DE NORA INDIA LIMITED

Result Update: Q3 CY12

BUY

CMP Target Price

201.00 228.00 Nov 19th, 2012
ISIN: INE244A01016

Stock Data Sector BSE Code Face Value 52wk. High / Low (Rs.) Volume (2wk. Avg ) Market Cap ( Rs in mn ) Years Net Sales EBITDA Net Profit EPS P/E CY11A 341.68 75.21 47.83 8.79 22.88

SYNOPSIS
Industrial Goods 590031 10.00 229.00/76.35 10194.00 1067.11 CY12E 505.69 109.64 72.41 13.64 14.74 CY13E 682.68 146.92 98.46 18.55 10.84

De Nora India Limited (DNIL) is engaged in the manufacture and coating of anode and cathode for electrolytic process for application in the chlor-alkali & chlorate plants. The company is the market leader in the Chlor-alkali & Cathodic Protection Systems business. During the quarter, the robust growth of Net Profit is increased by 669.15% to Rs. 68.07 million. De Nora India Limited has signed an order of approximately Rs.160 Million for manufacture of Chlorate Cells. De Nora India Limited has bought back 246,500 equity shares through open market transactions for an aggregate amount of Rs.22, 879, 685. During the quarter, the robust growth of Revenue is rose 401.88% to Rs. 255.81 million from Rs. 50.97 million. Net Sales and PAT of the company are expected to grow at a CAGR of 58% and 48% over 2010 to 2013E respectively.

Annual Estimated Results (A*: Actual / E*: Estimated)

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX

DE NORA INDIA LTD

Source: Company Data, Firstcall Research

Peer Groups Company Name De Nora India Ltd SKF India Ltd Ador Welding Ltd Esab India Ltd

CMP (Rs.) 201.00 600.45 135.50 431.00

Market Cap Rs. in mn. 1067.11 31663.30 1842.60 6634.40

EPS (Rs.) 8.79 37.60 15.31 23.41

P/E (x) Ratio 22.88 15.97 8.85 18.41

P/BV(x) Ratio 4.20 3.13 1.05 3.14

Dividend (%) 60.00 75.00 60.00 150.00

15%. when compared with the prior year period.Investment Highlights Results updates. Other Expenditure was at Rs. 2012. Cost of material consumed was stood at Rs. 159.59 14.25 millions in the corresponding period of the previous year.81 million from Rs. Profit before interest.07 12.85 1. 40.82 a share during the quarter.81 68.07 million against Rs.82 millions as against Rs. The third quarter witnesses a healthy increase in overall sales as well as profitability of the company. 255. De Nora India Limited (DNIL) is engaged in the manufacture and coating of anode and cathode for electrolytic process for application in the chloralkali & chlorate plants.37 millions and Employee benefit cost was at Rs.97 8.47 % Change 401.02 million in Q3 CY11.79 602. 10. reported its financial results for the quarter ended 30th Sep.63 Sep-11 50.88 669. registering 704. 50.35 The company’s net profit jumps to Rs. 22. Total expenditure in Q3 CY12 was at Rs.85 million in the corresponding quarter ending of previous year.82 101. 105. 68.47 millions in the corresponding period of the previous year.79% increase over previous year period. 24. .15 704.97 million. 101. Reported earnings per share of the company stood at Rs. an increase of 669. Months Net Sales PAT EPS EBITDA Sep-12 255.63 millions as against Rs.72 millions in Q3 CY12 is the primarily attributable to growth of expenditure. 14.25 millions against Rs.88% to Rs. depreciation and tax is Rs.Q3 CY12.12. Revenue for the quarter rose 401. Expenditure : During the quarter the total expenses are increased by 299 per cent due to increase in the raw material cost.8.

