2QFY2019 Result Update | Industrial Machinery
October 26, 2018
GMM Pfaudler Limited
BUY
CMP
`945
Performance Update
Target Price
`1200
Standalone (` cr)
Q2FY19
Q2FY18
% yoy
Q1FY19
% qoq
Investment Period
12 Months
Net sales
99.2
93.2
29.8%
76.4
6.4%
EBITDA
Stock Info
16.0
15.3
37.9%
11.6
4.8%
EBITDA margin (%)
16.1%
15.2%
16.4%
Sector
Industrial Machinery
Adjusted PAT
9.7
7.1
38.0%
7.0
6.7%
Market Cap (` cr)
1,379
Beta
0.9
For Q2FY2019, GMM Pfaudler (GMM) posted a growth of 29.8%/38% yoy
52 Week High / Low
1200/552
Avg. Daily Volume
3,912
growth in revenue/ PAT amid ~94 bps margin expansion. The company is seeing
Face Value (`)
2
good traction from its user industries like agrochemicals and pharmaceuticals
BSE Sensex
33,690
which are seeing robust capex owing to slowdown in China.
Nifty
10,056
Healthy order book: Q2’s top-line growth was led by robust execution in all of its
Reuters Code
GMMP.BO
segments. While pharma sector share has come down from historical 50% to
Bloomberg Code
GMM.IN
30%, the company is seeing good orders from the new Pharma City that is being
Shareholding Pattern (%)
set up in Hyderabad which has further boosted the company’s order book.
Promoters
75.0
Specialty chemicals and agro chemicals forms ~60% of H1FY2019’s revenue
MF / Banks / Indian Fls
0.3
Margins were decent: Operating margin were robust at 16.1% due to better
FII / NRIs / OCBs
1.1
product mix and cost optimization. GMM is likely to sustain operating margin at
Indian Public / Others
23.6
~16-17% level. Its subsidiary is also doing well and likely to maintain robust
revenue run rate and margins for the year.
Abs.(%)
3m 1yr 3yr
BSE 200
1.9
11.7
23.9
Outlook and Valuation: We have increased earnings estimates for improvement
GMM Pfaudler
(9.7)
(4.5)
250.0
in margins and robust order book. We are expecting a CAGR of ~21%/28% in
revenue/ earnings over FY18-20E. The stock has given 33% return since our
initiation in April and is currently trading at 20x its FY2020 earnings which still
looks attractive given its robust earnings growth trajectory. Hence, we recommend
BUY with a target price of `1200 (25x FY2020E EPS).
Key Financials
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
Net Sales
292.1
353.0
405.7
502.8
591.6
Nidhi Agrawal
% chg
-5.1
20.9
14.9
23.9
17.7
022-39357800 Ext: 6872
Net Profit
19.9
33.3
42.7
58.7
69.0
[email protected]
% chg
6.4
67.0
28.3
37.6
17.5
EBITDA (%)
12.0
13.5
15.3
17.1
17.1
EPS (Rs)*
13.6
22.8
29.2
40.2
47.3
P/E (x)
69.3
41.5
32.3
23.5
20.0
P/BV (x)
8.3
7.1
6.0
4.9
