CEMENT PRODUCTS Everest Industries Ltd. - Myiris.com

BUY
Price
Target
CEMENT
PRODUCTS
EARLIER RECO
Rs.219
Rs.284
Date Oct.22, 2012
SHARE HOLDING (%)
Promoters 49.5
FII 0.1
FI 8.9
Body Corporates 7.0
Public & Others 34.5
Reuters Code
Bloomberg Code
BSE Code
NSE Symbol
Market
Capitalization*
Shares
Outstanding*
STOCK DATA
EVRI.BO
EVI.IN
508906
EVERESTIND
Rs.2580 mn
$ 46 mn
15.2 mn
52 Weeks (H/L) Rs. 283 / 156
Avg. Daily
Volume (6m)
17,568 shares
Price Performance (%)
1M 3M 6M
(11) (17) (30)
200 Days EMA: Rs.207
*On fully diluted equity shares
ANALYST
Bharti Gupta | +91 22 4093 5069
bharti.gupta@sushilfinance.com
SALES
Devang Shah | +91 22 4093 6060/61
devang.shah@sushilfinance.com
Please refer to important disclosures at the end of the report
Sushil Financial Services Private Limited
Regd. Office : 12, Homji Street, Fort, Mumbai 400 001.
Everest Industries Ltd. (EIL) has reported yet another disappointing quarter led by high cost
inventory, low volumes & high fixed costs. The key highlights of Q4FY13 results is summarized as
below:
For Q4FY13, EIL’s revenues declined by 2.1% YoY to Rs.2413 mn led by 2.1% dip in both Building
products (-9.8% volume & +8.5% Real.) & steel building (-17.2% Volumes & +18.1% Real). The
steep volume dip in the building product segment was on account of sluggish demand for
asbestos cement sheets resulting in inventory build-up as on March quarter end. For FY13, the
revenues grew by 14.4% to Rs.10141 mn led by 15.8% growth in Building products & 10.0% YoY
growth in Steel buildings.
In order to combat high chrysotile fiber costs (key raw material), the company undertook a steep
price hike in H1FY13 (+20% YoY) which led to significant margin improvement (13.1% in H1FY13
vs. 9.8% in H1FY12). However, as the effect of low cost inventory started waning off, the
company’s margins declined to 6.1% vs. 8.4% (H2FY12). We expect the effect of high cost
inventory to continue to dampen the margins over the next 2 quarters leading to subdued
earnings in FY14E.
EIL’s Q4FY13 EBITDA dropped by 48.6% YoY to Rs.116.5 mn with margins of 4.8% (-436 bps).
Building product margins stood at 6.1% (-501 bps YoY) and Steel Building reported EBIT/ton of
Rs.6,879 (+13.4% YoY). For FY13 the EBITDA stood at Rs.978 mn up by 21.1% YoY, with operating
margin at 9.6% (+54 bps YoY).
The net profit declined by 69% YoY to Rs.41 mn mainly on account of higher interest & taxes. The
interest cost increased by 28.7% YoY to Rs.14 mn led by increased working capital requirements.
For FY13, the adjusted PAT grew by 18.2% YoY to Rs.525 mn with margins of 5.2% (5.0%).
EIL started trial production at its Greenfield plant in Balasore in Q4FY13. Post expansion, the
total building products capacity will increase to 810,000 MTPA. This plant will help the company
to address the demand from the eastern markets, save logistic costs & earn better realizations.
The commercial production is expected to start in Q2FY14E.
The company has also envisaged a capex of Rs.500 mn in its PEB segment to set up a Greenfield
plant at dahej with a capacity of 30,000 MT and likely to commence operations in Q2FY15E. Post
expansion, the capacity in the PEB segment would expand to 60,000 MT.
EIL has a current order book of 26,200 MT (~RS.2200 mn) to be executed over 6-9 months of
which it has added ~12500 MT (~Rs.1000 mn) in the last one quarter. Post expansion, the new
plant will help the company to cater to the demands from Western & Southern India.
