2QFY2017 Result Update | Ceramics
October 28, 2016
Asian Granito
BUY
CMP
`273
Performance Highlights
Target Price
`351
Quarterly Data
Investment Period
12 months
(` cr)
2QFY17
2QFY16
% yoy
1QFY17
% qoq
Revenue
265
250
6.1
213
24.7
Stock Info
EBITDA
31
22
43.6
25
26.0
Sector
Ceramics
Margin (%)
11.8
8.7
308bp
11.7
12bp
Market Cap (` cr)
820
Adj. PAT
10
6
56.4
6
53.3
Source: Company, Angel Research
Net Debt (` cr)
304
Beta
1.3
For 2QFY2017, Asian Granito’s results have come in line with our estimates on the
52 Week High / Low
304/109
bottom-line front while the top-line front disappointed. Revenues grew by ~6% yoy,
Avg. Daily Volume
88,577
which is lower than our estimate. On the operating front, the company reported
Face Value (`)
10
margin improvement, primarily on account of lower power & fuel cost. Further, on the
BSE Sensex
27,916
bottom-line front, the company reported strong growth on account of a favorable
Nifty
8,615
operating performance.
Reuters Code
ASGI.BO
Volumes grew 6%: The company’s top-line grew by ~6% yoy to `265cr (which is
Bloomberg Code
ASIAN.IN
below our estimate of `296cr) on back of volume growth of 6% yoy. Going
forward, the management expects improvement in sales on back of rival in
industry.
Shareholding Pattern (%)
Promoters
37.5
Strong operating performance boosts profitability: On the operating front, the
company’s margin improved by 308bp yoy to 11.8%, primarily on account of lower
MF / Banks / Indian Fls
0.8
power & fuel cost (due to recent merger with Artistique Ceramics, which has gas
FII / NRIs / OCBs
0.1
supply contract with ONGC in lower prices). The company reported ~56% yoy rise in
Indian Public / Others
61.6
its net profit to `10cr on back of the strong operating performance.
Outlook and valuation
Abs. (%)
3m 1yr
3yr
Considering the various initiatives taken by the government like smart cities,
Sensex
(0.4)
7.1
35.7
housing for all by 2022, and push towards providing sanitation would create a
GWRL
25.3
58.3
1030.1
new demand avenue for entry level or lower priced tiles (ceramic tiles). We expect
AGIL to report net revenue CAGR of ~9% to ~ `1,182cr over FY2016-18E. On
3-year price chart
the bottom-line front, we expect CAGR of ~39% to `48cr over FY2016-18E,
350
owing to better product mix, higher B2C sales and amalgamation synergy.
300
Hence, we recommend a BUY rating on the stock.
250
Key financials (Consolidated)
200
Y/E March (` cr)
FY2015
FY2016
FY2017E
FY2018E
150
100
Net sales
842
994
1,071
1,182
50
% chg
9.0
18.1
7.7
10.3
-
Net profit
15
25
38
48
% chg
14.5
24.8
38.3
48.0
EBITDA margin (%)
7.2
9.1
12.1
12.4
Source: Company, Angel Research
EPS (`)
4.8
8.2
12.7
16.0
P/E (x)
56.6
33.1
21.4
17.1
P/BV (x)
2.8
2.3
2.0
1.8
RoE (%)
5.0
6.8
9.5
10.7
RoCE (%)
9.0
9.0
12.2
13.9
Amarjeet S Maurya
EV/Sales (x)
1.2
1.1
1.1
0.9
022-39357800 Ext: 6831
EV/EBITDA (x)
15.9
12.5
8.8
7.5
[email protected]
Source: Company, Angel Research, Note: CMP as of October 27, 2016
Please refer to important disclosures at the end of this report
1
Asian Granito | 2QFY2017 Result Update
Exhibit 1: Quarterly performance
Y/E March (` cr)
2QFY17
2QFY16
% yoy
1QFY17
% qoq
1HFY17
1HFY16
% chg
Net Sales
265
250
6.1
213
24.7
478
449
6.6
