its early stages same strategy over the 1960s
350 14 whereby its currency value was
200 8
150 6
100 4
50 2
0 0
01-1964
06-1964
11-1964
04-1965
09-1965
02-1966
07-1966
12-1966
05-1967
10-1967
03-1968
08-1968
01-1969
06-1969
11-1969
04-1970
09-1970
China was the most recent country to replicate this model. China famously resisted an The RMB was near-constant from
appreciation of its currency despite running a balance of payments surplus. The RMB the early 1990s onwards until
was near-constant from the early 1990s onwards until 2007, and China experienced 2007, and China experienced an
an exponential uptick in export growth over the noughties (see the exhibit on the next exponential uptick in export
page). growth over the noughties
Exhibit 18: Chinas exports rose exponentially over the Exhibit 19: Indias manufactured exports have been
noughties following its effort to maintain a near-constant increasing at a faster pace than that of China in most years
currency for more than a decade after CY07
10 800 14
exports divided by India's
8 600 12
China's manufactured
6 10
400
4 8
(in times)
2 200
6
0 0
4
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2
0
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
Source: CEIC, Ambit Capital research Source: CEIC, Ambit Capital research
Exhibit 21: Indias manufactured export growth has exceeded that of Chinas
in five out of the last six years
14
exports divided by India's
China's manufactured
12
10
(in times)
8
6
4
2
0
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Source: CEIC, Ambit Capital research
Exhibit 22: The cost of capital in India is one of the highest Exhibit 23: Indias infrastructure quality too is one of the
relative to other exporters poorest as compared to its peers
12% 4
Quality of infrastructure
10%
(1=low, 5=high)
Lending rates
8%
(in % p.a.)
6% 3
4%
2%
0% 2
India Mexico Korea China India Mexico Korea China
Source: CEIC, Ambit Capital research; Note: Lending rate (in %, p.a.) is Source: CEIC, Ambit Capital research; Note: Quality of infrastructure captures
calculated by averaging the same for the 5-year period spanning CY10-14. the quality of trade and transport-related infrastructure. Data pertains to
Lending rate is defined as the bank rate that usually meets the short- and CY14.
medium-term financing needs of the private sector.
The infrastructural deficiencies mean that Indian exporters have longer working
capital cycles than their competitors in other Asian countries (it takes longer for raw
materials to reach the factory and longer for finished goods to be shipped out). This
coupled with the high cost of working capital (Indian SMEs typically pay 12-13% for
working capital finance) wipes out the buffer created by labour cost savings in
structurally low-margin businesses.
Exhibit 24: Indias rising specialisation in medium- Exhibit 25: Engineering goods exports have been growing at a
technology merchandise goods rapid pace
Despite these important shortcomings, India has developed an edge in the medium-
technology space (see the exhibit above), with companies like Bajaj Auto, Cummins
India and TVS Motors leading the charge. India has a natural advantage in the
knowledge-intensive and medium-technology space given its historical expertise at
reverse engineering and given the abundant availability of skilled engineers. Given Indias rising expertise in
Given Indias rising expertise in the medium-technology space and given its the medium-technology space
deficiencies on infrastructure and capital, India appears likely to enlarge its footing and given its deficiencies on
most decisively in the engineering goods space, which fortunately requires moderate infrastructure and capital, India
amounts of capital, labour and technology. In fact, this theme has already been appears likely to enlarge its
playing out, with Indias engineering goods exports being the second fastest-growing footing most decisively in the
exports category after petroleum products (see the exhibit above). engineering goods space
For a more comprehensive analysis of which sectors in India are best placed to
produce large-scale successful exporters, please turn to Section 2.
Similarly the list (sorted based on FY15 net exports as a percentage of standalone
revenues) have been reproduced in Exhibit 27 below.
Exhibit 27: The top sectors which are net exporters (basis net exports as a percentage of standalone revenues in FY15)#
Net exports as a % of stan.
Net exports
revenues
Capitaline Sector
Rank FY10 FY15 5yr No. of stocks FY10 FY15 5yr change
(ranked by FY15 net exports)
(` mn) (` mn) CAGR in the sector (` mn) (` mn) (bps)
1 IT - Software 480,018 1,194,303 20% 25 53.5 53.7 0.1
2 Castings, Forgings & Fasteners 11,670 42,300 29% 5 24.9 37.0 12.1
3 Pharmaceuticals 118,679 304,969 21% 37 25.0 32.9 7.9
4 Hotels & Restaurants 1,752 9,641 41% 3 6.5 23.3 16.8
5 Readymade Garments/ Apparels 1,897 3,018 10% 2 37.8 17.8 (20.0)
6 Plantation & Plantation Products 7,537 9,305 4% 5 20.5 15.9 (4.6)
Capital Goods-Non Electrical
7 (3,341) 27,382 N/A 15 (1.8) 10.4 12.2
Equipment
8 Sugar (26,762) 16,205 N/A 4 (42.8) 10.1 52.8
9 Tobacco Products 18,951 38,658 15% 3 9.6 9.7 0.1
10 Agro Chemicals 3,686 8,833 19% 6 5.7 6.3 0.6
11 Paper (83) 672 N/A 1 (1.3) 5.9 7.2
12 Automobile 34,753 101,404 24% 12 2.8 4.9 2.1
13 Telecomm Equipment & Infra Services (422) 2,103 N/A 3 (1.3) 2.6 3.9
14 Textiles (5,128) 10,035 N/A 9 (2.6) 2.2 4.8
15 Telecomm-Service (3,676) 8,043 N/A 6 (0.5) 0.7 1.3
16 Non Ferrous Metals (29,005) 3,273 N/A 4 (8.6) 0.6 9.2
Source: Capitaline, Ambit Capital research; Note: Net exports represents revenue earnings in forex minus revenue expenses in forex aggregated across all stocks
in the sector. Net exports as a percentage of revenue indicates an aggregate of net exports across stocks in a sector divided by an aggregate of revenues in that
sector.* The universe is BSE500. ORANGE shading denotes this exhibit has been sorted based on net exports as a % of standalone revenues in FY15. We have
used FY09/14 data for companies where the FY10/15 data was not available.
This point also holds true generally in the auto components space except in the case
of commercial vehicle tyres where imports (mainly from China) account for nearly 25-
30% of the total truck and bus tyre supplies in the Indian replacement market.
Furthermore, the slowdown in the Chinese automotive market and the recent
devaluation of Yuan pose risks of further rise in Chinese truck tyre imports. However,
in the more brand-conscious passenger vehicle and two-wheeler tyres segment,
Chinese imports have not been able to make any significant headway.
Exhibit 29: low ticket-size capital goods companies have strong export franchises
`mn Cummins India Triveni Turbines Elgi Equipments
FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15
Consolidated revenues 45,090 39,767 44,058 6,653 5,154 6,508 11,445 13,504 13,143
Exports 12,193 12,193 17,268 1,746 1,415 2,597 1,396 1,646 1,628
Import of RM*, FG**, Components 5,138 4,779 5,822 298 190 361 685 799 783
% of exports to net sales 27% 31% 39% 26% 27% 40% 12% 12% 12%
% of imports to net sales 11% 12% 13% 4% 4% 6% 6% 6% 6%
Net exports/(imports) as a % of net sales 16% 19% 26% 22% 24% 34% 6% 6% 6%
Source: Bloomberg, Ambit Capital research. Notes: * RM stands for raw materials; ** FG stands for finished goods.
However, the export opportunity is more encouraging for the lighter capital goods
players that sell products with smaller ticket sizes such as Cummins India (KKC IN,
mcap US$4.7bn, SELL), Triveni Turbines (TRIV IN, mcap US$547mn), Elgi The export situation is
Equipments (ELEQ IN, mcap US$315mn), AIA Engineering (AIA IN, mcap encouraging for the lighter
US$1.3bn, BUY), and VA Tech (VATW IN, mcap US$557mn, BUY). All of these firms capital goods players that sell
are well-managed, generate strong operating cash flows, have solid franchises in products with smaller ticket sizes
India and are actively looking to expand their export franchises.
Cummins India (KKC) has, over the past decade, positioned itself smartly as a
manufacturing hub for Cummins Inc with a particular focus on exporting engines to Cummins India has positioned
Africa and Latin America. Over the last five years, KKC invested `3.1bn (21% of FY14 itself as a manufacturing hub for
gross block) in setting up the export SEZ at Phaltan near Pune in Maharashtra. Cummins Inc with a particular
Consequent to this investment, we expect export revenue CAGR of 22% over FY14-16 focus on Africa and Latin America
(vs CAGR of 1% over FY12-14). Hence, we expect the share of exports as a
percentage of revenues to increase from 30% in FY14 to 34% in FY16. We have
profiled the company on page 49.
Section 5: Textiles
Nitin Bhasin, nitinbhasin@ambitcapital.com, +91 22 3043 3241
Indias export opportunity
Indias textile exports have historically been highly susceptible to the
vagaries of cotton prices and currency fluctuations. The availability of cheap
funding (under TUFS) has resulted in overcapacity (yarn/fabric) and high
competitive intensity in this sector. Against this backdrop, we believe that
companies in niche businesses only would be able to maintain their growth
momentum. Kitex Garments, Indo Count and Himatsingka Seide have not
only forayed into niche segments but have also built competitive advantages
by building a strong product-based bargaining/pricing power with their
clients in the developed world; we expect such companies exports to fare
better in light of the INR depreciation but their commodity business such as
yarn and fabric will be adversely affected, as clients can easily switch for
pricing.
Indian textile exports: Raw material advantage
India is the second-largest producer of textiles and garments in the world after China.
India is also the second-largest cotton producer and global leader in jute production.
In terms of exports, it ranks amongst the top-five global players, constantly expanding
its share in world trade. With a traditionally positive trade balance, the textiles sector
accounts for about 10% of India's total exports and contributes around 4% to Indias
GDP and 14% to its industrial production. The strongest competitive feature of the
industry in international markets remains easy access to raw materials at relatively
lower costs. However, the key issue remains overcapacity in yarns, poor fabric
processing capacities and fragmented garment manufacturing capacities.
Export franchise of India: Steady growth but behind potential
Export revenues of India have expanded at ~10% CAGR over 2004-14. Indian textile
exports have flourished in recent years possibly due to lower exports by China on
account of its Textile and Yarn policy and rising labour costs and power shortages in
the India. Historically, India was relegated to the position of a supplier of intermediate
products to other successful garment-exporting countries; now it stands a chance to
recover some market share from China and other nearby nations. However, this will
not be easy, as Bangladesh and Vietnam offer strong cost advantages. Our
discussions with the management teams of various textile exporters reveal the
following:
The unwinding of the Chinese policy (in FY15) has led to lower export throughput
in yarn exports (which is a commodity segment).
Companies in the made-ups and specialised fabric segment are not facing
growth headwinds of such magnitude from the reversal in the Chinese policy as
players in the yarn segment are.
Exhibit 30: Indias textile export revenues (US$ bn)
50 50
43
39 40
40 39 40
33
28
30 26 30
24 23
21
17
20 20
10 10
- -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Ambit Capital research, WTO Database, Texmin database
Indian textile exports highly susceptible to global cotton prices and currency
volatility
As seen in Exhibit 31 below, textile exports flourished during 2008-11 when cotton
prices remained benign. Contrary to that, as cotton prices increased during 2011-12,
the growth rates of Indian textile exports declined to as low as 0% YoY in 2012.
As seen in Exhibit 32 below during the phases of depreciating INR (2006-2007 and
2011-12), export revenues have improved, indicating high susceptibility to currency
fluctuations.