13.451 equity shares during the nine months period ended 30th Sep 2012) through open market transactions for an aggregate amount of Rs. The Company is a subsidiary of the De Nora and has brought to India the latest technologies with the complete support of De Nora's technical expertise and management. that De Nora India's strength lies in its technical expertise backed by its well trained team of specialists. Company Profile De Nora India Limited is a Public Limited Company with 51% equity held by De Nora. Oxygen & Specialties designs. ready to discuss the needs of any prospective client. De Nora India Limited provides its valuable customers. De Nora India meets the demands of the rapidly developing Chlor-alkali industry. a centralized data bank and access to the vast technology resources of De Nora.195 during the nine months period ended 30th Sep 2012). for both. Electro Chlorinators for On-site Hypo. not only a superior product.Latest Updates • De Nora India Limited has bought back 246. develops and manufactures electrodes. This factory also provides access to the Goa port facilities for our future export commitments. Of course.2013 for the production and trading of Titanium Anodes/ Nickel Cathodes for Chlor-alkali Industry used for NaOH/ KOH/Cl2.432. • De Nora India Limited has signed an order of approximately Rs. anode coatings and systems for several electrochemical applications .08. there is the additional benefit of the direct technical support of De Nora’s highly trained engineering staff.500 equity shares (135. Surface Finishing Products and Electro winning Products. With his factory in Goa with state-of-the-art facilities.2010 valid till 16. through out their operating life.160 Million for manufacture of Chlorate Cells.879. and sodium and potassium chlorate commodity chemical producers. in installation and operation of their electrodes.22. The Company has got the prestigious certification for ISO 9001:2008 for Quality Management System from JASANZ on 17.685 (Rs.08. Cathodic Protection Systems. It is our firm opinion. Products Chlor-Alkali which makes a full range of products and systems for chlorine and alkali. to define the best optimized solution. new and retrofitted cells of different technologies. but also technical assistance. This service is provided through a team of specialists. In keeping with the philosophy of the De Nora.

DNI Products .Electrochlorination Systems • • • Seaclor Mac® Solar Mac ® BRAVor™ .

35 154.20 8.70 63.31 0.08 199.03 55.67 7.37 47.42 175.57 45.44 3.14 47.91 56.20 139. Differed Tax Assets Current Assets.34 155.88 150.29 8.09 376. E* -Estimations & Rs.09 278.77 33.80 429.72 3.33 331. In Millions) Particulars March (Rs.74 169.39 107.88 Total Assets( 1+2+3+4 ) .35 260.31 103.39 Total Current Assets Less: Current Liabilities & Provisions (B) a) Liabilities b) Provisions 4.03 309. Loans & Advances (A) a) Inventories b) Sundry Debtor c) Cash & Bank Balance d) Other Current Assets e) Loans & Advances f) Unbilled revenue CY11A CY12E CY13E 54.33 157.48 134.79 429.mn) 1.22 7.82 32.73 312.31 260.57 331.35 53.80 419.Actual.85 64.54 55. Investments 3.88 429.48 50.69 93.23 47.91 260.56 1.Shareholder’s Funds a) Capital b) Reserves & Surplus Total Net worth Total Liabilities (1) 1.90 3.46 8.63 1.in.00 50.86 538. 2011 (A*.44 205.21 99.Financial Highlight Balance sheet as at December 31st.07 158.42 331. Net Current Assets (A-B) 126.56 53.Fixed Assets a) Gross block b) Depreciation c) Net Block d) Capital Work in Progress Total Fixed Assets 2.50 214.30 46.81 224.91 63.78 6.35 61.11 40.42 53.

33 10.13 -2.94 53.18 30-Sep-12 3m 255.66 -41.82 -158.63 -0.92 -6.98 -21.42 -1.91 68.09 278.00 12.66 102. 2012 to 31st Dec.69 12.Annual Profit & Loss Statement for the period of 2010 to 2013E Value(Rs.44 72.50 -6.94 .50 21.78 -7.00 5.09 10.92 -0.54 30.00 18.12 40.80 696.44 13.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS 31-Mar-12 3m 106.98 -31.68 10.79 3.09 33.52 30-Jun-12 3m 98.73 1.83 54.09 376.62 -0.00 2.55 518.69 34.82 31-Dec-12E 3m 342.in.68 13.07 53.55 204.05 68.02 91.13 109.00 89.mn) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS CY10 12m 173.94 0.19 101.85 -30.09 10.05 34.55 Quarterly Profit & Loss Statement for the period of 31st Mar.66 89.59 55.20 98.00 8.00 16.in. 12E Value(Rs.14 109.21 13.02 101.40 10.61 -1.64 -0.22 -7.12 139.79 CY12E 12m 505.64 CY13E 12m 682.09 10.32 22.12 -1.50 19.00 4.01 259.15 47.40 186.91 352.51 CY11 12m 341.00 21.52 -10.21 347.00 13.21 -0.81 4.50 40.41 53.23 -408.03 -6.59 109.38 75.48 -549.92 -88.42 0.71 54.63 99.38 91.86 -65.46 53.84 -146.60 32.20 53.00 -255.59 -277.55 146.92 10.44 10.61 -1.17 -0.44 205.18 75.13 99.14 146.79 10.79 4.34 -0.