Consumption of RM
149
143
4.3
111
34.2
260
269.32
(3.6)
(% of Sales)
56.0
57.0
52.1
54.3
60.0
Staff Costs
16
16
2.6
15
4.5
31
28
13.6
(% of Sales)
6.0
6.2
7.2
6.6
6.2
Power, Oil & Fuel
30
40
34.8
64.7
64.5
(% of Sales)
11.3
16.0
16.3
13.5
14.4
Other Expenses
40
30
31.5
27
46.4
67
51
30.0
(% of Sales)
14.9
12.0
12.7
13.9
11.4
Total Expenditure
234
228
2.5
188
24.6
422
413
2.3
Operating Profit
31
22
43.6
25
26.0
56
36
55.8
OPM
11.8
8.7
11.7
11.7
8.0
Interest
10
8
35.4
8
29.3
18
13
42.8
Depreciation
9
7
30.5
9
3.0
18
12
51.0
Other Income
0
1
(85.8)
0
(55.0)
0
1
(62.0)
PBT (excl. Ext Items)
12.0
8
52.7
8
45.4
20
12
66.6
Ext (Income)/Expense
-
-
-
-
PBT (incl. Ext Items)
12
8
52.7
8
45.4
20
12
66.6
(% of Sales)
4.5
3.2
3.9
4.2
2.7
Provision for Taxation
2
2
2
5
3
56.8
(% of PBT)
18.5
19.6
28.7
23
24
Reported PAT
10
6
54.8
6
66.3
16
9
69.7
PATM
3.7
2.5
2.8
3.3
2.1
Minority Interest After NP
1
1
0
1
1
Profit
1
0
1
2
0
Reported PAT
10
6
56.4
6
53.3
15.9
9.1
74.6
Equity shares (cr)
15
15
15
15
15
15
FDEPS (`)
0.6
0.4
56.4
0.4
53.3
1.1
0.6
74.6
Source: Company, Angel Research
October 28, 2016
2
Asian Granito | 2QFY2017 Result Update
Investment rationale
Focus on high value product
AGIL’s current vitrified sales (35%) are lower as compared to its peers like Somany
Ceramics (47%) and Kajaria Ceramics (61%). Recently, AGIL has launched various
products in premium segments like Imperio, Jumbo - Double Charge, CARARRA
White, XXL - Polished Glazed Vitrified Tiles, Polished Vitrified Tiles (Double Charge)
etc. Going forward, we expect AGIL’s profit margin to improve due to increase in
focus for higher vitrified product sales, which is a high margin business.
Shift from B2B to B2C would improve the margin
AGIL is continuously putting efforts to increase the B2C sales from the current level
(35% in FY16). It is expected to reach up to 50% in next 2-3 years on the back of
various initiatives taken by AGIL to increase direct interaction with customers like
strengthening distribution network, opening exclusive brand showrooms, trade
schemes on high value products, participation in key trade exhibition, etc.
Strengthening distribution network
AGIL has an extensive marketing and distribution network. It comprises of more
than 4,500 dealers and sub-dealers (~27% grew over last two years) and more
than 80 exclusive dealer showrooms covering each and every state of the country.
This helps the company in promoting its range of products in the market and
hence is planning to open 200 more exclusive dealer showrooms. Going forward,
we expect the company to continue to expand its network through dealers & sub-
dealers. Also, the company is opening 16 large format exclusive corporate display
stores for dealers and architects.
Artistique Ceramic merger to boost margins
In July FY2016, AGIL acquired Artistique Ceramic which has a better margin
profile. Going forward, we expect the company to improve its operating margin
from 7.5% in FY16 (excluding merger) to 12-12.5% in coming financial year.
Artisique Ceramics has a contract with RAS GAS to supply quality natural gas at a
discounted rate of 50% to current market rate, which would reduce the overall
power & fuel cost of the company.
