EQUITY

RESEARCH
ANALYSIS
DEBOJYOTI MUKHERJEE
NIDHI SHARMA
PRAVEEN KUMAR
RISHAV DHANDANIA
SHASHANK UNERCAT

INTRODUCTION
FUTURE EXPANSION AND RISK
ASSOCIATED
SWOT ANALYSIS
INDUSTRY ANALYSIS
TRENDS
PROFIT AND LOSS
BALANCE SHEET
WACC AND DUPONT ANALYSIS
RECOMENDATION

Established in 1979 at Ahmedabad, India

Chairman :- Rajendra S. Shah
Managing Director:- Bhadresh K. Shah
Subsidiary Companies :- Welcast Steel Ltd (72% holdings) Manufacturer in
Bangalore
- DCPL Foundries Pvt Ltd (70% Holdings)Manufacturer in Tamil Nadu
- Vega Industries Ltd (100% holdings) Marketing in
UK , US , China etc
Niche Manufacturer of high chrome casting with
rated capacity of 200000 metric tons per annum.
Metallurgy Process Technology followed.

Global Leader
Mining to be the main focus.
Capacity of 300000 metric tons planned by
2015
Greenfield and Brownfield Expansion
Utilization of 90% to be achieved
Foreign Currency Fluctuations is risky
Mining Sector in India has a negative growth.

STRENGTHS:

o
o

DIVERSIFIED CLIENT BASE

OLIGOPOLISTIC INDUSTRY STRUCTURE

WEAKNESS

REVENUE EXPOSED TO FOREX LOSSES

OPPORTUNITIES

STRONG PROMOTER HOLDING

THREATS

DECLINE IN CEMENT SECTOR

5.

PORTER FIVE FORCES:

THREATS OF NEW ENTRY
THREATS OF SUBSTITUTES
COMPETITIVE RIVALARY
BARGAINING POWER OF SUPPLIERS
BARGAINING POWER OF CUSTOMERS

Industry PE is 16x.

1.
2.

3.
4.

25
7000

22.15
20

6000

17.92

5000

19.23

15

14.22

4000
3000

P/E

10

2000

6.77
5

1000
0

0
2009
AIA CL

2010

2011

2012

NIFTY CL

AIA VS NIFTY

PE RATIO

2013

Gross Sales
PAT

Linear (PAT)

Linear (Gross Sales)

211.62

174.15

183.59

171.1

1478.87
1217.81

181.2
1085.59

134.21

1837

986.8

771.38

2008

2009

2010

2011

2012

2013

2008 2009 2010

2011

Dividend

ROE

4
2.5

2008 2009 2010

2013

GROSS SALES

PAT

2.5

2012

2011

2012

2013

DIVIDEND HISTORY

20.43

2010

18.79

2011

15.84

15.95

2012

2013

ROE

2012-13
2013-14
existing capacity
200000
198500
ex capacity utilisation
80.00%
85.00%
sales
160000
168725
new capacity
0
60000
new capacity utilisation
0.00%
60.00%
sales
0
36000
total sales
160000
204725
realisations/mt
110000
121000
total sales
17600000000 24771725000
total sales (cr)
1760
2477.1725
Excise
4.37%
4.37%
Excise
76.912 108.2524383

2014-15 2015-16
2016-17
198500
198500
198500
90.00%
80.00%
80.00%
178650
158800
158800
60000
240000
70.00% 80%,60%,40%
90%,80%,60%
42000
136000
178000
220650
294800
336800
133100
110000
110000
2.94E+10
32428000000
37048000000
2936.852
3242.8
3704.8
4.37%
4.37%
4.37%
128.3404
141.71036
161.89976

SALES ESTIMATION
INVENTORY AND DEBTOR
Sales
949.7
1136.42 1416.67
Debtor turnover
4.452852836 3.171699693 3.811064
Debtor days
81.96992208 115.080252 95.77378

1751.31
5.149825757
70.8761844

2368.920062
4.802631579
76

2808.511089
4.802631579
76

Inventory Turnover
Inventory days

4.345882961
83.98753562

5.447761194
67

5.447761194
67

6.199693181 4.800145303 4.705158

58.87388123 76.03936485 77.57444

INVENTORY AND DEBTOR ESTIMATION

Sales Averaged out on geographical

segments and its capacity
External debt of 1 bn in 2014 and 3 bn in 2015
Expenditures in the same trend as previous
Better Product mix and cost reduction
strategy
Straight Line method of Depreciation
Dividend Payout ratio to be the same .
Increase in net worth leading to increase in
EPS.