Exhibit 31: Textile exports are highly correlated to lagged Exhibit 32: Export revenues have mirrored currency
cotton prices fluctuations
10% 5%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0% -5%
2006
2007
2008
2009
2010
2011
2012
2013
2014
-10% -15%
Exhibit 33: Highly fragmented home textile export market Exhibit 34: Kitex Third-largest infant-wear manufacturer,
in India with 70% market share in Indias infantwear exports
Trident, Welspun, Others,
4% 10% 15%
Indo
Count, 3%
Himatsing Jay Jay
ka, 5% Mills, 15%
Kitex, 70%
others ,
79%
Source: Ambit Capital research Source: Ambit Capital research
Himatsingka Seide (HSS): The company scores well both on our competitive
advantage framework as well as on our accounting framework. HSS is penalised on
our competitive advantage framework on parameters of: (a) capital intensity and (b)
operating leverage. The company has continually invested in capacity expansion,
hindering free cash flow generation. Also, the under-absorbed overheads curb
operating leverage benefits. HSS has a strong B2B export franchise, with marquee
clients like Bed Bath & Beyond, Cosco and Macys and it is the sole licensee of
prestigious brands like CK and Barbara Barry, which give it some brand recall with
customers looking to buy fashion bedding. Post the planned capacity addition/up-
gradation, the company will be able to manufacture a greater proportion of high-
margin products and also provide greater protection against raw material volatility.
Indo Count (ICNT): The company scores well on our competitive advantage
framework with sustainable moats around: (a) the ability to provide on-the-ground
market research and (b) strong in-house execution capability. The company scores low
on our accounting framework due to weak cash generation and write-back of
accumulated losses (due to which the company had entered CDR). However, over the
last few years, the company has sweat its assets effectively, benefitted from modular
expansions and invested in building client connect from its market research. Going
forward, the company plans to increase its operations in the non-US geographies,
with a view to reduce concentration risks.
Kitex Garments (KGL): The company scores well both on our competitive advantage
framework as well as on our accounting framework. Its presence in a niche category
(infantwear) with high barriers to entry along with efficient capital utilisation results in
an increased bargaining power with customers and benefits of operating leverage.
KGL is the third-largest infant-wear manufacturer globally and has diversified its client
portfolio from a single client in FY09 to five currently. This leads to lower
concentration risk and improved margins. Going forward, KGL intends to improve its
revenue mix in favour of high-margin clients, buy/license a brand for the US market
and become a wholesaler like Gerber.
Vardhman Textiles (VTEX): The company scores poorly on both our accounting and
the competitive advantage framework. We do NOT see sustained competitive
advantage for VTEX which operates in a commodity-like segment with an inability to
pass on FULLY the input cost inflation even though it continues to earn a little
premium for its products. Furthermore, VTEX is highly susceptible to the vagaries of
cotton prices, as global cotton prices impact yarn prices, and to its disadvantage,
Indian cotton prices are determined by the Government. The company receives a
weak score on our accounting framework, with low cash conversion of 59%
(CFO:EBITDA) and low free cash flow generation.
Exhibit 36: Financial Snapshot
CAGR
` Mn FY10 FY11 FY12 FY13 FY14 FY15
(10-15)
Revenue
Arvind Ltd. 32,883 41,266 49,959 54,608 70,306 79,563 19%
Himatsingka Seide Ltd. 10,756 12,327 14,287 16,894 20,313 19,436 13%
Indo Count Industries Ltd. 4,186 7,269 8,072 12,105 14,909 17,242 33%
Kitex Garments Ltd. 2,474 2,561 3,120 3,170 4,427 5,116 16%
Vardhman Textiles Ltd. 33,914 44,922 46,831 50,139 62,080 68,292 15%
Total 84,213 108,344 122,269 136,916 172,035 189,648 18%
CAGR
` Mn FY10 FY11 FY12 FY13 FY14 FY15
(10-15)
Capital Employeed
Arvind Ltd. 34,072 35,959 38,710 44,370 53,004 58,518 11%
Himatsingka Seide Ltd. 13,358 12,675 12,668 13,386 15,497 15,612 3%
Indo Count Industries Ltd. 3,762 4,080 3,909 4,749 6,075 7,010 13%
Kitex Garments Ltd. 1,249 1,820 1,989 2,235 3,083 4,251 28%
Vardhman Textiles Ltd. 42,472 52,086 49,637 56,802 65,048 60,154 7%
Total 94,913 106,621 106,914 121,541 142,708 145,545 9%
` Mn FY10 FY11 FY12 FY13 FY14 FY15 Median
Free Cash Flow
Arvind Ltd. (155) (1,892) (394) (859) (2,584) (3,609) (1,376)
Himatsingka Seide Ltd. (1,929) (191) 522 551 (754) 1,064 165
Indo Count Industries Ltd. (199) 95 (32) (507) 11 598 (11)
Kitex Garments Ltd. 743 (414) 158 74 265 705 211
Vardhman Textiles Ltd. (3,004) (4,295) (4,256) (3,323) 434 10,920 (3,163)
Total (4,544) (6,697) (4,002) (4,065) (2,629) 9,677 (4,033)
CAGR
` Mn FY10 FY11 FY12 FY13 FY14 FY15
(10-15)
EBITDA
Arvind Ltd. 4,773 5,844 7,207 7,680 10,034 11,289 19%
Himatsingka Seide Ltd. 1,085 966 1,490 1,687 2,067 2,234 16%
Indo Count Industries Ltd. 330 723 630 1,201 1,891 3,137 57%
Kitex Garments Ltd. 496 530 657 658 1,102 1,841 30%
Vardhman Textiles Ltd. 7,903 11,275 6,818 10,252 15,593 13,141 11%
Total 14,587 19,338 16,803 21,477 30,686 31,641 17%
% FY10 FY11 FY12 FY13 FY14 FY15 Median
EBITDA margin (%)
Arvind Ltd. 14.5 14.2 14.4 14.1 14.3 14.2 14.2
Himatsingka Seide Ltd. 10.1 7.8 10.4 10.0 10.2 11.5 10.1
Indo Count Industries Ltd. 7.9 9.9 7.8 9.9 12.7 18.2 9.9
Kitex Garments Ltd. 20.0 20.7 21.1 20.8 24.9 36.0 20.9
Vardhman Textiles Ltd. 23.3 25.1 14.6 20.5 25.1 19.2 21.9
Industry Median 14.5 14.2 14.4 14.1 14.3 18.2 14.2
% FY10 FY11 FY12 FY13 FY14 FY15 Median
ROCE (%)
Arvind Ltd. 9.0 11.8 21.6 13.6 15.7 15.5 14.5
Himatsingka Seide Ltd. 4.9 3.1 7.8 9.1 10.3 11.5 8.5
Indo Count Industries Ltd. 0.4 12.3 8.0 19.8 31.3 41.6 16.1
Kitex Garments Ltd. 28.6 30.1 30.9 27.1 37.8 44.4 30.5
Vardhman Textiles Ltd. 13.1 18.3 8.0 13.7 20.1 12.5 13.4
Industry Median 9.0 12.3 8.0 13.7 20.1 15.5 14.5
Source: Ambit Capital research
Exhibit 38: Revenues and margins both have expanded well for both Indian specialty chemical players
CAGR
FY10 FY11 FY12 FY13 FY14 FY15
(FY10-15)
Sales
Aarti Industries Ltd. 13,012 14,530 16,733 20,962 26,325 29,080 17%
Adi Finechem Ltd. 384 574 972 1,231 1,518 1,506 31%
Atul Ltd. 12,137 15,553 17,924 20,429 24,578 26,564 17%
Camlin Fine Sciences Ltd. 1,416 1,717 3,352 3,736 5,087 5,583 32%
Gujarat Fluorochemicals Ltd. (Ex CER) 5,134 8,262 12,419 11,550 11,404 13,209.70 21%
Navin Fluorine (Ex CER) 2,573 3,557 4,728 4,929 4,862 5,915 18%
Omkar Speciality Chemicals Ltd. 681 1,068 1,669 2,117 2,403 2,651 31%
Oriental Carbon & Chemicals Ltd. 1,257 1,590 2,178 2,874 3,308 3,468 23%
SRF Ltd. (Chemicals, Ex CER) 3,982 6,739 7,648 7,721 9,561 12,634 26%
Vinati Organics Ltd. 2,321 3,226 4,475 5,529 6,961 7,717 27%
PI Industries (CSM) 2,065 2,582 3,947 6,352 9,771 11,633 41%
Total 44,962 59,397 76,044 87,430 105,777 119,961 22%
EBITDA
Aarti Industries Ltd. 2,030 1,979 2,493 3,612 4,015 4,657 18%
Adi Finechem Ltd. 25 104 147 174 333 250 59%
Atul Ltd. 1,103 1,708 1,880 2,491 3,637 3,914 29%
Camlin Fine Sciences Ltd. 139 155 290 461 595 842 43%
Gujarat Fluorochemicals Ltd. (Ex CER) -354 1,515 -1,185 2,612 1,892 2,781 nm
Navin Fluorine (Ex CER) -287 375 -14 256 660 722 nm
Omkar Speciality Chemicals Ltd. 128 215 332 402 429 522 32%
Oriental Carbon & Chemicals Ltd. 380 478 557 565 689 682 12%
SRF Ltd. (Chemicals, Ex CER) 600 1,961 2,116 1,527 2,635 4,219 48%
Vinati Organics Ltd. 527 697 950 1,203 1,529 1,918 29%
PI Industries (Overall EBITDA) 871 1,170 1,449 1,826 2,910 3,751 34%
Total 5,163 9,187 7,566 13,303 16,414 24,257 36%
PAT
Aarti Industries Ltd. 685 669 900 1,330 1,521 1,937 23%
Adi Finechem Ltd. -6 51 74 84 187 137 -290%
Atul Ltd. 517 897 950 1,281 2,202 2,262 34%
Camlin Fine Sciences Ltd. 11 74 39 151 287 550 120%
Gujarat Fluorochemicals Ltd. (Ex CER) 91 1,925 -3,497 1,224 3,979 1,870 83%
Navin Fluorine.(Ex CER) -308 188 390 41 547 582 -214%
Omkar Speciality Chemicals Ltd. 52 102 160 206 136 243 36%
Oriental Carbon & Chemicals Ltd. 295 374 315 279 405 453 9%
SRF Ltd. (Chemicals calculated as 70% of EBIDA) 420 1,373 1,481 1,069 1,845 2,953 48%
Vinati Organics Ltd. 400 520 548 687 862 1,158 24%
PI Industries 418 651 814 974 1,912 2,459 43%
Total 2,575 6,823 2,173 7,325 13,882 14,605 42%
Source: Company
2.0 1.6
1.7 1.3
1.2
1.4
1.2 0.9
1.1
0.7
0.4
0.2
FY10 FY11 FY12 FY13 FY14 2014 2015 2016 2017 2018 2019 2020
Source: Industry, Ambit Capital research Source: Industry, Ambit Capital research
Exhibit 41: Global pesticides market Breakup (2000) Exhibit 42: Global pesticides market Breakup (2013)
Off-Patent
Propreitar
Off-Patent y Product,
Generic
Propreitar 26%
Product,
y Product, 33%
37%
Patented
Product, Generic
Patented 22% Product,
Product, 52%
30%
80
70
60
50
40 Rising share of generic pesticide
30 products globally is enhancing
the exports opportunity for
20
domestic agrochemical players
10
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Stock-specific sections
The share price performance on the stocks highlighted in our July 2012, July 2013
and September 2014 thematics is highlighted below.
