1QFY2019 Result Update | Industrial Machinery
August 13, 2018
GMM Pfaudler Limited
BUY
CMP
`1024
Performance Update
Target Price
`1200
Standalone (` cr)
Q1FY19
Q1FY18
% yoy
Q4FY18
% qoq
Investment Period
12 Months
Net sales
93.2
76.4
35.4
87.9
6.1
EBITDA
15.3
10.7
42.2
14.4
6.0
EBITDA margin (%)
16.4%
11.4%
16.4%
Stock Info
Adjusted PAT
9.1
5.6
63.9
8.4
7.9
Sector
Industrial Machinery
For Q1FY2019, GMM Pfaudler (GMM) posted a growth of 35.4%/63.9% yoy
Market Cap (` cr)
1,497
growth in revenue/ PAT amid ~494 bps margin expansion. The company is
Beta
0.7
seeing good traction from its user industries like agrochemicals, which would
52 Week High / Low
1057/510
drive 15-20% revenue growth in next two years. In view of robust demand, it is
Avg. Daily Volume
3,460
Face Value (`)
2
expanding its capacities by 25% in FY2019.
BSE Sensex
37,869
Healthy order book: Q1’s top-line rose by 35% led by robust execution in glass
Nifty
11,429
line and proprietary products segment. Its Q1FY2019 closing order backlog is the
Reuters Code
GMMP.BO
highest ever order book achieved. Pharma sector share has come down from
Bloomberg Code
GMM.IN
historical 50% to 35%. Orders from Pharma City in Hyderabad has started
Shareholding Pattern (%)
pouring in which has further boosted the company’s order book.
Promoters
75.0
Margins were decent: Operating margin were robust at 16.4% due to better
MF / Banks / Indian Fls
0.7
product mix and cost optimization. GMM is likely to sustain operating margin at
FII / NRIs / OCBs
0.4
~16-17% level. Its subsidiary is also doing well and likely to maintain robust
Indian Public / Others
23.9
revenue run rate and margins for the year.
Outlook and Valuation: We have increased earnings estimates for improvement
in margins and robust order book. We are expecting a CAGR of ~19%/26% in
revenue/ earnings over FY18-20E. The stock has given 44% return since our
initiation in April and is currently trading at 17x its FY2020 earnings which still
looks attractive given its robust earnings growth trajectory. Hence, we recommend
BUY with a target price of `1200 (26x FY2020E EPS).
Nidhi Agrawal
022-39357800 Ext: 6872
Key Financials
[email protected]
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
Net Sales
292.1
353.0
405.7
480.8
577.6
% chg
-5.1
20.9
14.9
18.5
20.1
Net Profit
19.9
33.3
42.7
56.1
67.4
% chg
6.4
67.0
28.3
31.6
20.0
EBITDA (%)
12.0
13.5
15.3
17.1
17.1
EPS (Rs)*
13.6
22.8
29.2
38.5
46.2
P/E (x)
59.0
35.3
27.5
20.9
17.4
P/BV (x)
7.0
6.0
5.1
4.2
3.5
RoE (%)
11.9
17.1
18.5
20.2
20.1
RoCE (%)
16.1
20.3
22.7
25.7
25.8
EV/EBITDA
31.7
23.0
17.4
12.8
10.3
EV/Sales
3.8
3.1
2.7
2.2
1.8
Source: Company, Angel Research
Please refer to important disclosures at the end of this report
1
GMM Pfaudler |1QFY2019 Result Update
Exhibit 1: Q1 results at a glance
Standalone results -` cr
Q1FY18
Q4FY18
Q1FY19
YoY %
QoQ %
Net Sales
68.9
87.9
93.2
35.4%
6.1%
Raw Material Consumed
31.7
40.6
47.7
50.6%
17.5%
Stock Adjustment
-1.1
-3.4
2.3
-315.0%
-169.5%
Employee Expenses
8.6
9.5
9.9
15.7%
3.9%
Other Expenses
21.8
26.7
18.0
-17.6%
-32.7%
Total Expenditure
61.0
73.5
78.0
27.8%
6.1%
Raw Material Consumed
46%
46%
51%
Stock Adjustment