Profit And Loss Consolidated

Description
No of Months
INCOME
Gross Sales
Less: Excise
Net Sales
EXPENDITURE
Increase/Decrease in Stock
Raw Materials Consumed
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
total expenditure
Operating Profit (Excl OI)
Other Income
Operating Profit
Interest
PBDT
Depreciation
Profit Before Taxation & Exceptional Items
Exceptional Income / Expenses
Profit Before Tax
Provision for Tax
PAT
Minority Interest
Appropriations
Dividend(%)
EPS

Mar-09
12

Mar-10 Mar-11
12
12

Mar-12
12

Mar-13
12

1085.59
62.3
1023.29

986.8 1194.97
37.1
57.15
949.7 1136.42

1478.87
62.2
1416.67

1837
85.69
1751.31

-13.98
418.66
85.77
41.06
145.36
30.66
43.46
23.36
774.35
248.95
24.93
273.88
4.3
269.58
20.25
249.33
0
249.33
75.18
174.15
-0.69
444.83
125
18.46

7.87
346.88
89.41
43.33
126.16
29.62
42.94
32.74
718.95
230.77
32.24
263.01
3.29
259.71
0
237.01
0
237.01
65.91
171.1
-0.36
595.81
125
18.1

-70.45
556.39
112.55
52.26
173.59
29.63
52.35
2.81
909.13
251.53
24.72
276.26
4.35
271.91
0
246.51
0
246.51
62.93
183.59
-0.19
740.37
150
19.44

-37.58
580.01
149.36
64.89
215.33
39.01
68.93
59.65
1139.6
277.07
13.27
290.35
8.17
282.18
0
252.74
0
252.74
71.53
181.2
-0.75
874.77
150
19.13

Estimated
Estimated
Mar-14
Mar-15
12
12
2477.173
108.252
2368.920

2936.852
128.340
2808.511

-31.63
-45.702
-51.130
685.93
991.038
1174.941
176.1
236.399
280.267
80.89
108.736
128.914
290.15
357.273
423.570
46.69
66.009
78.258
108.74
119.646
141.849
80.89
74.171
87.935
1437.76
1907.571
2264.603
313.55
461.349
543.908
21.32
0.000
0.000
334.87
461.349
543.908
8.81
11.810
17.810
326.06
449.539
526.098
0
39.000
49.100
291.57
410.539
476.998
0
0.000
0.000
291.57
410.539
476.998
79.95
111.913
130.030
211.62
298.626
346.968
-0.8
-0.800
-0.800
1037.78
0.000
0.000
200
200
200
22.35 31.66768451 36.79407307

Capex increased to 2.2x

Debtors days to be constant at 76 days and 67
days calculated accordingly with the sales.
Plant shutdown and addition in 2014.
Accumulated depreciation increased in
proportion with the assets.
Total Reserves increased with increase in profit.
Assets like current investments , intangible
assets , Long term investment and other current
assets are kept constant.

Common Size Statement

DESCRIPTION
Raw Material Consumed
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses

Mar-10
37.35%
9.41%
4.56%
13.28%
3.12%
4.52%
3.45%

Mar-11
42.76%
9.90%
4.60%
15.28%
2.61%
4.61%
0.25%

Mar-12
38.29%
10.54%
4.58%
15.20%
2.75%
4.87%
4.21%

Mar-13 Average
37.36%
38.94%
10.06%
9.98%
4.62%
4.59%
16.57%
15.08%
2.67%
2.79%
6.21%
5.05%
4.62%
3.13%

Operating Profit (Excl OI)

Operating Profit
Interest
PBDT
Depreciation

24.30%
27.69%
0.35%
27.35%
2.39%

22.13%
24.31%
0.38%
23.93%
2.24%

19.56%
20.50%
0.58%
19.92%
2.08%

17.90%
19.12%
0.50%
18.62%
1.97%

20.97%
22.91%
0.45%
22.45%
2.17%

Profit Before Taxation & Exceptional Items

Exceptional Income / Expenses
Profit Before Tax
Provision for Tax
Profit After Tax