4.1
RoE (%)
11.9
17.1
18.5
21.0
20.4
RoCE (%)
16.1
20.3
22.7
26.9
26.2
EV/EBITDA
37.6
27.3
20.7
14.7
12.1
EV/Sales
4.5
3.7
3.2
2.5
2.1
Source: Company, Angel Research, closing price at the end of 25Th October 2018
Please refer to important disclosures at the end of this report
1
GMM Pfaudler |2QFY2019 Result Update
Exhibit 1: Q2 results at a glance
Standalone results -` cr
Q2FY18
Q2FY19
YoY % Q1FY19
QoQ % H1FY19 H1FY18
YoY %
Net Sales
76.4
99.2
29.8%
93.2
6.4%
192.4
145.3
32.4%
As a % of sales
Raw Material Consumed
38.0
49.7
30.9%
47.7
4.2%
97.5
69.7
39.8%
Stock Adjustment
-6.4
-1.6
-75.6%
2.3
-166.4%
0.8
-7.5
-110.5%
Employee Expenses
9.7
10.5
8.2%
9.9
6.3%
20.4
18.3
11.7%
Other Expenses
23.5
24.5
4.3%
18.0
36.2%
42.5
45.3
-6.3%
Total Expenditure
64.8
83.2
28.3%
78.0
6.7%
161.1
125.8
28.1%
EBITDA
11.6
16.0
37.9%
15.3
4.8%
31.3
19.5
60.5%
Other Income
1.3
1.9
49.4%
1.3
42.1%
3.2
4.1
-22.6%
Interest
0.1
0.3
145.7%
0.2
100.0%
0.5
0.6
-12.5%
PBDT
12.7
17.5
37.8%
16.4
6.8%
33.9
23.0
47.5%
Depreciation
2.0
2.6
29.5%
2.5
3.4%
5.2
4.0
29.5%
PBT
10.7
14.9
39.3%
13.9
7.4%
28.8
19.0
51.2%
Tax
3.7
5.2
41.7%
4.8
8.7%
10.0
6.4
54.6%
Profit After Tax
7.0
9.7
38.0%
9.1
6.7%
18.8
12.6
49.4%
Ratios
EBITDA margin
15.2%
16.1%
16.4%
16.0%
16.0%
PAT margin %
9.2%
9.8%
9.8%
9.8%
8.7%
Tax rate %
34.2%
34.8%
34.4%
34.6%
33.9%
Exhibit 2: Segmental performance
` cr
Q2FY18
Q2FY19
YoY %
Q1FY19 QoQ %
H1FY19
H1FY18
YoY %
Total Segment Revenue
76.4
99.2
29.8%
93.2
6.4%
192.4
150.5
27.8%
Glass Lined Equipments
53.6
67.1
25.2%
65.9
1.7%
133.0
106.5
24.9%
Heavy Engineering
9.2
13.7
48.6%
10.4
31.4%
24.1
18.6
29.3%
Proprietary Products
13.6
18.4
35.1%
16.9
9.3%
35.3
25.5
38.7%
Non GL segment
22.8
32.1
40.6%
27.3
17.7%
59.4
44.1
34.7%
As a % of revenue
Glass Lined Equipments
70%
68%
71%
69%
71%
Heavy Engineering
12%
14%
11%
13%
12%
Proprietary Products
18%
19%
18%
18%
17%
Non GL segment
30%
32%
29%
31%
29%
PBIT
13.1
16.6
26.2%
16.6
-0.2%
33.1
22.6
46.8%
Glass Lined Equipments
11.6
12.0
3.8%
13.1
-8.3%
25.2
19.7
27.8%
Heavy Engineering
0.9
2.3
154.6%
2.3
0.9%
4.6
1.7
173.0%
Proprietary Products
0.6
2.2
261.3%
1.2
89.3%
3.4
1.2
180.7%
Non-GL segment
1.5
4.5
197.4%
3.5
30.6%
8.0
2.9
PBIT margin %
17.2%
16.7%
17.8%
17.2%
15.0%
Glass-Lined segment
21.6%
17.9%
19.9%
18.9%
18.5%
Heavy Engineering
9.9%
16.9%
22.1%
19.2%
9.1%
Proprietary Products
4.5%
12.0%
6.9%
9.5%
4.7%
Non-GL segment
6.7%
14.1%
12.7%
13.4%
6.6%
Source: Company
October 26, 2018
2
GMM Pfaudler |2QFY2019 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.