-2%
-4%
3%
Employee Expenses
12%
11%
11%
Other Expenses
32%
30%
19%
PBIDT
10.7
14.4
15.3
42.2%
6.0%
Other Income
2.9
2.1
1.3
-54.1%
-36.4%
Interest
0.5
0.2
0.2
-61.8%
-27.7%
Depreciation
2.0
2.2
2.5
29.6%
13.4%
PBT
8.3
14.0
13.9
66.4%
-0.9%
Tax
2.8
5.6
4.8
71.5%
-14.2%
Profit After Tax
5.6
8.4
9.1
63.9%
7.9%
Ratios
EBITDA margin %
11.4%
16.4%
16.4%
PAT margin %
8.1%
9.6%
9.8%
Tax rate %
33.4%
39.7%
34.4%
Exhibit 2: Segmental performance
` cr
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Q1FY19
YoY
QoQ
Total Segment Revenue
74.1
76.4
79.2
87.9
93.2
25.8%
6.1%
Glass Lined Equipments
52.9
53.6
48.1
64.0
65.9
24.7%
3.0%
Heavy Engineering
9.4
9.2
8.5
9.9
10.4
10.4%
4.9%
Proprietary Products
11.8
13.6
22.6
13.9
16.9
42.8%
21.0%
Non GL segment
21.2
22.8
31.1
23.9
27.3
28.4%
14.3%
As a % of revenue
Glass Lined Equipments
71%
70%
61%
73%
71%
Heavy Engineering
13%
12%
11%
11%
11%
Proprietary Products
16%
18%
29%
16%
18%
Non GL segment
29%
30%
39%
27%
29%
PBIT
9.5
13.1
12.4
16.3
16.6
75.3%
1.5%
Glass Lined Equipments
8.1
11.6
9.5
13.4
13.1
62.2%
-1.8%
Heavy Engineering
0.8
0.9
0.8
1.5
2.3
194.5%
52.3%
Proprietary Products
0.6
0.6
2.0
1.5
1.2
97.3%
-20.0%
Non-GL segment
1.4
1.5
2.8
3.0
3.5
152.6%
16.8%
PBIT margin %
12.8%
17.2%
15.6%
18.6%
17.8%
Glass-Lined segment
15.3%
21.6%
19.8%
20.9%
19.9%
Heavy Engineering
8.3%
9.9%
9.7%
15.2%
22.1%
Proprietary Products
5.0%
4.5%
8.8%
10.4%
6.9%
Source: Company
August 13, 2018
2
GMM Pfaudler |1QFY2019 Result Update
Risks to our estimates
GMM’s primary raw material is steel; any abrupt fluctuation in pricing will
adversely impact its profitability.
Business may get impacted owing to the inability to get break through with
new clients or slowdown in capex by its clients.
GMM has market exposure to foreign exchange rates mainly on account
of exports, imports and investments in foreign subsidiary, and therefore, it
is subjected to the exchange fluctuation risk.
August 13, 2018
3
GMM Pfaudler |1QFY2019 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
Total operating income
292.1
353.0
405.7
480.8
577.6
% chg
-5.1
20.9
14.9
18.5
20.1
Total Expenditure
257.1
305.3
336.7
398.4
478.6
COGS
173.4
209.6
240.9
285.5
343.0
Selling and Administration Expenses
19.2
22.1
23.7
28.1
33.7
Personnel
56.2
66.1
63.5
75.3
90.4
Others Expenses
8.4
7.6
8.7
9.6
11.6
EBITDA
34.9
47.7
69.0
82.4
99.0
% chg
-2.8
36.6
44.5
19.5
20.1
(% of Net Sales)
12.0
13.5
17.0
17.1
17.1
Depreciation& Amortisation
8.1
8.2
9.8
10.8
12.7
EBIT
26.8
39.5
59.2
71.6
86.3
% chg
2.7
47.3
49.8
21.0
20.5
(% of Net Sales)
9.2
11.2
14.6
14.9
14.9
Interest & other Charges
0.7
0.9
1.0
1.0
1.0
Other Income
3.6
8.3
9.4
10.8
12.4
(% of Sales)
1.2
2.3
2.3
2.2
2.1
Extraordinary Items
-
-
-
-
-
Share in profit of Associates
-
-
-
-
-
Recurring PBT
29.8
46.9
67.5
81.4
97.7
% chg
5.6
57.4
44.1
20.5
20.0
Tax
9.7
13.6
18.0
25.2
30.3
PAT (reported)
19.9
33.3
42.7
56.1
67.4
% chg
6.4
67.0
28.3
31.6
20.0
(% of Net Sales)
6.8
9.4
10.5
11.7
11.7
Basic & Fully Diluted EPS (Rs)
13.6
22.8
29.2
38.5
46.2
% chg
6.4
67.0
28.3
31.6
20.0
August 13, 2018
4
GMM Pfaudler |1QFY2019 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018E FY2019E FY2020E