Exhibit 45: Share price performance from our July 2012 thematic
Company Name Ticker Mcap ADV - 6m Price (in `) as of Performance
$ mn $ mn 11-Jul-12 29-Jul-13
Bajaj Auto BJAUT IN 9,597 14.9 1,512 1,996 32%
Balkrishna Inds. BIL IN 954 1.3 274 218 -21%
Dr. Reddy's DRRD IN 10,197 19.5 1,645 2,218 35%
Glenmark Pharma GNP IN 4,268 20.2 395 587 49%
Cummins KKC IN 4,399 3.7 437 411 -6%
Elgi Equipments ELEQ IN 290 0.1 80 79 -1%
AIA Engineering AIAE IN 1,292 1.7 327 295 -10%
TTK Prestige TTKPT IN 680 1.0 3,299 3,634 10%
Absolute performance 11%
BSE500 Index 6,750 7,110 5%
Relative performance 6%
Source: Bloomberg, Ambit Capital research
Exhibit 46: Share price performance from our July 2013 thematic
Company Name Ticker Mcap ADV - 6m Price (in `) as of Performance
$ mn $ mn 29-Jul-13 29-Sep-14
Bajaj Auto BJAUT IN 9,597 14.9 1,996 2,305 15%
Balkrishna Inds. BIL IN 954 1.3 218 759 248%
Dr. Reddy's DRRD IN 10,197 19.5 2,218 3,208 45%
HCL Tech HCLT IN 19,798 32.0 448 853 90%
eClerx ECLX IN 747 0.7 731 1,390 90%
Cummins KKC IN 4,399 3.7 411 672 63%
Elgi Equipments ELEQ IN 290 0.1 79 125 59%
AIA Engineering AIAE IN 1,292 1.7 295 926 214%
TTK Prestige TTKPT IN 680 1.0 3,634 4,080 12%
Absolute performance 93%
BSE500 Index 7,110 10,162 43%
Relative performance 50%
Source: Bloomberg, Ambit Capital research
Exhibit 47: Share price performance from our September 2014 thematic
Company Name Ticker Mcap ADV - 6m Price as of Performance
$ mn $ mn 29-Sep-14 08-Sep-15
Bajaj Auto BJAUT IN 9,486 14.9 2,305 2,206 -4%
TVS Motors TVSL IN 1,569 7.7 229 221 -3%
Bharat Forge BHFC IN 3,535 20.2 838 1,022 22%
Balkrishna Industries BIL IN 947 1.3 759 656 -14%
WABCO WIL IN 1,841 1.0 3,786 6,454 70%
Cummins India KKC IN 4,399 3.7 672 1,055 57%
AIA Engineering AIAE IN 1,292 1.7 926 911 -2%
TTK Prestige TTKPT IN 680 1.0 4,080 3,886 -5%
VA Tech VATW IN 545 1.5 851 666 -22%
Triveni Turbines TRIV IN 528 0.2 88 106 21%
Elgi Equipments ELEQ IN 290 0.1 125 122 -3%
PI Industries PI IN 1,354 2.3 456 659 45%
Aarti Industries ARTO IN 541 0.7 276 406 47%
16%
BSE500
BSE500 Index 10,162 10,126 0%
Index
Relative performance 16%
Source: Bloomberg, Ambit Capital research
Bajaj Auto has built a strong export franchise (44% of FY15 revenues) Auto & Auto Ancillaries
over the past decade, underpinned by its first mover advantage and
market share gains from Chinese players (particularly in Africa). The Recommendation
long-term opportunity in the export markets remains strong (low Mcap (bn): `634/US$9.5
penetration of 2Ws and further opportunity of market share gains). 3M ADV (mn): `991/US$14.9
However, strong near-term headwinds, such as weak crude oil prices,
CMP: `2,191
pose major risks to Bajajs exports into economies like Nigeria.
TP (12 mths): `2,350
Background Upside (%): 7
Bajaj is the second-largest motorcycle (market share of 17.9%) and the largest
3W (market share of 56%) manufacturer in India. It generated revenues of Flags
`218bn (up 7% YoY) and net earnings of `32.6bn (up 1% YoY) in FY15.
Accounting: GREEN
Current export franchise Predictability: AMBER
Bajaj is the largest exporter of 2Ws and 3Ws from India, with 68% and 71% Earnings Momentum: AMBER
volume share respectively (FY15). The company exports to nearly 62 countries,
with its major export regions being as Africa (particularly Nigeria and Egypt), Asia Catalyst
(particularly Sri Lanka and Bangladesh), the Middle East and Latin America. The
company is a market leader in the 2Ws across 26 countries. Bajaj primarily Weak demand to keep FY16
competes against Chinese and Japanese players in Africa as well as in the rest of domestic motorcycle industry
volumes muted (5% YoY growth)
the world. Exports, having compounded at a strong 24% CAGR over FY10-15,
accounted for almost 44% of Bajajs FY15 revenues. Macro headwinds in key export
geographies to keep near term
Export strategy export volumes muted (11% YoY
Bajaj has a well-thought-out export strategy: (i) tie-up with Kawasaki in markets growth in FY16 vs. 15% in FY16)
dominated by Japanese players (such as the ASEAN and Latin American
markets); (ii) solo presence in markets where it competes with Chinese players on Performance
quality (predominantly African markets); and (iii) KTM bikes in developed nations
120
where the market is shifting from >500cc performance motorcycles to sub-
500cc. Bajaj has decades worth of experience in exports (having already built a 110
substantial export business) and a strong balance sheet (net cash of `83bn or 100
0.8x equity).
90
Overall success of the business
80
Bajaj reported healthy growth in revenues (18% CAGR), EBITDA and net earnings
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
(30% CAGR each) over FY09-14. However, its performance moderated in FY15
(with revenues, EBITDA and net earnings increasing by only 7%, 1% and 1%,
respectively) due to: (1) significant loss in domestic market share; and (2) muted Bajaj Auto Sensex
export growth particularly in 2HFY15 (due to macro headwinds in key export
markets). Whilst the long-term opportunity in the export markets remains strong Source: Bloomberg, Ambit Capital research
(increasing 2W industry penetration mainly in African markets and market share
gain opportunity from Chinese players), strong near-term headwinds, such as
weak crude oil prices, pose major risks to Bajajs sales in key markets such as
Nigeria.
Valuation
Our DCF-based model leads to a valuation of `2,350, implying 15.0x FY17E EPS.
The stock is currently trading at a premium of 9% to Hero MotoCorp on FY17E
P/E.
premium of 6% to Hero MotoCorp on FY17 P/E.
Key financials - standalone
Year to March (` mn) FY13 FY14 FY15E FY16E FY17E Analyst Details
Revenues 202,283 203,531 218,175 247,928 278,539
Ashvin Shetty, CFA
EBITDA 38,690 43,861 44,292 52,051 58,478
+91 22 3043 3285
EBITDA (%) 19.1% 21.6% 20.3% 21.0% 21.0%
ashvinshetty@ambitcapital.com
EPS (`) 99 112 113 131 148
RoE (%) 41% 37% 32% 33% 32% Ritu Modi
RoCE (%) 172% 165% 154% 166% 183% +91 22 3043 3292
P/E (x) 22.2 19.6 19.4 16.8 14.8 ritumodi@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Bajaj Auto
Exhibit 1: Strong revenue growth and EBITDA margin Exhibit 2: RoCE and RoE over the last five years
improvement over the past five years impacted by rising cash on books
220 23% 350% 80%
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 3: Bajaj Autos well-diversified exports franchise Exhibit 4: Rising share of exports in overall revenues
100 46%
90 44%
80 42%
LatAm, 19%
40%
70
38%
Africa, 43% 60
ASEAN, 6% 36%
50
34%
40 32%
South Asia & 30 30%
Middle East,
32% 20 28%
FY10 FY11 FY12 FY13 FY14 FY15
Exhibit 5: On P/E, Bajaj is currently trading in line with its Exhibit 6: On EV/EBITDA, Bajaj is currently trading at a
three-year historical average discount of 8% to the three year average
20 14.5
19
13.5
18
17 12.5
16
11.5
15
14 10.5
13
9.5
12
11 8.5
Apr-12
Jul-12
Apr-13
Jul-13
Apr-14
Jul-14
Apr-15
Apr-12
Jul-12
Apr-13
Jul-13
Apr-14
Jul-14
Apr-15
Oct-12
Jan-13
Oct-13
Jan-14
Oct-14
Jan-15
Oct-12
Jan-13
Oct-13
Jan-14
Oct-14
Jan-15
Bajaj Auto 1-yr fwd P/E Avg P/E Bajaj Auto 1-yr fwd EV/EBITDA Avg EV/EBITDA
Source: Bloomberg, Ambit Capital research. Note: P/E bands arrived at using Source: Bloomberg, Ambit Capital research. Note: EV/EBITDA bands arrived
Bloomberg consensus estimates for the respective periods at using Bloomberg consensus estimates for the respective periods
The growth drivers for Bharat Forges export business are likely to be a Auto and Auto ancillaries
higher focus on the global passenger vehicle forging business and
market share gains in the non-auto space. At the same time, robust Recommendation
demand in the domestic and US/Europe commercial vehicle business
Mcap (bn): `236/US$3.5
augurs well for its automotive revenue growth.
3M ADV (mn): `1,120/US$16.8
Background
CMP: `1,016
Bharat Forge (BF) is a global leader in the forging business, with a presence in
TP (12 mths): NA
auto and industrial applications. BF has ~80% market share in domestic MHCV
crankshafts/front axle beams. In recent years, BF has forayed into the non-auto Upside (%): NA
segment which now accounts for 38% of revenues. BF generated consolidated
revenues of `76.2bn (up 14% YoY) and net earnings of `7.2bn (up 74% YoY) in Flags
FY15. Accounting: AMBER
Current export franchise Predictability: AMBER
Exports from India accounted for 60% of FY15 standalone revenues (36% of Earnings Momentum: AMBER
consolidated revenues and 31% CAGR over FY10-15). In the CV segment, BF
has a strong presence across North America, Europe, South America and Asia Catalysts
Pacific (clients include Daimler, MAN and Volvo). In industrial components, BF
Continuing momentum in exports
supplies forged products to various industries (mainly oil & gas) in Europe and and recovery in domestic MHCV
America. Europe and the US together accounted for nearly 57% of FY15 segment to drive 15% revenue
standalone revenues (vs 45% in FY09). In order to expand its global presence, growth in FY16 (consensus)
BF acquired overseas companies in the US and Europe for local manufacturing. EBITDA margin improvement of
These acquisitions have given BF access to global customers and technologies. 100bps in FY16 driven by strong
Export strategy revenue growth (consensus)
Whilst the company has achieved a sizeable exports share in the CV space, BF
plans to increase its market share and customer base in the global passenger Performance
car forging business (16% of consolidated revenues). The company plans to 180
increase this share on the back of orders from various global OEMs like Ford 160
and Daimler Chrysler. Furthermore, it has identified the non-auto space 140
(aerospace and locomotive), which accounts for 38% of total exports, as the 120
next focus area for its export business. BF plans to utilise its relationships/JVs 100
with global players (Alstom, Areva, etc) to scale up its non-auto business. 80
60
Overall success of the business
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
BF has reported strong financial performance in recent years (FY10-15), with
healthy growth in revenues (18% CAGR) and EBITDA (34% CAGR). The
company has posted strong operating margin improvement over FY10-15 (up Bharat Forge Sensex
888bps) due to rising contribution from the non-auto business, better product
mix (higher share of machined products) and higher exports from India. The Source: Bloomberg, Ambit Capital research
company generates strong CFO (average 102% of EBITDA over FY10-15) and
its balance sheet deleveraging efforts have led to net debt:equity declining
from 0.98x in FY10 to 0.41x in FY15.
Valuation
The stock is currently trading at 19x FY17E consensus net earnings, which is
marginally higher (~10%) than the multiple commanded by the broad Indian
auto component sector. However, its valuation is at a significant discount to
that of larger auto component makers like Bosch (30% discount).