October 26, 2018
3
GMM Pfaudler |2QFY2019 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
Total operating income
292.1
353.0
405.7
502.8
591.6
% chg
-5.1
20.9
14.9
23.9
17.7
Total Expenditure
257.1
305.3
336.7
416.6
490.2
COGS
173.4
209.6
240.9
298.5
351.3
Selling and Administration Expenses
19.2
22.1
23.7
29.3
34.5
Personnel
56.2
66.1
63.5
78.7
92.6
Others Expenses
8.4
7.6
8.7
10.1
11.8
EBITDA
34.9
47.7
69.0
86.2
101.4
% chg
-2.8
36.6
44.5
24.9
17.7
(% 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
75.4
88.7
% chg
2.7
47.3
49.8
27.4
17.7
(% of Net Sales)
9.2
11.2
14.6
15.0
15.0
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
2.1
2.1
Extraordinary Items
-
-
-
-
-
Share in profit of Associates
-
-
-
-
-
Recurring PBT
29.8
46.9
67.5
85.1
100.1
% chg
5.6
57.4
44.1
26.1
17.5
Tax
9.7
13.6
18.0
26.4
31.0
PAT (reported)
19.9
33.3
42.7
58.7
69.0
% chg
6.4
67.0
28.3
37.6
17.5
(% of Net Sales)
6.8
9.4
10.5
11.7
11.7
Basic & Fully Diluted EPS (Rs)
13.6
22.8
29.2
40.2
47.3
% chg
6.4
67.0
28.3
37.6
17.5
October 26, 2018
4
GMM Pfaudler |2QFY2019 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
277.5
335.7
Shareholders Funds
166.8
194.8
230.8
280.4
338.6
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
292.5
351.4
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
281.7
354.3
Inventories
70.9
82.3
94.5
117.1
137.8
Sundry Debtors
48.7
69.9
80.3
99.5
117.1
Cash
53.6
31.7
30.6
30.7
58.9
Loans & Advances
5.5
24.1
27.7
34.3
40.4
Other Assets
-
-
-
-
-
Current liabilities
84.4
113.2
127.9
151.5
178.3
Net Current Assets
94.2
94.7
105.3
130.2
176.0
Other Non Current Asset
5.6
3.4
4.1
5.0
5.9
October 26, 2018
5
GMM Pfaudler |2QFY2019 Result Update
Consolidated Cash flow Statement
Y/E March (` cr)
FY2016
FY2017
FY2018E FY2019E FY2020E
Profit before tax
29.8
46.9
60.7
85.1
100.1
Depreciation
8.1
8.2
9.8
10.8
12.7
Change in Working Capital
(2.0)
(12.8)
(9.7)
(24.8)
(17.6)
Interest / Dividend (Net)
-
-
-
-
-
Direct taxes paid
(9.6)
(14.0)
(18.0)
(26.4)
(31.0)
Others
1.8
5.3
-
-
-
Cash Flow from Operations
24.7
23.0
42.8
44.7
64.2
(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
9.2
10.8
Cash Flow from Financing
(6.0)
(6.3)
(6.7)
(9.2)
(10.8)
Inc./(Dec.) in Cash
1.7
(5.3)
(0.8)
0.1
27.9
Opening Cash balances
34.7
36.4
31.1
30.3
30.4
Closing Cash balances
36.4
31.1
30.3
30.4
58.3
Free cash Flow
10.8
8.6
27.8
29.7
49.2
October 26, 2018
6
GMM Pfaudler |2QFY2019 Result Update
Key Ratios
Y/E March
FY16
FY17
FY18E
FY19E
FY20E
Valuation Ratio (x)
P/E (on FDEPS)
69.3
41.5
32.3
23.5
20.0
P/CEPS
37.1
24.3
19.1
14.3
12.2
P/BV
8.3
7.1
6.0
4.9
4.1
Dividend yield (%)
0.3
0.4
0.4
0.6
0.7
EV/Sales
4.5
3.7
3.2
2.5
2.1
EV/EBITDA
37.6
27.3
20.7
14.7
12.1
EV / Total Assets
7.7
6.3
5.3
4.3
3.5
Per Share Data (`)
EPS (Basic)
13.6
22.8
29.2
40.2
47.3
EPS (fully diluted)
13.6
22.8
29.2
40.2
47.3
Cash EPS
25.5
38.9
49.4
66.1
77.8
DPS
3.0
4.0
4.0
5.2
6.1
Book Value
114.3
133.4
158.1
192.0
231.9
Returns (%)
ROCE
16.1
20.3
22.7
26.9
26.2
Angel ROIC (Pre-tax)
25.8
30.5
35.5
42.5
44.8
ROE
11.9
17.1
18.5
21.0
20.4
Turnover ratios (x)
Asset Turnover (Gross Block)
2.6
3.1
3.2
3.6
3.8
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
October 26, 2018
7
GMM Pfaudler |2QFY2019 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.
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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%)
October 26, 2018
8