Beardsell Limited

Q2FY11 Result Update

Enhancing investment decisions

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

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

CRISIL Assessment CRISIL Assessment

Fundamental Grade Valuation Grade
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (- 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

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

Additional Disclosure
This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

Disclaimer:
This Exchange-commissioned Report (Report) is based on data publicly available or from sources considered
reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon
as such. The data / Report are subject to change without any prior notice. Opinions expressed herein are our current
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any solicitation, whatsoever. The subscriber / user assumes the entire risk of any use made of this data / Report.
CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This
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 November 17, 2010
Fair Value Rs 61
Beardsell Limited CMP Rs 55

Chennai factory to improve prospects CFV MATRIX

Fundamental Grade 3/5 (Good fundamentals) Excellent

Fundamentals
Valuation Grade 4/5 (CMP has upside)
5

Fundamental Grade
Industry Building Products
4

Beardsell Ltd’s (Beardsell’s) Q2FY11 results were broadly in line with CRISIL 3
Equities’ expectations. Although EBITDA and PAT margins declined more than
2
200 bps q-o-q in Q2FY11, we are confident of an improvement in margins in
the following quarters once the Chennai factory becomes operational. Based on 1
steady industry growth prospects, we maintain our FY11 and FY12 earnings
1 2 3 4 5
estimates and fundamental grade of ‘3/5’. Poor
Fundamentals

Q2FY11 result analysis Valuation Grade

Beardsell’s Q2 revenues grew 35.5% y-o-y to Rs 166 mn primarily due to

Downside
•

Strong

Strong
Upside
growth in the insulation segment comprising expanded polystyrene (EPS)
and prefab panels. However, on a q-o-q basis revenues were flat at Rs
166 mn.
KEY STOCK STATISTICS
• Insulation revenues increased 35.1% y-o-y to Rs 157.2 mn with EBIT
margins at 3.6% during the quarter. EPS segment revenues increased NIFTY 5,989
21.9% y-o-y to Rs 73.3 mn, while the prefab panels segment registered y- NSE Beardsell
o-y growth of 80.4% to Rs 50 mn in Q2FY11. Face value (Rs per share) 10
• Currently, the demand from Chennai, where Beardsell is trying to build its Shares outstanding (mn) 3.8
customer base, is being met from the Coimbatore factory. As a result, Market cap (Rs mn)/(US$ mn) 209/4.7
transportation cost increased 24.5% y-o-y. Raw material cost too Enterprise value (Rs mn) /(US$ mn) 150/3.4
increased 54% y-o-y to Rs 49 mn. Therefore EBITDA margin declined 230 52-week range (Rs) (H/L) 100/35
bps q-o-q to 4.8% in Q2FY11, however it was flat on y-o-y basis. Beta 1.7
• In line with decline in EBITDA margins, PAT margin declined 219 bps q-o-q Free float (%) 52.0%
to 1.9% in Q2FY11. PAT margins also declined 252 bps y-o-y due to Avg daily volumes (30-days) 372
significantly higher interest expense. Avg daily value (30-days) (Rs mn) 0.1

Key development: Chennai factory likely to be operational in Q4FY11

Beardsell is putting up an EPS manufacturing capacity of 800 mtpa (~40% of SHAREHOLDING PATTERN
the existing capacity) in Chennai. Most of the construction activities have 100%
90%
already been completed; plant and machineries have been dispatched from 30.1% 30.1% 30.1% 30.7%
80%
China. We have already factored in the incremental revenues from the Chennai 70%
factory in FY12. Hence, we maintain our estimates. 60% 21.3% 21.3% 21.3% 21.3%
50%
Valuations: Upside from current levels 40%
We continue to value Beardsell based on the discounted cash flow method. As 30%
48.6% 48.6% 48.6% 48.0%
our FY11 and FY12 earnings estimates are unchanged, we maintain our one- 20%