24.96%
0.00%
24.96%
6.94%
18.02%

21.69%
0.00%
21.69%
5.54%
16.16%

2.43%
0.00%
17.84%
5.05%
12.79%

16.65%
0.00%
16.65%
4.57%
12.08%

16.43%
0.00%
20.28%
5.52%
14.76%

Ratios for projections

Depreciation/Net block
Depreciation/gross block
pure working capital - Inventories
debtors
creditors
Creditors/RMC & power
effectivee tax rate

Mar-10
10.44%
7.08%
16.13%
22.46%
2.35%
5.12%
27.81%

Mar-11
9.46%
6.41%
20.83%
31.53%
11.68%
19.85%
25.53%

Mar-12
8.66%
5.94%
21.25%
26.24%
6.96%
13.52%
28.30%

Mar-13
9.56%
6.29%
23.01%
19.42%
6.43%
13.07%
27.42%

YOY
DESCRIPTION
Net Sales

Mar-10
-7.19%

Mar-11
19.66%

Raw Material Consumed

Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
General and Administration Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
Total Expenditure
Operating Profit (Excl OI)

-29.67%
4.24%
5.53%
-13.21%
-3.39%
-1.20%
40.15%
-7.15%
-7.30%

11.38%
25.88%
20.61%
37.60%
0.03%
21.91%
-91.42%
26.45%
9.00%

Mar-12 Mar-13
24.66% 23.62%
-18.91%
32.71%
24.17%
24.05%
31.66%
31.67%
2022.78%
25.35%
10.15%

-10.29%
17.90%
24.66%
34.75%
19.69%
57.75%
35.61%
26.16%
13.17%

External Debts are added to the secured loans.

Short term liability is also increased in the
proportion of the expenditure.
Short term provisions are with slight increase as
it just includes the employee benefits.
Total Debts is calculated upon the incremental
assets.
The tax is taken out proportionately on the basis
of the previous year trends
Net Worth drives the book value to increase and
the contingent liability is kept to be constant.

(Indian Rupee .in Crores)

EQUITY AND LIABILITIES

Share Capital
Total Reserves (Incl Revaluation)
Revaluation reserve
Shareholder's Funds
Minority Interest
Long-Term Borrowings
Secured Loans
Unsecured Loans
Deferred Tax Assets / Liabilities
Other Long Term Liabilities
Long Term Trade Payables
Long Term Provisions
Total Non-Current Liabilities
Current Liabilities
Trade Payables
Other Current Liabilities
Short Term Borrowings
Short Term Provisions
Total Current Liabilities
Total Liabilities
ASSETS
Non-Current Assets
Gross Block
Less: Accumulated Depreciation
Less: Impairment of Assets
Net Block
Lease Adjustment A/c
Capital Work in Progress
Intangible assets
Pre-operative Expenses pending
Assets in transit
Long Term Investment
Long Term Loans & Advances
Other Non Current Assets
Total Non-Current Assets
Current Assets Loans & Advances
Currents Investments
Inventories
Trade Receivables
Cash and Bank
Other Current Assets
Short Term Loans and Advances
Total Current Assets
Total Assets
Contingent Liabilities
Total Debt
Book Value
Adjusted Book Value