Key financials - consolidated
Year to March FY11 FY12 FY13 FY14 FY15
Analyst Details
Net Sales (` mn) 50,870 62,791 51,665 67,161 76,247
EBITDA (` mn) 7,852 9,964 7,915 10,271 14,408 Ashvin Shetty, CFA
EBITDA (%) 15.4% 15.9% 15.3% 15.3% 18.9% +91 22 3043 3285
EPS (`) 13.1 18.1 11.3 17.8 31.0 ashvinshetty@ambitcapital.com
BPS (`) 84 94 97 115 148 Ritu Modi
RoE (%) 16% 19% 12% 15% 21% +91 22 3043 3292
P/E (x) 77.7 56.3 89.6 57.0 32.8 ritumodi@ambitcapital.com
Source: Company, Bloomberg, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Bharat Forge
Exhibit 1: Strong revenue growth and EBITDA margin over Exhibit 2: RoCE and RoE have been improving driven by
the years improvement in margin
80,000 19.0% 25%
18.0%
70,000 17.0% 20%
16.0% 15%
60,000 15.0%
14.0% 10%
50,000 13.0%
5%
12.0%
40,000 11.0% 0%
10.0%
-5%
30,000 9.0%
FY10 FY11 FY12 FY13 FY14 FY15
FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 3: Growing export revenues and export contribution Exhibit 4: Well diversified geographical spread
through the years (consolidated) (consolidated) across India, Europe and the US
30,000 40%
Asia Pacific,
25,000 35% 2%
10,000 20%
5,000 15%
FY10 FY11 FY12 FY13 FY14 FY15 USA, 25%
Exhibit 5: On P/E, BF is currently trading at a 17% premium Exhibit 6: On EV/EBITDA, BF is currently trading at a 30%
to its five-year historical average premium to its five-year historical average
40 20.0
35 18.0
30 16.0
14.0
25
12.0
20
10.0
15 8.0
10 6.0
5 4.0
- 2.0
Apr-06
Feb-12
Feb-13
Feb-14
Feb-15
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Aug-12
Aug-13
Aug-14
Aug-15
Apr-06
Feb-12
Feb-13
Feb-14
Feb-15
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Aug-12
Aug-13
Aug-14
Aug-15
BHFC 1-yr fwd P/E Avg P/E BHFC 1-yr fwd EV/EBITDA Avg EV/EBITDA
Source: Bloomberg, Ambit Capital research. Note: P/E bands arrived at using Source: Bloomberg, Ambit Capital research. Note: EV/EBITDA bands arrived
Bloomberg consensus estimates for the respective periods at using Bloomberg consensus estimates for the respective periods
Balkrishna Industries (BKT) has built a substantial export business over Auto and Auto ancillaries
the years in the niche area of off-highway tyres (OHT) by successfully
leveraging Indias low cost of manufacturing. Whilst we expect its Recommendation
market share of 4% to grow as the new Bhuj facility provides additional Mcap (bn): `63/US$0.9
capacity for product portfolio expansion, we remain concerned about 3M ADV (mn): `52/US$0.8
the current weak global demand environment for off-highway tyres CMP: `657
and the negative impact of lower Euro realisation on revenues/margin. TP (12 mths): `690
Upside (%): 5
Background
BKT is the leading exporter of off-highway tyres (OHT) like farm,
Flags
industrial/construction and mining tyres from India. It generated revenues of
`40bn (up 13% YoY) and adjusted net earnings of `4.9bn (flat YoY) in FY15. Accounting: AMBER
Predictability: AMBER
Current export franchise Earnings Momentum: AMBER
BKT has built a significant OHT export business, accounting for nearly 90% of
its revenues and recording 21% CAGR over FY10-15. The company primarily Catalysts
caters to Europe (54% of total volumes) and North America (19%). The Weak global demand for OHT to
company has close to 4-5% market share in the global OHT market, with keep volumes muted (Flat YoY in
higher market share in the farm tyre market replacement segment. FY16)
Depreciation in Euro to impact
Export strategy realisation (4% YoY decline) and
After surviving the initial tough years in the 1990s, BKT succeeded in building margin (98bps YoY drop) in FY16
an extensive global OHT business on the back of competitive pricing against
global peers, helped by Indias low cost advantage. With the commissioning of
the new Bhuj plant in October 2015, the companys capacity will increase to Performance
300k tonnes pa vs 180k tonnes now. Having made reasonable progress in
120
farm tyres, BKT plans to increase its focus on the industrial/construction/mining
110
segment (particularly enabled by the new Bhuj facility), OEMs and new 100
geographies (like India and Africa) for future growth opportunities. 90
80
Overall success of the business 70
BKTs standalone volumes, revenues, EBITDA and net earnings have reported a 60
Sep-14
Nov-14
Jan-15
May-15
Jul-15
CAGR of 11%, 22%, 24% and 24% respectively over FY08-15 (implying major Mar-15
market share gains). Whilst we continue to expect market share gains for BKT,
the global off-highway tyre (OHT) has remained weak driven by weak Balkrishna Ind Sensex
crop/commodity prices and consumer sentiment, leading us to build in flat YoY
growth in FY16. Whilst rubber prices remain benign, the depreciation in Euro
Source: Bloomberg, Ambit Capital research
relative to INR and exhaustion of favourable hedges could potentially impact
sales realisation and margin in the coming quarters.
Valuation
Our DCF model values the core OHT business at `690/share, implying 12.5x
FY17E net earnings. BKT is currently trading at 12.0x FY17E net earnings, 30%
premium to its historical three-year average, which appears justified due to
better margin and free cash generation prospects.
Key financials standalone (` mn)
Year to March FY13 FY14 FY15 FY16E FY17E
Net Sales 31,906 35,767 40,485 35,244 40,690 Analyst Details
EBITDA 6,644 8,938 10,030 9,513 10,283 Ashvin Shetty, CFA
EBITDA (%) 20.8% 25.0% 24.8% 27.0% 25.3% +91 22 3043 3285
EPS (`) 36.8 50.5 50.6 49.1 54.9 ashvinshetty@ambitcapital.com
RoE (%) 28% 30% 23% 19% 18%
Ritu Modi
RoCE (%) 19% 20% 19% 17% 19% +91 22 3043 3292
P/E (x) 17.9 13.0 13.0 13.4 12.0 ritumodi@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Balkrishna Industries
Exhibit 1: Strong revenue growth and EBITDA margin over Exhibit 2: Return ratios impacted due to significant capex
the years incurred towards the new Bhuj plant
45,000 28.0% 40%
40,000 26.0%
35%
35,000 24.0%
30%
30,000 22.0%
25,000 20.0% 25%
20,000 18.0%
20%
15,000 16.0%
15%
10,000 14.0%
5,000 12.0% 10%
FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 3: Geographical spread indicates significant Exhibit 4: Export revenues and export contribution through
exposure to Europe the years (check exports should be 90% in FY15 )
32,000 90%
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 5: On P/E, Balkrishna trades at a premium of 22% Exhibit 6: On EV/EBITDA, Balkrishna trades at a premium
to the historical three-year average of 7% to the historical three-year average
16 10.0
14 9.0
12 8.0
10 7.0
8 6.0
6 5.0
4 4.0
2 3.0
- 2.0
Oct-08
Mar-09
Jul-09
Nov-09
Mar-10
Dec-10
Apr-11
Sep-11
Jan-12
May-12
Sep-12
Feb-13
Jun-13
Oct-13
Feb-14
Jul-14
Nov-14
Mar-15
Aug-10
Aug-15
Oct-08
Mar-09
Jul-09
Nov-09
Mar-10
Dec-10
Apr-11
Sep-11
Jan-12
May-12
Sep-12
Feb-13
Jun-13
Oct-13
Feb-14
Jul-14
Nov-14
Mar-15
Aug-10
Aug-15
Balkrishna 1-yr fwd P/E Avg P/E Balkrishna 1-yr fwd EV/EBITDA Avg EV/EBITDA
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Sundram Fasteners, the largest player in the organised fasteners Auto and Auto ancillaries
segment in India has witnessed healthy growth in its exports in recent
years (revenue CAGR of 22% over FY10-15). Besides growth in the Recommendation
traditional fasteners segment, the introduction of new components Mcap (bn): `34/US$0.5
(pump assemblies, engine components) has driven strong exports for 3M ADV (mn): `16/US$0.2
the company in the recent years.
CMP: `164
Background TP (12 mths): NA
Sundram Fasteners is largest organised manufacturers of fasteners in India with Upside (%): NA
market share of close to 40-50% and significant exposure to the domestic CV
segment. The company revenues have witnessed CAGR of 13% over FY10-15 Flags
with average EBITDA margin of close to 10.9% during the last five years (FY11- Accounting: GREEN
FY15). Predictability: AMBER
Current export franchise Earnings Momentum: AMBER
Sundram Fasteners exports has witnessed healthy growth in exports in the
recent years at CAGR of 22% over FY10-15 and helped company tide over the Catalysts
slowdown in the domestic CV segment since FY13. Exports accounted for a Consensus expects healthy 15% YoY
significant 36% of the standalone revenues in FY15 (up from 25% in FY11). The growth in FY16 revenues driven by
companys exports are primarily into USA (accounting for nearly 80% of total recovery in domestic MHCV and
exports) and into the passenger car segment with General Motors, Ford and further growth in exports
Cummins being the key export clients. EBITDA margin improving by 50bps
YoY in FY16 on the back of healthy
Export strategy
revenue growth
The key driver for the companys healthy export growth in the recent years has
been diversification of business beyond the traditional fasteners segment with
the introduction of new products such as pump assemblies and engine Performance
components. Consequently, the share of non-fastener products in the overall 180
standalone revenues has increased from 57% in FY11 to 64% in FY15. The 160
company continues to focus on new product development for the export markets 140
and expects them to drive further growth in the export markets. 120
100
Overall success of the business
80
Export business growth has helped offset the revenue weakness in the domestic 60
revenues due to the slowdown in the CV segment particularly during FY13 and
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
FY14. Consequently, despite decline of 8% CAGR over FY12-14 in domestic
revenues, total revenues declined by only 3% CAGR over FY12-14 thanks to 9%
CAGR in export revenue over the same period. In FY15, helped further by a Sundram Fasteners Sensex
recovery in domestic MHCV segment (domestic revenues up 16%) total
standalone sales witnessed a healthy growth of 15% YoY. Subsidiaries (27% of Source: Bloomberg, Ambit Capital Research
consolidated revenues), however, continue to witness muted performance with
FY15 revenues at `9.0bn, up 10% YoY but PAT margin of only 0.3%.
Valuation
Sundram Fasteners currently trades at 12.0x FY17 net earnings which is at a
discount of 20% to the large auto component makers despite higher net
consensus earnings growth expectations (48% CAGR over FY15-17) and similar
RoEs (FY17 consensus at 25%).