year fair value of Rs 61 and valuation grade of ‘4/5’. 10%

0%

KEY FORECAST Dec-09 Mar-10 Jun-10 Sep-10

Promoter FII DII Others
(Rs mn) FY08 FY09 FY10 FY11E FY12E
Operating income 595 520 556 635 761 PERFORMANCE VIS-À-VIS MARKET
EBITDA 36 13 25 34 44 Returns
Adj PAT 23 10 9 22 27 1-m 3-m 6-m 12-m
Adj EPS-Rs 6.0 2.6 2.4 5.7 7.0
Beardsell -2% 3% -13% na
EPS growth (%) (7.6) (87.7) 496.4 27.0 21.7
NIFTY 2% 15% 21% 29%
Dividend yield (%) 1.8 - - - -
RoCE (%) 17.9 4.2 8.9 11.0 13.3
RoE (%) 15.0 5.9 4.9 10.4 11.3 ANALYTICAL CONTACT
PE (x) 16.1 12.7 23.5 9.5 7.8 Sudhir Nair (Head) snair@crisil.com
P/BV (x) 2.3 0.7 1.1 0.9 0.8 Ravi Dodhia rdodhia@crisil.com
EV/EBITDA (x) 9.1 4.5 6.1 4.4 3.4 Bhaskar Bukrediwala bsbukrediwala@crisil.com
Sou rc e: Com pan y, CR I SIL Equ it ies est im ate Client servicing desk
CMP: Current Market Price
+91 22 3342 3561 clientservicing@crisil.com

CRISIL EQUITIES | 1
 Beardsell Limited

Q2FY11 Result Summary

(Rs mn) Q2FY11 Q1FY11 Q2FY10 q-o-q (%) y-o-y (%)
Net sales 166 166 123 0.4 35.5
Raw materials cost 49 51 32 (2.6) 54.3
Raw materials cost (% of net
sales) 29.7% 30.6% 26.1% -90bps 363bps
Employees cost 14 14 12 2.9 20.0
Other expenses 95 90 73 5.9 29.6 EBITDA margin
EBITDA 8 12 6 (32.2) 36.7 declined 230 bps q-
EBITDA margin 4.8% 7.1% 4.7% -230bps 4bps o-q due to higher
Depreciation 2 2 1 (0.3) 173.0 transportation costs
EBIT 5.7 9.5 5.0 (39.8) 14.2
Interest and finance charges 2 1 0 95.0 862.9
Operating PBT 4 9 5 (55.1) (20.6)
Other Income 3 2 4 58.3 (35.8)
PBT 7 10 9 (35.9) (27.7)
Tax 3 3 4 (2.0) (7.2)
PAT margin decline
PAT 3 7 5 (53.3) (41.6)
in line with EBITDA
Adj PAT 3 7 5 (53.3) (41.6)
margin
Adj PAT margin 1.9% 4.1% 4.4% -219bps -252bps
No of equity shares (Mn) 3.8 3.8 3.8 - -
Adj EPS (Rs) 0.8 1.8 1.4 (53.3) (41.6)

Sou rc e: Com pan y, CR I SIL Equ it ies

Insulation segment’s EBIT declined significantly Trading segment’s revenues improved in Q2FY11
Rs mn Rs mn
160 16% 15 60%
14% 14% 42%
14%
150 12%
11% 13 30%
10% 12% 12%
9% 27%
140 -5%
10%
8% 11 0%
130 8% -12%
-23% -17%
7% -40%
6% 9 -30%
120
-62% -36%
4%
4%
110 7 -54% -60%
2% 13
12 10 9
9 7 7
100 0% 6
5 6 6 -90%
Q1FY09

Q2FY09

Q3FY09

Q4FY09

Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

Q2FY11

Q1FY09

Q2FY09

Q3FY09

Q4FY09

Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

Q2FY11

Insulation revenues EBIT margins (RHS) Trading revenues y-o-y growth (RHS)

Sou rc e: Com pan y, CR I SIL Equ it ies Sou rc e: Com pan y, CR I SIL Equ it ies

CRISIL EQUITIES | 2
 Beardsell Limited

EBITDA margins are highly volatile Q2 PAT margin declined 252 bps y-o-y to 1.9%
(Rs mn) (Rs mn)
170 3.2% 7.1% 4.8% 12% 11.9%
8.9% 20 16%

160 4.7% 8% 15 12%

4.0%
2.6% 10 4.1%
150 4% 4.1% 4.4% 8%
5 2.3% 1.3% 1.9%
140 0% 4%
-11.9% 0
130 -4% 0%
-5
-8.0%
120 -8% -4%
-10

110 -12% -15 -8%

119 131 116 123 150 165 166 166 3 -10 5 5 2 20 7 3
100 -16% -20 -12%

Dec-08

Mar-09

Sep-09

Dec-09

Mar-10

Sep-10
Jun-09

Jun-10
Dec-08

Mar-09

Sep-09

Dec-09

Mar-10

Sep-10
Jun-09

Jun-10

Revenue EBITDA margin (RHS) PAT PAT margin (RHS)

Sou rc e: Com pan y, CR I SIL Equ it ies Sou rc e: Com pan y, CR I SIL Equ it ies