Mar-10

Mar-11

18.8641
883.22

18.8641
1033.259

0.152

0.14

902.0841
6.02

1052.123
6.467

8.202

21.152

6.567
1.635

16.908
4.244

11.686

15.237

Mar-12

Mar-13

Mar-14

Mar-15

18.8641

18.8641

18.8641

18.8641

1216.649
0.1289

1398.938
0.1171

1697.564
0.1171

2044.532
0.1171

1235.513

1417.802

1716.428

2063.396

4.3796
7.125
3.01
4.115
15.7698

8.0841
106.3266
102.39
3.9366
13.2079

8.0841
116.3266
252.39
3.9366
13.2079

8.0841
121.3266
252.39
3.9366
13.2079

4.3014

5.9011

5.9011

5.9011

19.888

36.389

27.1962

125.4356

135.4356

140.4356

22.345
54.678
15.575
275.291

132.7872
2.93
16.9668
345.021

98.6427
35.5844
38.5995
50.3256

112.6358
53.2305
52.4333
75.0359

152.3216
53.2305
62.4333
75.0359

180.5873
53.2305
67.4333
75.0359

367.889
1295.881

497.705
1592.684

223.1522
1490.241

293.3355
1844.657

343.0213
2202.969

376.287
2588.203

320.973
103.374
0
217.599
0
11.2
13.944
0
0

396.251
127.884
0
268.367
0
15.164
13.961
0
0

0.001
0
0
242.744

0.001
0
0
297.493

495.2143
155.4278
0
339.7865
0
18.0849
16.2816
0
0
0.001
17.9827
6.1908

548.3423
187.8489
0
360.4934
0
31.5744
16.6692
0
0
7.3963
16.4592
3.7338

657.9489
226.8489
0
431.1
0
150
16.6692
0
0
7.3963
16.4592
3.7338

861.2489
275.9489
0
585.3
0
150
16.6692
0
0
7.3963
16.4592
3.7338

398.3275

436.3263

625.3585

779.5585

141.46
153.185
213.279
209.305
0.963
334.945
1053.137
1295.881
83.179
927.9921
95.62
95.62

150.133
236.747
358.3
153.059
0.077
396.875
1295.191
1592.684
109.292
1094.979
111.53
111.53

140.2583
301.0887
371.7256
149.6417
3.3622
125.8363

186.7035
402.9814
340.0717
279.1356
0.8062
198.6292

1091.913
1490.24
154.5007
1267.089
130.98
130.98

1408.328
1844.654
225.4896
1551.322
150.31
150.31

186.7035

186.7035

434.8429
493.2546
371.0259

515.5349
584.7859
351.66

0.8062
198.6292

0.8062
198.6292

1685.262
2310.621
225.4896
1765.058
181.0398
181.9792

1838.12
2617.678
225.4896
2396.401
181.0398
218.7655

CAPM MODEL
Market Beta (Calculated)
Government bond Rate (Observed)
0.236343933
8.74%

Market Return

Rate ( Calculated)

wacc

Cost of Debt K(d)

9.90%

Total Debt

13%
Market Cap

1551.3217
Total
4549.1187

WACC

13.67%

9.6262%

Weight of Debt Weight of equity

2997.797
34.10%
65.8984%

0.3463

Tax rate
ROE

15.95

31/03/2013

3 Stage Dupont Analysis

Net Profit Margin
Asset Turnover Ratio
Equity Multiplier

5 Stage Dupont Analysis

ebit/sale
sale/asset
asset/avg equity
pat/ebt
ebt/ebit
ROE

3 Stage Dupont Analysis

12.08352605
1.050295512
1.25687687

3 Stage Dupont Analysis ROE

ROE

15.95

31/03/2013
19.12111505
1.050295512
1.25687687
0.725794835
0.870696091
15.9513677

15.84

31/03/2012

Net Profit Margin

Asset Turnover Ratio
Equity Multiplier

12.79055814
0.919044283
1.347646353

3 Stage Dupont Analysis ROE

15.84170327

5 Stage Dupont Analysis

ebit/sale
sale/asset
asset/avg equity
pat/ebt
ebt/ebit
ROE

DUPONT ANALYSIS

31/03/2012
20.49524589
0.919044283
1.347646353
0.716942312
0.870466678
15.84170327

Expected Return
Date

Expected Return

Rate (Calculated)
3/31/2013
13.73%
3/31/2012
13.28%
3/31/2011
13.33%
3/31/2010
13.09%
3/31/2009
14.47%
13.58%

WACC is 9.62%, which represents the minimum

rate of return at which company produces value
for its investors.
The company expected return is more than
WACC which indicates that investor shall put
their money into the stock and vice versa.
Net profit margin has decreased.
Quite efficient
Financial Leverage Risk has decreased
Tax burden has increased
Interest rate burden is almost same
Operating Profit Margin has decreased

CURRENT MARKET PRICE (AS ON 1ST FEB

2014): RS. 511.50
TARGET PRICE: RS 588
RECOMMENDATION: BUY

ECONOMIC TIMES
BUSINESS STANDARD
ANNUAL REPORT OF THE COMPANY
MONEY CONTROL