Key financials - consolidated
Year to March FY11 FY12 FY13 FY14 FY15
Net Sales 22,839 27,702 26,510 27,362 31,561 Analyst Details
EBITDA 2,540 3,050 2,661 2,897 3,757 Ashvin Shetty, CFA
EBITDA (%) 11.1% 11.0% 10.0% 10.6% 11.9% +91 22 3043 3285
EPS (`) 5 4.8 3.8 5.8 6.3 ashvinshetty@ambitcapital.com
BPS (`) 26 31 34 38 42
Ritu Modi
RoE (%) 21% 16% 11% 15% 15% +91 22 3043 3292
P/E (x) 30.1 34.1 43.6 28.4 26.1 ritumodi@ambitcapital.com
Source: Company, Bloomberg, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Sundram Fasteners
Exhibit 1: Healthy revenue growth and EBITDA margin over Exhibit 2: RoCE/RoE improved in FY14 and FY15 driven by
the years healthy exports growth and domestic recovery (FY15)
35,000 13% 24%
12% 22%
30,000 20%
11% 18%
25,000 10% 16%
14%
20,000 9% 12%
8% 10%
15,000 8%
7%
6%
10,000 6% 4%
FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 3: Growing export revenues and export contribution Exhibit 4: Subsidiaries rising share in consolidated
through the years revenues
10,000 42% 10,000 31%
9,000 9,000 29%
37%
8,000 8,000 27%
7,000 32% 7,000
25%
6,000 6,000
27% 23%
5,000 5,000
4,000 4,000 21%
22%
3,000 3,000 19%
2,000 17% 2,000 17%
FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15
Exports (Rs bn) Exports as % of rev (RHS) Subsidiary revenues As % of total revenues
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 5: On P/E, Sundram Fasteners is currently trading Exhibit 6: On EV/EBITDA, Sundram Fasteners is trading at
at a 63% premium to its five-year historical average a 39% premium to its five-year historical average
30 16.0
25 14.0
12.0
20
10.0
15
8.0
10 6.0
5 4.0
- 2.0
Feb-12
Feb-13
Feb-14
Feb-15
Apr-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Aug-12
Aug-13
Aug-14
Aug-15
Apr-06
Feb-12
Feb-13
Feb-14
Feb-15
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Aug-12
Aug-13
Aug-14
Aug-15
SF 1-yr fwd P/E Avg P/E SF 1-yr fwd EV/EBITDA Avg EV/EBITDA
Source: Bloomberg, Ambit Capital research. Note: P/E bands arrived at using Source: Bloomberg, Ambit Capital research. Note: EV/EBITDA bands arrived
Bloomberg consensus estimates for the respective periods at using Bloomberg consensus estimates for the respective periods
Cummins India (KKC) has become a manufacturing hub for Cummins Incs Capital Goods
low KVA engine exports. Over the last six years, KKC invested `3.1bn in
setting up the export SEZ at Phaltan. Consequently, we factor in export Recommendation
revenue CAGR of 16% over FY15-17. However, we remain sceptical about Mcap (bn): `293/US$4.4
the high KVA domestic opportunity given the shift in buyer preferences
3M ADV (mn): `273/US$4.1
towards medium-low KVA due to declining power deficit. Hence, we
CMP: `1,055
factor in an EBITDA margin decline of 50bps over FY15-17E, which feeds
TP (12 mths): `608
into a 360bps fall in RoE. At CMP, KKC is trading at a punchy 32.7x FY17E
Downside (%): 48
P/E. Our TP of `608/share implies FY17E P/E of 20.8x.
Market leader in high KVA engines Flags
KKC is Indias leading manufacturer of gensets, with a strong presence in the
Accounting: GREEN
high KVA engine segment (~45% of its revenue in FY15). KKCs domestic
Predictability: GREEN
franchise is struggling with revenue decline of 11% over FY13-15 due to weak
Earnings Momentum: GREEN
demand and market share loss; however, its export franchise is doing well, with
export revenue CAGR of 16% over FY13-15 due to growth in low KVA exports.
Catalysts
High KVAs share in exports to remain high
Loss of market share in FY16
Until FY14, medium and high KVA exports were the primary export drivers for
50bps contraction in EBITDA margin
KKC (59% share in exports in FY14). However, post the commissioning of Phaltan
over FY15-17
facility in end-FY14, KKCs low KVA exports have increased by 152% YoY in FY15
and the share of medium and high KVA exports has declined to 49% in FY15.
Overall, exports increased by 44% in FY15 vs a 6% decline in domestic revenue. Performance
Low KVA exports to drive the revenue growth over the next two years 180
We believe export growth for low KVA engines will continue to increase over the 160
next two years, as Cummins Inc is shifting its sourcing strategy of buying low KVA 140
gensets from its Cummins UK facility to KKCs Phaltan facility. The rationale for 120
this may be to reduce costs given the sluggish global demand environment (flat
100
global genset sales over CY10-14) alongside rising costs in the UK. Our
80
calculations suggest that the total low KVA export opportunity for KKC is `24bn
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
vs its FY15 low KVA export revenue of `8.2bn. Whilst the export visibility is high
for at least the next two years, once KKC achieves this export target of `24bn, the
growth from thereon is a function of global demand for these gensets or if KKC Sensex Cummins
becomes the global hub for medium/high/heavy duty KVA for Cummins Inc.
Cummins problem area - A declining domestic franchise Source: Bloomberg, Ambit Capital research
Whilst we factor in strong export revenue CAGR of 26% over FY15-17, we expect
domestic revenue to grow moderately at 8% due to higher competitive intensity
and a weak demand environment. Moreover, we expect KKCs EBITDA margin to
structurally decline given: (a) shift in genset portfolio towards low-margin
medium and low KVA; and (b) deceleration in distribution and after-sales
segment given the low running hours for engines used for back-up applications.
Punchy multiple to de-rate
As margins decline, KKCs punchy valuation of 32.7x FY17E P/E (55% premium
to its five-year average) should de-rate. We have modelled in average EBITDA
margin of 16.2% over FY16-18E vs 16.8% over FY13-15, resulting in average
RoE declining to 25% over FY16-18E vs 31% over FY10-14.
Key financials
YE March (` mn) FY14 FY15 FY16E FY17E FY18E
Operating income 39,767 44,058 51,778 62,897 76,996
Analyst Details
EBITDA (%) 17.5 16.7 16.3 16.2 16.0
Bhargav Buddhadev
Net profit 6,000 7,859 7,571 8,964 10,116
EPS (`) 24.2 28.8 24.5 25.2 24.4 +91 22 3043 3252
RoE (%) 21.0 20.6 20.2 22.6 23.0 bhargavbuddhadev@ambitcapital.com
RoCE (%) 48.8 41.6 38.7 32.7 28.9 Deepesh Agarwal
P/E (x) 11.4 10.1 8.9 7.6 6.5 +91 22 3043 3275
P/BV (x) 39,767 44,058 51,778 62,897 76,996 deepeshagarwal@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Cummins India
Exhibit 1: Cummins reported strong revenue growth of 44% in Exhibit 2: vs a 6% decline in domestic revenue in FY15
exports
20.0 60.0 40 20.0
10.0 20.0 20 -
5.0 - 10 (10.0)
FY13
FY14
FY15
FY12
FY13
FY14
FY15
Export revenue (Rsbn) Domestic revenue (Rsbn)
Revenue growth YoY (%) on RHS Revenue growth YoY (%) on RHS
Source: Company, Ambit Capital research Source: Company, Ambit Capital research.
Exhibit 3: Low KVA exports from Phaltan stood at `8.2bn Exhibit 4: Description of the Phaltan plant
`mn FY14 FY15 Plants Capability
Low KVA exports For Export market
- From Phaltan 1,550 8,150 Low KVA genset plant Low and medium KVA engines
Domestic
- From Other Facilities 1,950 670
HHP Rebuild Centre Rebuild High KVA engines
Other exports 8,460 8,400
Reconditioning facility Distribution parts
Total Exports 11,960 17,220
Tata Cummins B series engines
Source: Company, Ambit Capital research Parts Distribution Centre Aftermarket parts
Midrange Uplift Centre B, L and C series engines
Phaltan High Horsepower B and L series engines
Source: Company, Ambit Capital research
Exhibit 5: Low KVA export opportunity for KKC is at `24bn Exhibit 6: On forward P/E, Cummins is trading at a 55%
premium to its five-year average P/E
CY14 Export Share of
Figures in US$mn unless Opportuni 1,200
genset market for low
specified ty for KKC 42x
sales KKC KVA (%) 1,100
US/Canada 1,100 No NA NA 1,000
35x
Europe + Middle East 637 Yes 30% 191 900
China 319 No NA NA 800 28x
LaTAM + Mexico 261 Yes 50% 130 700
Asia Pacific 232 Yes 40% 93 600
21x
India 232 No NA NA 500
Africa 116 Yes 70% 81 400
14x
Total Low KVA export 300
495
potential (US$mn) 200
Less: Freight and other
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
25%
selling overheads
Total low KVA export
396
potential for KKC
Low KVA export potential
24 Source: Company, Bloomberg, Ambit Capital research
for KKC (in `bn)
Source: Industy, Cummins Inc; Ambit Capital research, Note - # as our channel
interaction US/Canada and China already has sufficient low KVA manufacturing
capacity for domestic market and as per Cummins Inc.s procurement practice,
KKC cannot export low KVA engine to these geographies; * we assume the
share of low KVA market based on ancedote data
Balance sheet
Year to March (` mn) FY14 FY15 FY16E FY17E FY18E
Cash 865 799 843 5,071 7,263
Debtors 7,820 9,355 10,923 12,924 16,876
Inventory 5,513 6,823 7,518 8,616 10,336
Loans & advances 8,426 7,545 8,795 8,099 9,704
Investments 4,954 4,650 2,693 2,693 2,693
Fixed assets 10,149 14,046 18,047 19,586 19,878
Miscellaneous - - - - -
Total assets 37,727 43,217 48,820 56,989 66,750
Current liabilities & provisions 11,611 13,721 15,320 18,094 21,306
Debt - - - - -
Other liabilities 465 631 631 631 631
Total liabilities 12,076 14,352 15,951 18,724 21,937
Shareholders' equity 554 554 554 554 554
Reserves & surpluses 25,097 28,311 32,314 37,711 44,259
Total networth 25,652 28,865 32,868 38,265 44,814
Net working capital 10,149 10,001 11,916 11,545 15,610
Net debt (cash) (865) (799) (843) (5,071) (7,263)
Source: Company, Ambit Capital research
Income statement
Year to March (` mn) FY14 FY15 FY16E FY17E FY18E
Operating income 39,767 44,058 51,778 62,897 76,996
% growth (11.8) 10.8 17.5 21.5 22.4
Operating expenditure 32,799 36,708 43,364 52,708 64,677
EBITDA 6,967 7,351 8,414 10,189 12,319
% growth (7.7) 5.5 14.5 21.1 20.9
Depreciation 528 797 998 1,211 1,309
EBIT 6,440 6,553 7,416 8,978 11,011
Interest expenditure 42 45 30 30 30
Non-operational income / Exceptional items 1,777 2,866 1,847 1,984 2,690
PBT 8,175 9,374 9,233 10,932 13,670
Tax 2,175 1,515 1,662 1,968 3,554
Minority Interest / others - - - - -
Reported PAT 6,000 7,859 7,571 8,964 10,116
Adjustments - 816 - - -
Adjusted PAT 6,000 7,043 7,571 8,964 10,116
% growth -14.6% 17.4% 7.5% 18.4% 12.8%
Source: Company, Ambit Capital research
Ratio Analysis
Year to March FY14 FY15 FY16E FY17E FY18E
EBITDA margin (%) 17.5 16.7 16.3 16.2 16.0
EBIT margin (%) 16.2 14.9 14.3 14.3 14.3
Net profit margin (%) 15.1 17.8 14.6 14.3 13.1
Return on capital employed (x) 21.0 20.6 20.2 22.6 23.0
Return on equity (%) 24.2 28.8 24.5 25.2 24.4
Return on invested capital (%) 29.1 26.1 23.3 24.1 24.5
Current ratio (x) 1.9 1.8 1.8 1.9 2.1
Source: Company, Ambit Capital research
Valuation parameters
Year to March FY14 FY15 FY16E FY17E FY18E
EPS (`) 21.6 25.4 27.3 32.3 36.5
Book value per share (`) 92.5 104.1 118.6 138.0 161.7
P/E (x) 48.8 41.6 38.7 32.7 28.9
P/BV (x) 11.4 10.1 8.9 7.6 6.5
EV/EBITDA (x) 41.9 39.7 34.7 28.7 23.7
EV/Sales (x) 7.3 6.6 5.6 4.6 3.8
CFO/EBITDA 0.85 0.93 0.99 1.23 0.89
Source: Company, Ambit Capital research
Apr-15
Jul-15
Sep-14
Oct-14
Dec-14
Jan-15
Mar-15
Aug-15
Jun-15
in reduced capex spends by miners thus impacting offtake of high-chrome media
and the conversion process. During the previous meltdown in global commodity
prices, AIA found it difficult to break into mining clients. In its 1QFY16 earnings
SENSEX AIA
call, the management highlighted that it will now be more aggressive in terms of
pricing.