Share price movement Fair value movement since initiation

250 (Rs)
70 2,500
200
60
2,000
50
150
40 1,500

100 30 1,000
20
50 500
10

0 - -
Jun-10

Nov-10
May-10

Jul-10

Aug-10

Sep-10

Oct-10
Jan-10

Nov-10
Feb-10

May-10

Jun-10
Mar-10

Jul-10

Aug-10

Sep-10

Oct-10
Apr-10

Beardsell NIFTY Total Traded Quantity(RHS) Beardsell CRISIL Fair Value

-Indexed to 100
Sou rce: N SE, CR ISIL Equ iti es Sou rce: N SE, CR ISIL Equ iti es

CRISIL EQUITIES | 3
 Beardsell Limited

VALUATION
We continue to value Beardsell based on the discounted cash flow method. We

maintain our fair value estimate for Beardsell at Rs 61. At this value, the implied

P/E multiples are 10.7x FY11 earnings estimate and 8.8x FY12 earnings estimate.

One-year forward P/E band One-year forward EV/EBITDA band

(Rs) (Rs mn)
100 350

300
80
250
60
200

40 150

100
20
50

0 0
Jan-10

Jun-10

Nov-10
Feb-10

May-10
Mar-10

Jul-10

Sep-10
Apr-10

Aug-10

Oct-10

Jan-10

Nov-10
May-10

Jun-10
Feb-10

Jul-10
Mar-10

Aug-10

Sep-10
Apr-10

Oct-10
Beardsell 5x 6x 7x 8x 9x EV 3x 4x 5x 6x

Sou rce: N SE, CR ISIL Equ iti es Sou rce: N SE, CR ISIL Equ iti es

P/E – premium/discount to NIFTY P/E movement

20% 20
18
0% 16
14
-20% 12 +1 std dev
10
-40% 8
6
-1 std dev
-60% 4
2
-80% 0
Jan-10

Jun-10

Nov-10
Feb-10

May-10
Mar-10

Jul-10

Sep-10
Apr-10

Aug-10

Oct-10

Jan-10

Jun-10

Nov-10
Feb-10

May-10
Mar-10

Jul-10
Apr-10

Aug-10

Sep-10

Oct-10
Premium/Discount to NIFTY Median 1yr Fwd PE (x) Median PE

Sou rce: N SE, CR ISIL Equ iti es Sou rce: N SE, CR ISIL Equ iti es

CRISIL IER reports released on Beardsell

Date Nature of report Fundamental Fair value Valuation CMP
grade grade (on the date of report)
4-May-10 Initiating coverage* 3/5 Rs 54 2/5 Rs 64
1-June-10 Q4FY10 result update 3/5 Rs 54 2/5 Rs 60
18-Aug-10 Q1FY11 result update 3/5 Rs 61 4/5 Rs 53
17-Nov-10 Q2FY11 result update 3/5 Rs 61 4/5 Rs 55
* For detailed initiating coverage report please visit: www.ier.co.in
CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