OUTLOOK & VALUATION
EIL reported disappointing set of numbers for Q4FY13 led by higher material costs which is likely
to dampen the margins for H1FY14E as well. Given the current sluggishness in demand and the
company’s inability to raise prices, we believe the company will continue to underperform on the
margin front for the following reasons: (1) higher base of H1FY13 – 13.1% (2) high cost inventory –
Chrysotile Fiber (+18-20% YoY - ~2.4 months) & Finished Goods (~80,000 MT) (3) Higher
depreciation on account of capitalization of Balasore plant & (4) Elevated Interest costs led by high
working capital & long term debt ($12 mn ECB). Though the management has indicated downward
revision (~5-7%) in chrysotile fiber costs (~45-50% of Building products cost), we believe the real
benefit will arise only from H2FY14E. Overall, the current demand scenario suggests us that the
near term outlook is CAUTIOUS, however we believe things would improve towards H2FY14E on
the back of (i) Lower material cost (ii) stabilization of new plant at Balasore (iii) Likely price
increase (iv) likelihood of normal monsoons resulting in improved demand towards peak season
(v) pre-election welfare spending to drive rural demand & (vi) commencement of new steel plant
at Dahej in FY15E. We strongly believe the stock will underperform the market over the next 1-2
quarters for the reasons explained above. However, with gradual improvement in earnings over
FY15E coupled with high dividend yield of 4.4%, we recommend our investors to BUY on dips for a
target of Rs.247. We have factored USDINR at Rs.54.4 & Rs.53.0 for FY14E & FY15E. Any adverse
currency movement could severely affect our earnings estimate.
KEY FINANCIALS
Q4FY13 Result Update
Everest Industries Ltd.
June 5, 2013 BUY HIGH RISK PRICE Rs.170 Target Rs.247
Y/E Mar. Revenue
(Rs mn)
APAT
(Rs mn)
AEPS
(Rs)
AEPS
(% Ch.)
P/E
(x)
ROCE
(%)
ROE
(%)
P/BV
(x)
FY12 8,868.6 444.3 29.4 26.0 5.8 18.7 23.0 1.0
FY13 10,141.3 525.0 34.6 17.6 4.9 19.1 19.5 0.9
FY14E 11,566.1 457.6 30.1 (12.8) 5.6 15.3 15.0 0.8
FY15E 13,542.0 683.1 45.0 49.3 3.8 21.6 19.6 0.7
For private Circulation Only.
Member : BSEL, SEBI Regn.No. INB/F010982338 | NSEIL, SEBI Regn.No.INB/F230607435.
Phone: +91 22 40936000 Fax: +91 22 22665758 Email : info@sushilfinance.com

Everest Industries Ltd.
QUARTERLY STATEMENT
Rs.mn
Y/E March Q4FY12 Q3FY13 Q4FY13
Net Sales 2,465.3 2,581.4 2,413.0
(%) Chg YoY 24.6 22.8 (2.1)
Raw Materials 1,403.9 1,466.5 1,449.3
Personnel Cost 214.1 220.8 235.3
Other Costs 620.8 704.5 611.9
Total Expenditure 2,238.8 2,391.8 2,296.5
PBIDT 226.5 189.6 116.5
(%) Chg YoY 26.3 19.3 (48.6)
% OPM 9.2 7.3 4.8
Depreciation 53.0 56.1 57.7
Interest 10.8 13.1 13.9
Other Income 29.8 21.9 31.8
PBT incl OI 192.5 142.3 76.7
Tax 60.4 46.2 36.0
RPAT 132.1 96.1 40.7
(%) Chg YoY 24.4 31.6 (69.2)
% NPM 5.4 3.7 1.7
PROFIT & LOSS STATEMENT
Rs.mn
Y/E March FY12 FY13 FY14E FY15E
Net Sales 8,868.6 10,141.3 11,566.1 13,542.0
COGS 5,917.4 6,819.8 7,918.2 9,060.6
Personnel Cost 797.5 921.0 1,052.5 1,239.1
Freight 712.7 757.3 896.4 1,049.5
Selling & Admin 633.4 665.4 742.5 877.5
EBITDA 807.6 977.8 956.5 1,315.3
Depreciation 200.8 220.5 243.1 270.4
Interest 44.4 55.8 125.0 131.8
Other Income 177.9 87.5 98.6 114.1
PBT incl OI 740.3 789.0 687.1 1,027.2
Tax 212.7 264.0 229.5 344.1
RPAT 527.6 525.0 457.6 683.1
APAT 444.3 525.0 457.6 683.1
BALANCE SHEET STATEMENT
Rs.mn
As on 31st March FY12 FY13E FY14E FY15E
Share Capital 151.1 151.9 151.9 151.9
Reserves & Surplus 2,344.0 2,745.8 3,071.0 3,612.8
Net Worth 2,495.1 2,897.7 3,222.9 3,764.7
Total Loan funds 810.4 1,733.2 1,452.7 1,225.3
Deferred Tax 239.0 245.6 248.3 253.5
Capital Employed 3,544.5 4,876.5 4,923.9 5,243.6
Net Block 2,202.6 2,024.9 2,306.4 2,581.9
Cap. WIP 78.8 459.8 517.2 80.3
Investments 0.2 0.2 0.2 0.2
Inventories 1,579.8 2,541.7 2,661.9 2,988.4
Debtors 417.0 523.5 563.0 683.5
Cash & Bank Bal 351.3 528.4 266.5 695.7
Loans & Advances 512.5 921.8 1,034.8 1,083.3
Curr Liab & Prov 1,603.2 2,136.1 2,438.4 2,882.1
Net Current Assets 1,262.9 2,391.6 2,100.0 2,581.1
Capital Deployed 3,544.5 4,876.5 4,923.9 5,243.6
Source : Company, Sushil Finance Research Estimates
June 5, 2013
FINANCIAL RATIO STATEMENT
Y/E March FY12 FY13E FY14E FY15E
Growth (%)
Net Sales 22.6 14.4 14.0 17.1
EBITDA 19.1 21.1 (2.2) 37.5
Net Profit 26.2 18.2 (12.8) 49.3
Profitability (%)
EBIDTA Margin (%) 9.1 9.6 8.3 9.7
Net Profit Margin (%) 5.0 5.2 4.0 5.0
ROCE (%) 18.7 19.1 15.3 21.6
ROE (%) 23.0 19.5 15.0 19.6
Per Share Data (Rs.)