Source: Bloomberg, Ambit Capital research
INR depreciation should help
We have currently built in 10%/3% volume/realisation growth for FY16E,
resulting in revenue growth of 13%. These estimates are likely to be downgraded
due to weak outlook on volume and realisations. The recent INR depreciation
and hence stable margins at 24-26% could lead to upgrades. AIA enjoys a
significant cost advantage over Magotteaux, which gives it enough headroom to
price its products aggressively, thereby reducing the pricing differential between
forged and high-chrome media.
Limited upside but cost advantage/industry structure support valuation
AIA is currently trading at 20x/17x FY16/FY17 P/E, higher than its five-year
average of 16x. However, the benefits of INR depreciation may be offset by
downgrades to our volume & realisation estimates; hence we see limited upside
from CMP (14%). We expect cuts to our FY16 estimates but limited cuts to our
valuation. A share price correction would force us revisit our stance.
Key financials - standalone
Year to March (` bn) FY14 FY15 FY16E FY17E FY18E
Revenues 20.8 21.8 24.7 30.2 35.8
EBITDA 5.0 5.8 6.2 7.6 9.0
EBITDA (%) 24.1% 26.8% 25.3% 25.3% 25.3% Analyst Details
EPS (`) 37.2 46.3 45.4 55.1 65.7
Nitin Bhasin
RoE (%) 20.5 22.5 19.0 19.7 20.1
RoCE (%) 20.6 21.7 18.5 19.4 19.9 +91 22 3043 3241
P/E (x) 24.4 19.7 20.1 16.5 13.9 nitinbhasin@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
AIA Engineering
Exhibit 1: Strong revenue growth in the last five years Exhibit 2: RoCE and RoE have improved since FY13
coupled with margin expansion in the last two years
25 Revenue and margins 30% 24% Profitability ratios 24%
22% 22%
20
20% 20%
25%
15 18% 18%
10 16% 16%
20%
14% 14%
5
12% 12%
- 15% 10% 10%
FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15
Revenue (Rsbn; LHS) EBITDA margin (RHS) RoE (LHS) RoCE (RHS)
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 3: Revenue growth from outside India decelerated Exhibit 4: Production growth of mined commodities
in FY15 to 3% after 30% CAGR over FY10-14 globally has decelerated in 2014
20 20% 20% Global Production growth
Revenue from outside India
(mn mt, YoY)
15%
15 15%
10%
10 5% 10%
0%
5 5%
-5%
- -10% 0%
FY10 FY11 FY12 FY13 FY14 FY15 2009 2010 2011 2012 2013 2014
Gross revenue outside of India (Rsbn; LHS) Global Mined Copper production
Growth (YoY; RHS) Global Iron Ore production
INR depreciation vs USD (YoY; RHS) Gold mine production
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 5: On P/E, AIA is currently trading at an 15% Exhibit 6: On P/B, AIA is currently trading at a 20%
premium to its five-year historical average premium to its five-year historical average
30 1 year forward P/E 6 1 year forward P/B
26 (consensus) (consensus)
5
22
4
18
3
14
2
10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
1
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Balance sheet
` mn FY14 FY15 FY16E FY17E FY18E
Total Net-worth 17,466 20,914 24,341 28,498 33,457
Loans 900 641 641 141 141
Sources of funds 18,566 21,802 25,229 28,886 33,844
Net block 3,887 4,881 6,773 8,519 8,472
Investments 5,291 6,370 5,370 5,370 5,370
Cash and bank balances 2,198 1,868 5,073 5,476 9,083
Sundry debtors 4,315 3,938 5,144 6,192 7,219
Inventories 3,508 4,596 3,945 4,705 5,425
Loans and advances 2,121 2,690 2,791 3,321 3,825
Total Current Assets 12,154 13,139 16,969 19,713 25,575
Current Liabilites 2,490 2,209 2,908 3,559 4,215
Other current liabilities 1,161 1,018 1,356 1,660 1,965
Provisions 1,273 1,477 1,472 1,655 1,855
Current liabilities and provisions 4,924 4,705 5,737 6,874 8,036
Net current assets 8,391 9,452 12,589 14,499 19,505
Application of funds 18,566 21,801 25,228 28,885 33,844
Source: Company, Ambit Capital research
Income statement
` mn FY14 FY15 FY16E FY17E FY18E
Operating Income 20,801 21,836 24,670 30,194 35,756
% growth 18.8% 5.0% 13.0% 22.4% 18.4%
EBITDA 5,021 5,848 6,242 7,639 9,046
% growth 61.9% 16.5% 6.7% 22.4% 18.4%
EBITDA margin (%) 24.1% 26.8% 25.3% 25.3% 25.3%
Net depreciation / amortisation 381 697 609 753 847
Other income 334 832 520 557 663
Adjusted PBT 4,599 5,943 6,120 7,423 8,854
Provision for taxation 1,342 1,634 1,836 2,227 2,656
Reported Consolidated PAT 3,517 4,364 4,284 5,196 6,198
EPS (Adjusted) (Rs) 37.3 46.3 45.4 55.1 65.7
Source: Company, Ambit Capital research
Ratios
FY14 FY15E FY16E FY17E FY18E
Dividend payout ratio (%) 17.4 17.2 17.2 17.2 17.2
Net debt/Equity (0.4) (0.4) (0.4) (0.4) (0.4)
Working capital turnover (x) 2.3 2.5 3.4 4.0 4.5
Gross block turnover (x) 3.5 3.1 2.7 2.6 2.7
Debt/Equity 0.1 0.0 0.0 0.0 0.0
Net debt/Equity (0.4) (0.4) (0.4) (0.4) (0.4)
ROCE 20.7 22.0 18.5 19.4 19.9
ROE 20.6 22.5 19.0 19.7 20.1
Valuation metrics
P/E (x) 24.4 19.7 20.1 16.5 13.9
P/B (x) 4.9 4.1 3.5 3.0 2.6
EV/EBITDA (x) 15.8 13.4 12.2 9.8 7.9
Source: Company, Ambit Capital research
Jan-15
Feb-15
Apr-15
May-15
Jul-15
Sep-14
Dec-14
Mar-15
Aug-15
Jun-15
product through the 3-5 years required to bring a molecule to commercialisation
and then through the patent protection period of ~20 years. The CSM business
EBITDA margin at ~22% is healthy and has been expanding steadily. Sensex PI
Overall success of the business
Over the last five years, PI has recorded an impressive CAGR of 27%/34%/45% Source: Bloomberg, Ambit Capital research
on overall sales/EBITDA/PAT, outperforming most of its peers. Its RoCEs have
improved from 14% to 28% over FY09-15. Cash flow conversion remains healthy
with average pre-tax CFO:EBITDA of ~90%.
Valuation
PI is currently trading at 21x one-year forward earnings vs its last five-year
average of 10x one-year forward. Our target price of `825 implies 25x FY17E
P/E (delivering EPS CAGR of 32% over FY15-18E).
Key financials Consolidated
Y/E March FY13 FY14 FY15E FY16E FY17E
Operating Income (` mn) 11,514 15,955 19,403 23,506 29,384
EBITDA (` mn) 1,826 2,910 3,727 4,691 6,399
EBITDA margin (%) 15.9 18.2 19.2 20.0 21.8
EPS (`) 7.6 14.0 18.1 22.7 32.5 Analyst Details
RoCE (%) 16.2 23.9 26.3 27.7 31.9 Ritesh Gupta, CFA
RoE (%) 22.7 31.2 31.0 30.2 32.9 +91 22 3043 32842
P/E 86.7 46.9 36.5 29.0 20.3 riteshgupta@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
PI Industries
Exhibit 1: Revenue growth has been strong alongside Exhibit 2: RoCE has seen healthy improvement whilst RoEs
improvement in margins have remained stable due to falling leverage
Exhibit 3: Exports growth momentum remains sustainable Exhibit 4: Exports now contribute to more than half of
revenues
Exhibit 5: P/E multiple has seen significant re-rating Exhibit 6: and the same applies to the P/B ratio
35 10.0
30 8.0
25
20 6.0
15 4.0
10
5 2.0
- -
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15
One-yr fwd P/E 5-yr avg P/E One-yr fwd P/B 5-yr avg P/B
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Aug-15
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
across key countries and also cross sell more products to its existing clients to
leverage on its product and client strengths. Key growth areas for the company
are: (a) Pharma intermediates (capabilities on a wide range of chemistries Sensex Atul
alongside USFDA plants), (b) aromatic products (flavours, fragrances, and
sunscreens), (c) new generics and CRAMS under agrochemicals, and (d) new
Source: Bloomberg, Ambit Capital research
products under colorants, pigments, polymers, etc.
Overall success of the business
Over the last decade, Atul has significantly turned around the efficiency of its
businesses. Atul significantly reduced its exposure to the lower-margin business
of colorants to higher-margin products under life sciences; thus, PBT CAGR was
at 32% vs 14% sales CAGR over FY05-15. Cumulative CFO/EBITDA at 83% was
led by improvement in inventory days (from 66 days to 51 days) and receivable
days (from 79 days to 59 days) over FY10-15. Fixed asset turns too have
improved from 1x in FY10 to 2x in FY15.
Valuation
Atul is now trading at 13x FY17 consensus EPS vs the historical average of 7
times. Sector peers such as Aarti and Vinati trade at 12x/17x FY17 consensus
estimates. The multiples are in line with its peer average. The stock might trade
at a premium to its peer median given its strong chemistry capabilities, high
dividend payout and clean corporate governance.
Key financials - Consolidated
Year to March (` mn) FY11 FY12 FY13 FY14 FY15
Net Sales 15,553 17,924 20,429 24,578 26,564
EBITDA 1,708 1,880 2,491 3,637 3,914
EBITDA (%) 27.4 29.8 39.1 73.9 81.1 Analyst Details
EPS (`) 11.5 12.7 13.2 19.4 17.8 Ritesh Gupta, CFA
RoCE (%) 15.8 14.9 16.5 25.7 24.2 +91 22 3043 32842
RoE (%) 47.8 41.7 31.4 21.5 19.7
riteshgupta@ambitcapital.com
P/E (x) 47.5 43.6 33.2 17.6 16.0
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Atul Ltd
Exhibit 1: EBITDA margins have scaled up driven by focus Exhibit 2: RoCE and RoE have increased in tandem
on improving product mix
30% 16% 30
14%
25% 25
12%
20% 20
10%
15% 8% 15
6%
10% 10
4%
5% 5
2%
0% 0% 0
FY11 FY12 FY13 FY14 FY15 FY2011 FY2012 FY2013 FY2014 FY2015
Exhibit 3: Atuls growth rate have seen an impact of a Exhibit 4: Net exports have scaled up over the last 4 years
temporary blip in 2,4 D (~20-25% of export sales) led by higher domestic sourcing
Exhibit 5: P/E multiples have sharply re-rated over the last Exhibit 6: Atul is trading on 3.2x one-year book value per
18 months share
20 4
15 3
10
2
5
1
-
May-11
Dec-11
Mar-12
May-13
Dec-13
Mar-14
May-15
Month
Oct-10
Jan-11
Aug-11
Jul-12
Oct-12
Jan-13
Aug-13
Jul-14
Oct-14
Feb-15
-
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15
One-yr fwd P/E 5-yr avg P/E One-yr fwd P/B 5-yr avg P/B
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Feb-15
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Mar-15
Apr-15
May-15
Aug-15
Jun-15
Jul-15
integration. The company has nearly doubled its gross block over the last three
years and is planning a capex of `4.5bn (30% of FY15 gross block) over the
next 18-24 months to expand into new chemistries (toluene and ethylene
Sensex Aarti
based) alongside capacity addition for chlorination and PDA. This should result
in faster revenue growth driven by 3-4x asset turnover (FY15 asset turn of 3x).