CRISIL EQUITIES | 4
 Beardsell Limited

FINANCIALS
Income statement Balance Sheet
(Rs mn) FY08 FY09 FY10 FY11E FY12E (Rs mn) FY08 FY09 FY10 FY11E FY12E
Operating income 595 520 556 635 761 Liabilities
EBITDA 36 13 25 34 44 Equity share capital 38 38 38 38 38
EBITDA margin 6.1% 2.5% 4.5% 5.4% 5.8% Reserves 124 131 163 184 211
Depreciation 6 6 7 8 11 Minorities - - - - -
EBIT 31 7 18 26 33 Net worth 162 169 201 223 250
Interest 2 1 2 2 2 C onvertible debt - - - - -
Operating PBT 28 6 16 24 32 Other debt 13 4 28 20 10
Other income 9 7 9 9 9 Total debt 13 4 28 20 10
Exceptional inc/(exp) 0 (7) 8 - - Deffered tax liability (net) 4 (7) (3) (2) (1)
PBT 38 6 33 33 40 Total liabilities 180 165 226 241 259
Tax provision 14 4 16 11 14 Assets
Minority interest - - - - - Net fixed assets 40 63 97 99 113
PAT (Reported) 24 3 17 22 27 C apital WIP 3 10 8 8 8
Less: Exceptionals 0 (7) 8 - - Total fixed assets 42 73 105 107 121
Adjusted PAT 23 10 9 22 27 Investments 1 1 3 3 3
Current assets
Ratios Inventory 39 23 35 35 43
FY08 FY09 FY10 FY11E FY12E Sundry debtors 120 99 118 135 163
Growth Loans and advances 61 46 50 57 69
Operating income (%) 15.2 (12.6) 6.9 14.1 19.9 C ash & bank balance 55 68 87 77 68
EBITDA (%) 107.8 (63.7) 91.8 36.0 29.1 Marketable securities 0 0 0 0 0
Adj PAT (%) (9.1) (57.6) (7.2) 141.1 21.7 Total current assets 275 236 289 304 342
Adj EPS (%) (9.1) (57.6) (7.2) 141.1 21.7 Total current liabilities 138 145 172 174 208
Net current assets 137 91 117 130 134
Profitability Intangibles/Misc. expenditure - - - - -
EBITDA margin (%) 6.1 2.5 4.5 5.4 5.8 Total assets 180 165 226 241 259
Adj PAT Margin (%) 3.9 1.9 1.6 3.5 3.5
RoE (%) 15.0 5.9 4.9 10.4 11.3 Cash flow
RoC E (%) 17.9 4.2 8.9 11.0 13.3 (Rs Mn) FY08 FY09 FY10 FY11E FY12E
RoIC (%) 26.9 16.1 16.1 22.3 21.1 Pre-tax profit 37 13 25 33 40
Total tax paid (16) (15) (11) (10) (13)
Valuations Depreciation 6 6 7 8 11
Price-earnings (x) 16.1 12.7 23.0 9.5 7.8 Working capital changes 17 59 (7) (23) (13)
Price-book (x) 2.3 0.7 1.0 0.9 0.8 Net cash from operations 44 62 14 9 25
EV/EBITDA (x) 9.1 4.5 5.9 4.4 3.4 Cash from investments
EV/Sales (x) 0.6 0.1 0.3 0.2 0.2 C apital expenditure (5) (36) (40) (10) (25)
Dividend payout ratio (%) 28.6 - - - - Investments and others - - (3) - -
Dividend yield (%) 1.8 - - - - Net cash from investments (5) (36) (42) (10) (25)
Cash from financing
B/S ratios Equity raised/(repaid) 0 4 15 - 0
Inventory days 25.5 16.7 25.1 21.3 22.0 Debt raised/(repaid) (7) (10) 24 (8) (10)
C reditors days 85.0 99.0 108.2 98.6 98.2 Dividend (incl. tax) (7) - - - -
Debtor days 77.6 66.8 76.6 74.1 74.5 Others (incl extraordinaries) 0 (7) 8 - -
Working capital days 55.3 36.7 17.5 23.9 28.6 Net cash from financing (13) (13) 47 (8) (9)
Gross asset turnover (x) 6.8 5.7 4.3 3.9 4.2 C hange in cash posiiton 26 13 19 (10) (9)
Net asset turnover (x) 15.2 10.1 7.0 6.5 7.2 C losing cash 55 68 87 77 68
Sales/operating assets (x) 13.8 9.0 6.2 6.0 6.7
C urrent ratio (x) 2.0 1.6 1.7 1.7 1.6 Quarterly financials
Debt-equity (x) 0.1 0.0 0.1 0.1 0.0 (Rs Mn) Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11
Net debt/equity (x) (0.3) (0.4) (0.3) (0.3) (0.2) Net Sales 123 150 165 166 166
Interest coverage 13.4 6.6 11.1 12.3 21.0 C hange (q-o-q) 6% 22% 10% 0% 0%
EBITDA 6 4 5 12 8
Per share C hange (q-o-q) -44% -34% 39% 120% -32%
FY08 FY09 FY10 FY11E FY12E EBITDA margin 4.7% 2.6% 3.2% 7.1% 4.8%
Adj EPS (Rs) 6.0 2.6 2.4 5.7 7.0 PAT 5 2 20 7 3
C EPS 7.5 4.1 4.3 7.9 9.8 Adj PAT 5 2 20 7 3
Book value 42.3 44.1 52.4 58.1 65.1 C hange (q-o-q) 13% -65% 928% -65% -53%
Dividend (Rs) 1.8 - - - - Adj PAT margin 4.4% 1.3% 11.9% 4.1% 1.9%
Actual o/s shares (mn) 3.8 3.8 3.8 3.8 3.8 Adj EPS 1.4 0.5 5.1 1.8 0.8

Note: All ratios are computed on Adj PAT

Source: Co mpan y, CRISIL Equ ities estimate

CRISIL EQUITIES | 5
CRISIL Independent Equity Research Team

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