AEPS (Rs.) 29.4 34.6 30.1 45.0
CEPS (Rs.) 48.1 49.5 46.3 63.1
BVPS (Rs) 165.1 190.8 212.2 247.8
Valuation
PER (x) 5.8 4.9 5.6 3.8
P/BV (x) 1.0 0.9 0.8 0.7
EV/EBITDA (x) 3.7 3.9 3.9 2.4
EV/Net Sales (x) 0.3 0.4 0.3 0.2
Turnover
Inventory Days 96 110 120 114
Debtor Days 16 17 17 17
Creditor Days 43 46 49 48
Gearing Ratio
D/E 0.3 0.6 0.5 0.3
2

Everest Industries Ltd.
Rating Scale
This is a guide to the rating system used by our Institutional Research Team. Our rating
system comprises of six rating categories, with a corresponding risk rating.
Risk Rating
Risk Description
Low Risk
Medium Risk
High Risk
Predictability of Earnings / Dividends; Price Volatility
High predictability / Low volatility
Moderate predictability / volatility
Low predictability / High volatility
Total Expected Return Matrix
Rating Low Risk Medium
High Risk
Buy Over 15 %
Risk
Over 20% Over 25%
Accumulate 10 % to 15 15% to 20% to 25%
Hold % 0% to 10 % 202020% 0% to
Sell
Neutral
Not Rated
Please Note
Negative
Returns Not
Applicable Not
Applicable
15% Negative
Returns Not
Applicable Not
Applicable
0% to 20%
Negative Returns
Not Applicable
Not Applicable
•Recommendations with “Neutral” Rating imply reversal of our earlier opinion (i.e. Book Profits / Losses).
•** Indicates that the stock is illiquid With a view to combat the higher acquisition cost for illiquid stocks, we have
enhanced our return criteria for such stocks by five percentage points.
•Stock Review Reports: These are Soft coverage’s on companies where Management access is difficult or Market
capitalization is below Rs. 2000 mn. Views and recommendation on such companies may not necessarily be based
on management meeting but may be based on the publicly available information and/or attending Company AGMs.
Hence Stock Reviews may be just one-time coverage’s with an occasional Update, wherever possible.
Additional information with respect to any securities referred to herein will be available upon request.
This report is prepared for the exclusive use of Sushil Group clients only and should not be reproduced, re-circulated,
published in any media, website or otherwise, in any form or manner, in part or as a whole, without the express
consent in writing of Sushil Financial Services Private Limited. Any unauthorized use, disclosure or public
dissemination of information contained herein is prohibited. This report is to be used only by the original recipient to
whom it is sent.
This is for private circulation only and the said document does not constitute an offer to buy or sell any securities
mentioned herein. While utmost care has been taken in preparing the above, we claim no responsibility for its
accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the investors are
requested to use the information contained herein at their own risk.
This report has been prepared for information purposes only and is not a solicitation, or an offer, to buy or sell any
security. It does not purport to be a complete description of the securities, markets or developments referred to in
the material. The information, on which the report is based, has been obtained from sources, which we believe to be
reliable, but we have not independently verified such information and we do not guarantee that it is accurate or
complete. All expressions of opinion are subject to change without notice.
Sushil Financial Services Private Limited and its connected companies, and their respective directors, officers and
employees (to be collectively known as SFSPL), may, from time to time, have a long or short position in the securities
mentioned and may sell or buy such securities. SFSPL may act upon or make use of information contained herein
prior to the publication thereof.
The Investment horizon of this report is approximately 1 year. Any calls which lapse the time duration of a year
would be auto closed without any further notifications/updates. Clients are requested to keep track of the same
June 5, 2013
3