Source: Bloomberg, Ambit Capital research
Overall success of the business
Aarti is promoted by first-generation technocrats who are chemical engineers
from the reputed University Department of Chemical Technology (UDCT),
Mumbai. Established in FY75, the company has evolved from a manufacturer
of basic chemicals to more complex chemicals. The company today maintains
an impressive list of clients and has expanded its manufacturing footprint to
more than 16 manufacturing units spread across Gujarat and Maharashtra.
Valuation
Aarti is now trading at 15x one-year forward multiple vs the historical average
of 5x. Its peers, Atul Ltd and Vinati Organics, trade at one-year forward P/Es of
15x and 19x respectively. We believe multiple expansion would be limited from
hereon though the company is likely deliver 20% earnings CAGR over FY15-17
based on consensus estimates.
Key financials - Consolidated
Year to March (` mn) FY11 FY12 FY13 FY14 FY15
Net Sales 14,530 16,733 20,962 26,325 29,080
EBITDA 1,979 2,493 3,612 4,015 4,657
EBITDA (%) 13.6% 14.9% 17.2% 15.3% 16.0%
Analyst Details
EPS (`) 10.6 13.1 17.0 18.3 23.2
Ritesh Gupta, CFA
RoCE (%) 11.7% 13.3% 15.5% 15.5% 19.3%
RoE (%) 16.9% 18.8% 20.0% 20.0% 21.5% +91 22 3043 32842
P/E (x) 38.1 31.0 23.8 22.1 17.7 riteshgupta@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Aarti Industries
Exhibit 1: Revenue growth was impacted by weaker input Exhibit 2: RoCE and RoE increased in tandem despite
prices though margins improved, taking care of profit addition of new manufacturing facilities
growth
8% 10% 0%
FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15
Exhibit 3: Aarti continues to show superior growth rates in Exhibit 4: Net exports have scaled up over the last 4 years
export earnings
Exhibit 5: P/E multiples have sharply re-rated in recent Exhibit 6: Aarti is trading on 3x one-year book value per
months share
3.50
12.00 3.00
2.50
8.00 2.00
1.50
4.00 1.00
0.50
0.00 0.00
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
Dec-12
Apr-13
Aug-13
Dec-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
One-yr fwd P/E 5-yr avg P/E One-yr fwd P/B 5-yr avg P/B
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Dec-14
Jan-15
Feb-15
Apr-15
May-15
Jul-15
Aug-14
Aug-15
ICNTs exports are predominately to the US market and it is trying to de-risk by
expanding to UK, Japan, and Australia. In addition, once the eagerly-awaited
FTA is signed between India and EU, it would open a huge market for the Indian Sensex Indo Count
textile companies. The design/marketing team of 100 people (US and India) set
up by the company conducts market research and sell to major clients; given the Source: Bloomberg, Ambit Capital research
knowledge of the customer, the clients appreciate ICNTs products. This is now
helping the company to expand into utility/institutional and fashion bedding,
which will triple its opportunity. The management indicated that the company will
expand capacities (through greenfield expansion) if these ventures succeed.
Overall success of the business product/service based
Derivative losses and slowdown in demand for home textiles in the US drove
ICNT into CDR in August 2008. The liquidity position has been on the mend over
the past six years primarily driven by change in business approach and traction in
the home textiles business and the companys lean working capital business
model (~30 days working capital cycle). The company in 2HFY15 expanded
capacity from 45mn meters to 68mn mtrs pa, incurring a capex of ~0.7bn
largely funded by the TUFS scheme. The incremental capacity will enable it to tap
demand for higher-value bed linen products (utility bedding and top-of the-bed).
Key Financials
Year to March (` mn) Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
Net Sales 7,082 7,797 11,868 14,676 17,169
EBITDA 473 356 897 1,588 2,488 Analyst Details
EBITDA (%) 6.7% 4.6% 7.6% 10.8% 14.5%
EPS (`) 3.0 (0.6) 8.2 31.0 36.9 Aditya Bagul
RoCE (%) 3.5% 3.6% 11.7% 20.5% 23.4% +91 22 3043 3264
RoE (%) 8.0% 5.4% 24.1% 45.3% 48.0%
adityabagul@ambitcapital.com
P/E (x) 334.9 NA 121.1 32.2 27.1
Source: Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Indo Count
Exhibit 1: Rising franchise with customers has reduced Exhibit 2: RoCE and RoE improved due to improved
margin cyclicality and led to secular improvement revenue growth and operating leverage
Revenues (Rs bn) EBITDA margin % (RHS) RoCE RoE (RHS)
30% 50%
20 20% 25% 40%
- 0% 0% -10%
FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, Ambit Capital research Source: Company, Ambit Capital research.
Exhibit 3: ICNTs geographical spread of exports Exhibit 4: Accelerating growth in export revenues
dominated by home textiles with some from yarn
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 5: ICNT is currently trading at an 30% premium to Exhibit 6: In line with the historical average, upside
its 5-year historical average on improving fundamentals potential is due to further deleveraging
60 60
50 50
40 40
30 30
20 20
10 10
- -
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Ratio Analysis
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EBITDA margin (%) 7% 5% 8% 11% 14%
EBIT margin (%) 4% 2% 6% 9% 14%
Net prof. (bef min int) margin (%) 2% 1% 4% 8% 10%
Dividend payout ratio (%) 0% 0% 0% 0% 0%
Net debt: equity (x) * 1.7 1.7 1.8 1.3 0.7
RoCE (pre-tax) (%) 3% 4% 12% 20% 23%
RoIC (pre-tax) (%) 0% -4% 4% 14% 18%
RoE (%) 8% 5% 24% 45% 48%
Source: Company, Ambit Capital research
Valuation Parameters
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EPS (`) 3.0 (0.6) 8.2 31.0 36.9
Diluted EPS (`) 3.0 (0.6) 8.2 31.0 36.9
Book value per share (`) * 10.1 9.3 17.0 47.5 79.8
Dividend per share (`) - - - - -
P/E (x) 334.9 NA 121.1 32.2 27.1
P/BV (x) 98.4 107.3 58.7 21.0 12.5
EV/EBITDA (x) 90.6 119.7 48.0 27.3 17.2
EV/EBIT (x) 154.7 250.6 60.5 31.2 18.4
Source: Company, Ambit Capital research
Aug-15
Export strategy - Increased focus on premium clients
KTG intends to improve its revenue mix in favour of high-margin clients like
Toys R Us, Jockey and Mothercare which procure high-value-added products, Sensex Kitex
which will drive continued margin improvement. The company also plans to
enter the retailing space by buying/licensing a brand for the US hypermarket
Source: Bloomberg, Ambit Capital Research
market. Also, it plans to be a wholesaler like Gerber. Apart from this, KTG plans
to launch its products through the e-commerce channel for the US market,
which can capture margins across the entire value chain.
Overall success of the business
Apart from improvement in the client mix, the company is implementing various
technological upgrades including upgrading the sewing machines, installation
of automatic dying facility, etc. This along with improvement in capacity
utilisation should improve the profitability of the company. High cash holdings
(0.8x equity) alongside leverage (0.5x equity) remain key concerns.
Key financials
Year to March (` mn) Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
Net Sales 2,561 3,120 3,170 4,422 5,111
EBITDA 478 594 618 968 1,707
EBITDA (%) 18.7% 19.0% 19.5% 21.9% 33.4%
EPS (`) 4.3 5.7 6.2 12.1 20.7 Analyst Details
RoCE (%) 18.9% 20.4% 17.7% 22.3% 29.8% Aditya Bagul
RoE (%) 32.0% 31.7% 26.7% 38.7% 45.0% +91 22 3043 3264
P/E (x) 158.8 120.7 111.5 57.0 33.2 adityabagul@ambitcapital.com
Source: Company, Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Kitex Garments
Exhibit 1: Margins recovered over last two years with Exhibit 2: RoCE and RoE over the last five years have
increase in revenues tracked EBITDA margins
4 80%
3 60%
2 40%
1 20%
US, 80% - 0%
FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 5: On P/E, Kitex is currently trading at a 15-20% Exhibit 6: On EV/EBITDA, Kitex is currently trading at a 15-
premium to its five-year historical average 20% premium to its five-year historical average
70 40
60 35
50 30
40 25
20
30
15
20 10
10 5
- -
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Source: Bloomberg, Ambit Capital research. Note: P/E bands arrived at using Source: Bloomberg, Ambit Capital research. Note: EV/EBITDA bands arrived
Bloomberg consensus estimates for the respective periods at using Bloomberg consensus estimates for the respective periods
Ratio Analysis
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EBITDA margin (%) 19% 19% 19% 22% 33%
EBIT margin (%) 16% 17% 17% 20% 29%
Net prof. (bef min int) margin (%) 8% 9% 9% 13% 19%
Dividend payout ratio (%) 8% 8% 11% 8% 6%
Net debt: equity (x) * 1.1 0.5 0.4 0.1 NA
RoCE (pre-tax) (%) 19% 20% 18% 22% 30%
RoIC (pre-tax) (%) 12% 14% 16% 28% 47%
RoE (%) 32% 32% 27% 39% 45%
Source: Company, Ambit Capital research
Valuation Parameters
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EPS (`) 4.3 5.7 6.2 12.1 20.7
Book value per share (`) * 15.5 20.5 25.8 36.7 55.6
Dividend per share (`) 3.4 4.6 7.0 9.4 11.7
P/E (x) 158.8 120.7 111.5 57.0 33.2
P/BV (x) 44.5 33.6 26.7 18.8 12.4
EV/EBITDA (x) 70.4 56.7 54.5 35.1 20.0
EV/EBIT (x) 82.3 64.1 63.4 39.0 22.9
Source: Company, Ambit Capital research
Vardhmans export revenue CAGR of ~29% over the last five years Textiles
outstripped the firms domestic revenue CAGR of ~10% due to a
combination of external factors (like diminishing competitiveness of the Recommendation
Chinese textile industry) and internal factors (like improved product mix
Mcap (bn): `56/US$0.8
and capacity expansion alongside INR depreciation). We do not see
3M ADV (mn): `69/US$1
strong competitive advantages in this business model, as VTEX operates
in a commodity-like segment with an inability to fully pass on the input CMP: `866
cost inflation, making it susceptible to the vagaries of cotton prices. High
capital intensity, high levels of cotton inventory in China and resultantly Flags
uncertain yarn pricing remain key challenges. Accounting: AMBER
Predictability: AMBER
Background - A large and reputed spinner and fabric manufacturer
Earnings Momentum: GREEN
Incorporated in 1965, VTEX (the erstwhile Mahavir Spinning Mills Ltd) is one of
Indias leading textile companies, with diverse operations across manufacturing
of yarn (60% of revenues), fabric (25%), sewing (10%), threads, fibre and Catalysts
garmenting. The company has a strong yarn exports presence in the US, Japan, Stable input costs to reduce margin
Hong Kong, Korea, the UK and the EU, in addition to the domestic market. The volatility
company has a manufacturing setup of 22 units across 6 states in India, with a Leveraging on R&D capabilities of JV
manufacturing capacity of ~0.2mn tonnes yarn and 170mn meters of fabric. partners to aid realisations
Export franchise Chinas slide floats the VTEX boat
Exports revenues (~40% of overall revenues) have been expanding at ~29% Performance
CAGR over the last five years vs domestic revenue CAGR of ~10%. Export
250
revenues in grew by more than 26% YoY CAGR over the last 2 years due to: (a)
200
the erosion in competitiveness of Chinese players; and (b) long-term
150
relationships with global players through product development and
customisation. Europe and US contribute to ~70% of exports, with the balance 100
coming from Asian countries like Vietnam, China, and Japan. Over the years, the 50
company has expanded its fabric production base more than yarn exports but it -
Sep-14
Oct-14
Jan-15
Feb-15
Apr-15
May-15
Jun-15
Jul-15
Aug-14
Dec-14
Dec-14
Mar-15
Aug-15
continues to sell yarn to intermediate exporters.