October 28, 2016
3
Asian Granito | 2QFY2017 Result Update
Outlook and valuation
Considering the various initiatives taken by the government like smart cities,
housing for all by 2022, and push towards providing sanitation would create a
new demand avenue for entry level or lower priced tiles (ceramic tiles). We expect
AGIL to report net revenue CAGR of ~9% to ~`1,182cr over FY2016-18E. On the
bottom-line front, we expect CAGR of ~39% to `48cr over FY2016-18E, owing to
better product mix, higher B2C sales and amalgamation synergy. Hence, we
recommend a BUY rating on the stock.
Exhibit 2: One-year forward P/E band
400
5.0 X
10.0 X
15.0 X
20.0 X
25.0 X
350
300
250
200
150
100
50
0
Source: Company, Angel Research
Company Background
Asian Granito India (AGIL) is an India-based tiles manufacturing company. The
company is engaged in the manufacture and sale of ceramic wall, ceramic floor,
vitrified tiles, digital polished glazed vitrified tiles, digital wall tiles,marble, and
quartz. The company operates two business segments: tiles and marble and
quartz. The company manufactures tiles in multiple sizes and offers more than
1,200 designs. The company exports its products in 50+ countries like North
America, Europe, Africa, UAE, Australia, East Asia, Middle East, etc. It has eight
manufacturing facilities spread across Gujarat. Currently, the company has
combined capacity of 100,000 Sq. mtrs per day.
October 28, 2016
4
Asian Granito | 2QFY2017 Result Update
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
Total operating income
772
842
994
1,071
1,182
% chg
9.0
9.0
18.1
7.7
10.3
Total Expenditure
708
781
904
941
1,035
Cost of Materials
480
534
615
659
723
Personnel
37
42
59
66
77
Power, Oil & Fuel
116
131
128
107
118
Others Expenses
74
74
102
109
117
EBITDA
64
61
90
130
147
% chg
(8.2)
(5.1)
48.4
43.5
13.1
(% of Net Sales)
8.3
7.2
9.1
12.1
12.4
Depreciation& Amortisation
22
19
28
37
39
EBIT
43
42
63
93
107
% chg
(11.7)
(1.6)
50.0
47.9
15.6
(% of Net Sales)
5.5
5.0
6.3
8.7
9.1
Interest & other Charges
21
23
29
39
39
Other Income
1
1
1
2
2
(% of PBT)
5.7
4.7
3.9
2.7
2.2
Share in profit of Associates
-
-
-
-
-
Recurring PBT
23
20
35
55
70
% chg
(10.7)
(11.3)
74.2
58.4
25.8
Prior Period & Extraord. Exp./(Inc.)
-
-
-
-
-
PBT (reported)
23
20
35
55
70
Tax
8
6
11
18
22
(% of PBT)
37.1
27.9
32.2
32.0
32.0
PAT (reported)
14
15
24
38
47
Add: Share of earnings of asso.