SOURCES OF FUNDS
Equity Share Capital
2.9
2.9
2.9
2.9
2.9
Reserves& Surplus
163.9
191.9
227.9
275.3
332.1
Shareholders Funds
166.8
194.8
230.8
278.2
335.0
Minority Interest
-
-
-
-
-
Total Loans
-
-
-
-
-
Other Liab & Prov
4.4
11.1
11.6
12.1
12.8
Total Liabilities
171.3
205.9
242.4
290.3
347.8
APPLICATION OF FUNDS
Net Block
53.4
61.2
66.4
70.6
72.9
Capital Work-in-Progress
4.3
2.0
2.0
2.0
2.0
Investments
13.7
44.6
64.6
84.6
94.6
Current Assets
178.6
207.9
233.2
273.2
346.6
Inventories
70.9
82.3
94.5
112.0
134.6
Sundry Debtors
48.7
69.9
80.3
95.2
114.4
Cash
53.6
31.7
30.6
33.1
58.2
Loans & Advances
5.5
24.1
27.7
32.8
39.4
Other Assets
-
-
-
-
-
Current liabilities
84.4
113.2
127.9
144.9
174.1
Net Current Assets
94.2
94.7
105.3
128.2
172.5
Other Non Current Asset
5.6
3.4
4.1
4.8
5.8
Total Assets
171.3
205.9
242.4
290.3
347.8
August 13, 2018
5
GMM Pfaudler |1QFY2019 Result Update
Consolidated Cashflow Statement
Y/E March (` cr)
FY2016
FY2017
FY2018E FY2019E FY2020E
Profit before tax
29.8
46.9
60.7
81.4
97.7
Depreciation
8.1
8.2
9.8
10.8
12.7
Change in Working Capital
(2.0)
(12.8)
(9.7)
(20.5)
(19.2)
Interest / Dividend (Net)
-
-
-
-
-
Direct taxes paid
(9.6)
(14.0)
(18.0)
(25.2)
(30.3)
Others
1.8
5.3
-
-
-
Cash Flow from Operations
24.7
23.0
42.8
46.5
60.9
(Inc.)/ Dec. in Fixed Assets
(13.9)
(14.4)
(15.0)
(15.0)
(15.0)
(Inc.)/ Dec. in Investments
0.3
0.1
-
-
-
Cash Flow from Investing
(17.0)
(22.0)
(36.9)
(35.4)
(25.5)
Issue of Equity
-
-
-
-
-
Inc./(Dec.) in loans
-
-
-
-
-
Others
6.0
6.3
6.7
8.8
10.5
Cash Flow from Financing
(6.0)
(6.3)
(6.7)
(8.8)
(10.5)
Inc./(Dec.) in Cash
1.7
(5.3)
(0.8)
2.3
24.9
Opening Cash balances
34.7
36.4
31.1
30.3
32.6
Closing Cash balances
36.4
31.1
30.3
32.6
57.5
Free cash Flow
10.8
8.6
27.8
31.5
45.9
August 13, 2018
6
GMM Pfaudler |1QFY2019 Result Update
Key Ratios
Y/E March
FY16
FY17
FY18
FY19E
FY20E
Valuation Ratio (x)
P/E (on FDEPS)
59.0
35.3
27.5
20.9
17.4
P/CEPS
31.6
20.7
16.3
12.7
10.6
P/BV
7.0
6.0
5.1
4.2
3.5
Dividend yield (%)
0.4
0.5
0.5
0.6
0.7
EV/Sales
3.8
3.1
2.7
2.2
1.8
EV/EBITDA
31.7
23.0
17.4
12.8
10.3
EV / Total Assets
6.5
5.3
4.5
3.6
2.9
Per Share Data (`)
EPS (Basic)
13.6
22.8
29.2
38.5
46.2
EPS (fully diluted)
13.6
22.8
29.2
38.5
46.2
Cash EPS
25.5
38.9
49.4
63.5
76.1
DPS
3.0
4.0
4.0
5.0
6.0
Book Value
114.3
133.4
158.1
190.5
229.5
Returns (%)
ROCE
16.1
20.3
22.7
25.7
25.8
Angel ROIC (Pre-tax)
25.8
30.5
35.5
41.5
44.2
ROE
11.9
17.1
18.5
20.2
20.1
Turnover ratios (x)
Asset Turnover (Gross Block)
2.6
3.1
3.2
3.4
3.7
Inventory / Sales (days)
89
85
85
85
85
Receivables (days)
61
72
72
72
72
Payables (days)
101
115
115
110
110
WC cycle (ex-cash) (days)
48
42
42
47
47
Source: Company, Angel Research
August 13, 2018
7
GMM Pfaudler |1QFY2019 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER:
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
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contrary view, if any
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Disclosure of Interest Statement
GMM Pfaudler
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
No
relatives
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%)
August 13, 2018
8