Export strategy - No change and waiting for global/local cues
Improving yarn realisation (due to changes in Chinese cotton and yarn policy) Sensex Vardhman
and INR depreciation strengthened the companys exports profitability. The
management acknowledges that the reversal of the Chinese (Cotton and Yarn) Source: Bloomberg, Ambit Capital research
policy would impact the global textile market. The management believes that the
impact on the company would be moderate due to the higher proportion of
specialised value-added yarns and improved product mix in favour of fabrics.
However, the company operates in a commodity-like segment with high
competition from domestic and international players, leading to an inability to
fully pass on input cost inflation. Capital allocation to business segments will be
driven by market share considerations and global demand-supply.
Overall success of the business
After stellar performance in FY14, revenue growth and margins dropped in FY15
due to lower yarn realisation in the export market and cotton inventory loss. The
management expects the operating margin to be at 19-23% over the next two
years on the back of: (a) stable cotton prices (leading to lower inventory write-
offs); and (b) increasing contribution of the high-margin fabric business.
Key Financials
Year to March (` mn) Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
Net Sales 44,185 46,488 49,736 61,664 67,860
EBITDA 10,934 6,239 9,762 14,603 11,130
EBITDA (%) 24.7% 13.4% 19.6% 23.7% 16.4%
EPS (`) 84.0 22.6 57.0 114.9 64.0 Analyst Details
RoCE (%) 18.4% 7.1% 13.4% 19.7% 10.3% Aditya Bagul
RoE (%) 29.3% 7.5% 16.3% 27.2% 13.7% +91 22 3043 3264
P/E (x) 10.8 40.2 15.9 7.9 14.2 adityabagul@ambitcapital.com
Source: Ambit capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Vardhman Textiles
Exhibit 1: Raw material (RM) cost volatility leads to margin Exhibit 2: RoCE and RoE over the last five years have
cyclicality; exports drive revenue growth momentum tracked EBITDA margins
Source: Company, Ambit Capital research Source: Company, Ambit Capital research.
Exhibit 3: VTEXs geographical spread of exports Exhibit 4: Accelerating growth in export revenues
Exhibit 5: VTEX has rerated by ~40% over the last year; re- Exhibit 6: VTEX has rerated by ~40% over the last year due
rating could be a function of declining earnings estimates to deleveraging (lower net debt/equity)
12 7
10 6
8 5
4
6
3
4 2
2 1
- -
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Source: Bloomberg, Ambit Capital research. Note: P/E bands arrived at using Source: Bloomberg, Ambit Capital research. Note: EV/EBITDA bands arrived
Bloomberg consensus estimates for the respective periods at using Bloomberg consensus estimates for the respective periods
Ratio Analysis
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EBITDA margin (%) 25% 13% 20% 24% 16%
EBIT margin (%) 19% 8% 14% 18% 9%
Net prof. (bef min int) margin (%) 13% 4% 8% 12% 7%
Dividend payout ratio (%) 5% 24% 11% 7% 21%
Net debt: equity (x) * 1.1 1.0 0.9 0.8 0.4
RoCE (pre-tax) (%) 14% 5% 9% 14% 7%
RoIC (pre-tax) (%) 11% 3% 7% 13% 6%
RoE (%) 29% 8% 16% 27% 14%
Source: Company, Ambit Capital research
Valuation Parameters
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EPS (`) 84.0 22.6 57.0 114.9 64.0
Diluted EPS (`) 84.0 22.6 57.0 114.9 64.0
Book value per share (`) * 362.2 353.0 400.9 501.0 539.9
Dividend per share (`) 4.3 6.6 6.5 8.6 14.8
P/E (x) 10.8 40.2 15.9 7.9 14.2
P/BV (x) 2.5 2.6 2.3 1.8 1.7
EV/EBITDA (x) 7.7 13.2 8.8 5.9 6.8
EV/EBIT (x) 10.2 23.5 12.6 7.6 13.1
Source: Company, Ambit Capital research
Aug-15
finished product either from captive facilities in India or from Asian countries.
Export strategy - Expansion, backward integration and more brands Sensex Himatsingka
Over the last two years, the company restructured its front-end operations in the
US resulting in subdued growth (8%, after 20% over FY10-13). However, post the Source: Bloomberg, Ambit Capital research
restructuring, the management expects revenue growth to improve. The
company has planned capacity up-gradation and expansion in FY16 (60mn
mtrs). This will enable the company to divert higher-margin business to in-house
capacity and outsource only the low-margin products. HSS, through this process,
also plans to backward integrate into spinning, enabling reduction in raw
material cost volatility; this would increase capital intensity. The company is also
looking at adding few other brands to its ambit which suit the DNA of the
business.
Overall success of the business
Stable revenue growth (13% CAGR over FY10-15) along with improving EBITDA
margins (5% in FY09) to more than 10% in FY15 & healthy cash conversion of
90% have led to RoCEs improving to 10-12% (vs 2-3% in FY10-11). Multiple
margin levers include: (a) reduced impact of raw material cost volatility post
current capacity up-gradation/expansion; (b) higher proportion of value-added
products being manufactured in-house; and (c) operating efficiencies and
benefits of operating leverage flowing into the manufacturing operations.
Key Financials - consolidated
Year to March (` mn) Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
Net Sales 12,327 14,287 16,894 20,282 19,406
EBITDA 886 1,461 1,598 2,019 2,025
EBITDA (%) 7.2% 10.2% 9.5% 10.0% 10.4% Analyst Details
EPS (`) (1.7) 3.4 5.8 6.4 9.7 Aditya Bagul
RoCE (%) 2.6% 7.7% 8.8% 11.0% 10.9%
+91 22 3043 3264
RoE (%) -3.0% 5.2% 8.4% 8.5% 12.2%
adityabagul@ambitcapital.com
P/E (x) (101.8) 50.9 29.4 26.6 17.6
Source: Ambit Capital research
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Himatsingka Seide
Exhibit 1: RM cost volatility led to margin cyclicality; Exhibit 2: RoCE and RoE over the last five years have tracked
exports drive revenue growth momentum EBITDA margins
Standalone Revenues (Rs bn)
Consol Revenue (Rs bn) RoCE RoE (RHS)
Standalone Margins (RHS)
Consol margins (RHS) 14% 15%
30 30%
12%
10% 10%
20 20%
8%
5%
10 10% 6%
4% 0%
- 0% 2%
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
0% -5%
FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, Ambit Capital research Source: Company, Ambit Capital research
Exhibit 5: HSS has re-rated by more than 50% over the Exhibit 6: On EV/EBITDA, HSS is currently trading at an 28%
last 18 months on the back of improving fundamentals premium to its five-year historical average
50 14
40 12
30 10
20 8
10 6
-
4
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
(10)
(20) 2
(30) -
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Source: Bloomberg, Ambit Capital research. Note: P/E bands arrived at Source: Bloomberg, Ambit Capital research. Note: EV/EBITDA bands arrived at
using Bloomberg consensus estimates for the respective periods using Bloomberg consensus estimates for the respective periods
Ratio Analysis
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EBITDA margin (%) 7% 10% 9% 10% 10%
EBIT margin (%) 3% 6% 6% 7% 8%
Net prof. (bef min int) margin (%) -1% 2% 3% 3% 5%
Dividend payout ratio (%) -46% 7% 10% 17% 16%
Net debt: equity (x) * 1.2 1.1 0.9 0.9 0.8
RoCE (pre-tax) (%) 2% 10% 9% 12% 11%
RoIC (pre-tax)(%) -2% 4% 3% 6% 5%
RoE (%) -3% 5% 8% 8% 12%
Source: Company, Ambit Capital research
Valuation Parameters
Year to March Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
EPS (`) (1.7) 3.4 5.8 6.4 9.7
Diluted EPS (`) (1.7) 3.4 5.8 6.4 9.7
Book value per share (`) * 53.1 57.7 64.6 75.7 81.8
Dividend per share (`) 1.5 0.4 1.0 2.0 3.0
P/E (x) (109.5) 54.8 31.6 28.6 19.0
P/BV (x) 3.5 3.2 2.9 2.4 2.3
EV/EBITDA (x) 27.6 16.6 15.2 12.4 12.3
EV/EBIT (x) 76.2 26.8 22.6 16.9 15.7
Source: Company, Ambit Capital research
3,000
2,500
2,000
1,500
1,000
500
0
Sep-12
Nov-12
Mar-13
May-13
Sep-13
Nov-13
Mar-14
May-14
Sep-14
Nov-14
Mar-15
May-15
Sep-15
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
BAJAJ AUTO LTD
1,500
1,000
500
0
Sep-12
Sep-13
Sep-14
Sep-15
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Nov-14
Jan-15
Mar-15
May-15
1,000
800
600
400
200
0
Sep-12
Sep-13
Sep-14
Sep-15
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
250
200
150
100
50
0
Sep-12
Nov-12
Mar-13
May-13
Sep-13
Nov-13
Mar-14
May-14
Sep-14
Nov-14
Mar-15
May-15
Sep-15
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
1,500
1,000
500
0
Sep-12
Nov-12
Mar-13
May-13
Sep-13
Nov-13
Mar-14
May-14
Sep-14
Nov-14
Mar-15
May-15
Sep-15
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
CUMMINS INDIA LTD
1,400
1,200
1,000
800
600
400
200
0
Sep-12
Sep-13
Sep-14
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Nov-14
Jan-15
Mar-15
May-15
800
600
400
200
0
Sep-12
Nov-12
Mar-13
May-13
Sep-13
Nov-13
Mar-14
May-14
Sep-14
Nov-14
Mar-15
May-15
Sep-15
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
PI INDUSTRIES LTD
2,000
1,500
1,000
500
0
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
ATUL LTD
500
400
300
200
100
0
Sep-12
Sep-13
Sep-14
Sep-15
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
AARTI INDUSTRIES LIMITED
1,200
1,000
800
600
400
200
0
Sep-12
Sep-13
Sep-14
Sep-15
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Nov-14
Jan-15
Mar-15
May-15
1,200
1,000
800
600
400
200
0
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
1,200
1,000
800
600
400
200
0
Sep-12
Sep-13
Sep-14
Sep-15
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
250
200
150
100
50
0
Sep-12
Nov-12
Mar-13
May-13
Sep-13
Nov-13
Mar-14
May-14
Sep-14
Nov-14
Mar-15
May-15
Sep-15
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
HIMATSINGKA SEIDE LTD
Copyright 2015 AMBIT Capital Private Limited. All rights reserved. Ambit Capital Pvt. Ltd.
Ambit House, 3rd Floor. 449, Senapati Bapat Marg,
Lower Parel, Mumbai 400 013, India.
Phone: +91-22-3043 3000 | Fax: +91-22-3043 3100
CIN: U74140MH1997PTC107598
www.ambitcapital.com