-
-
2
2
2
Less: Minority interest (MI)
-
-
2
2
2
Extraordinary Items
(1)
PAT after MI (reported)
14
15
25
38
48
% chg
(16.7)
1.7
70.9
54.6
25.4
(% of Net Sales)
1.8
1.7
2.5
3.6
4.1
Basic EPS (`)
4.7
4.8
8.2
12.7
16.0
Fully Diluted EPS (`)
4.7
4.8
8.2
12.7
16.0
% chg
(16.7)
1.7
70.9
54.6
25.4
October 28, 2016
5
Asian Granito | 2QFY2017 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
SOURCES OF FUNDS
Equity Share Capital
23
23
23
30
30
Reserves& Surplus
253
267
341
371
419
Shareholders Funds
275
290
363
401
450
Minority Interest
-
-
19
19
19
Total Loans
228
175
335
359
320
Deferred Tax Liability
17
18
30
30
30
Total Liabilities
520
483
747
809
818
APPLICATION OF FUNDS
Gross Block
308
338
603
643
663
Less: Acc. Depreciation
131
149
211
248
287
Net Block
178
188
392
395
376
Capital Work-in-Progress
7
15
6
6
6
Investments
13
11
13
13
13
Current Assets
488
438
539
614
668
Inventories
207
191
245
270
298
Sundry Debtors
191
166
197
211
230
Cash
19
15
17
25
34
Loans & Advances
21
21
30
54
59
Other Assets
49
46
50
54
47
Current liabilities
165
168
203
219
245
Net Current Assets
323
270
336
395
423
Deferred Tax Asset
-
-
-
-
-
Mis. Exp. not written off
-
-
-
-
-
Total Assets
520
483
747
809
818
October 28, 2016
6
Asian Granito | 2QFY2017 Result Update
Consolidated Cash flow
Y/E March (` cr)
FY2014
FY2015
FY2016
FY2017E
FY2018E
Profit before tax
22
19
35
55
70
Depreciation
22
19
28
37
39
Change in Working Capital
6
49
(64)
(51)
(20)
Interest / Dividend (Net)
21
23
29
39
39
Direct taxes paid
(8)
(6)
(5)
(18)
(22)
Others
(0)
0
(1)
1
1
Cash Flow from Operations
62
104
21
63
107
(Inc.)/ Dec. in Fixed Assets
(23)
(30)
(224)
(40)
(20)
(Inc.)/ Dec. in Investments
5
2
(3)
-
-
Cash Flow from Investing
(29)
(33)
(221)
(40)
(20)
Issue of Equity
4
-
8
-
-
Inc./(Dec.) in loans
(24)
(53)
160
24
(39)
Dividend Paid (Incl. Tax)
-
-
-
-
-
Interest / Dividend (Net)
(24)
(23)
36
(39)
(39)
Cash Flow from Financing
(43)
(76)
203
(15)
(78)
Inc./(Dec.) in Cash
(10)
(4)
3
8
9
Opening Cash balances
29
19
15
17
25
Closing Cash balances
19
15
17
25
34
October 28, 2016
7
Asian Granito | 2QFY2017 Result Update
Key Ratio
Y/E March
FY2014
FY2015
FY2016
FY2017E
FY2018E
Valuation Ratio (x)
P/E (on FDEPS)
57.5
56.6
33.1
21.4
17.1
P/CEPS
22.9
24.5
16.0
11.0
9.5
P/BV
3.0
2.8
2.3
2.0
1.8
Dividend yield (%)
0.0
0.0
0.0
0.0
0.0
EV/Sales
1.3
1.2
1.1
1.1
0.9
EV/EBITDA
15.9
15.9
12.5
8.8
7.5
EV / Total Assets
1.5
1.5
1.2
1.1
1.0
Per Share Data (`)
EPS (Basic)
4.7
4.8
8.2
12.7
16.0
EPS (fully diluted)
4.7
4.8
8.2
12.7
16.0
Cash EPS
11.9
11.1
17.0
24.7
28.8
DPS
0.0
0.0
0.0
0.0
0.0
Book Value
91.5
96.3
120.7
133.4
149.4
Returns (%)
ROCE
8.4
9.0
9.0
12.2
13.9
Angel ROIC (Pre-tax)
9.0
9.5
9.4
12.9
14.9
ROE
5.2
5.0
6.8
9.5
10.7
Turnover ratios (x)
Asset Turnover (Gross Block)
2.5
2.5
1.6
1.7
1.8
Inventory / Sales (days)
98
83
90
92
92
Receivables (days)
90
72
72
72
71
Payables (days)
68
61
57
53
52
WC cycle (ex-cash) (days)
121
94
105
111
111
October 28, 2016
8
Asian Granito | 2QFY2017 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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offering of securities of the company covered by Analyst during the past twelve months.
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Disclosure of Interest Statement
Asian Granito
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
October 28, 2016
9