84 22.46% 14.10% 17.42% 10.55 21.11 47.19% 14.30 CY11 8.64 21.37% 31.) P/BV Charts CY10 5.31 62.83 4.22 CY13E 18.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) EV/EBITDA (x) Book Value (Rs.83% 6.20 CY12E 13.32% 14.84 80.97 2.68% 20.64% 36.52% 20.74 21.01% 20.Ratio Analysis Particulars EPS (Rs.09% 9.00% 22.90% 35.21% 14.80 4.50 11.51 23.25% 27.88 18.79 22.34% 14.43 3.26% 19.77% 18.27 46.48 .85% 35.

the stock trades at 9. The electronic industry has carved a niche in the metamorphosing and globalized market. transformers and other large electrical products. We recommend ‘BUY’ in this particular scrip with a target price of Rs. motors and generators According to the Indian Electrical and Electronics Manufacturers Association (IEEMA). and opens the flood gate of employment opportunities for people throughout the world. The industry has become an integral traction of the economy of a country.64 and Rs.228.55 respectively. helps in promoting business development and expansion.48 x respectively for CY12E and CY13E. Net Sales and PAT of the company are expected to grow at a CAGR of 58% and 48% over 2010 to 2013E respectively. the sector grew about 20% in the second quarter. While revival of automation projects — typically one of the first indicators for any growth in the economy — is already under way.00 for Medium to Long term investment. compared with 1. after liquidity improved and companies resumed expansion plans.13. an apex body representing the Indian electrical equipment industry. Industry Overview Electricity is a cornerstone of national economy of any country and electrical industry is so robust that prosperity and development of a country banks on it.000-crore industry. Price to Book Value of the stock is expected to be at 3. switchgears. We expect that the company surplus scenario is likely to continue for the next three years. The Rs 52. On the basis of EV/EBITDA.201. will keep its growth story in the coming quarters also. .7% in the first half. Earning per share (EPS) of the company for the earnings for CY12E and CY13E is seen at Rs. which sells cables. Industry seeks urgent intervention from Central Government at the highest level for conducive policy initiatives while entering into 12th Plan so as to meet laid down targets of power generation capacity and related transmission & distribution capacity expansions. “This demand growth could likely see a two-fold increase in the next 2-3 years. an 11. saw a major part of its growth come in the second half of 2009-10.84 x for CY13E.Outlook and Conclusion At the current market price of Rs.22 x and 2. Recovery in India’s manufacturing sector is in full swing. Industry witnessed surge in imports by 100% for insulators.31 x for CY12E and 6.18.3% rise in the electrical equipment industry has underscored the overall growth story in the world’s second fastest growing economy. the stock P/E ratio is at 14.00.84 x CY13E respectively.74 x CY12E and 10.

The Central Electricity Authority has set a target to add more than 21. the growth in electrical will strengthen policy measures as the government is working to restrict Chinese power equipment makers. the apex Indian industry association of manufacturers of electrical. Coming after a lull of two years.000 mw of capacity by the end of this fiscal. it was expected that growth in automation would also give a boost to the electrical sector. switchgear and cables as a recovery in real estate and infrastructure pushed up the demand for such products. Also as prices of electrical equipment are typically stable unlike that of the automation sector. For the first time in 10 years. the Indian electrical equipment industry has seen a negative growth of 2. such as the Rajiv Gandhi Gramin Vidyutikaran Yojana.4% in the first quarter (Q1) of the current fiscal (2012-13) compared to the corresponding period of Q1 FY12 (13. L&T. The Indian Electrical and Electronics Manufacturers Association (IEEMA). It is expected that competition would be intense. steel and cement. However.10%). most of the orders would be through EPC route with more new players entering the business and subcontracting the same to existing contractors. “The power sector reforms if implemented as scheduled will create large business for power sector equipment manufacturers and service providers. Demand for power equipment is expected to rise as India is targeting at least 9% GDP growth for the year ahead. Havells. higher electrical sales implies that projects have been revived. textile. Growth Drivers: The Company’s position as the market leader is due to its persistent efforts and emphasis in the following areas: • • • Product quality Continuous product improvement Introduction of new products through in-house developments . Since spends on automation and electrical in any project are equal. India has historically faced a demand-supply gap and this will feed the electrical industry.000 mw capacity by the end of 2012. The government plans to add about 12. industrial electronics and allied equipment today released the Q1 FY13 performance of the US$25 billion Indian electrical equipment industry. Schneider Electric and WS Industries. including from renewable sources. The government has also taken policy initiatives to speed up power sector development. The industry has posted a 30% growth in the fourth quarter in sales of rotating machines. mainly by the Power Grid Corporation. The growth in demand mainly came from industries such as power. Analysts and industry experts said the growth will be sustained as most of the transmission and distribution projects are likely to begin in the next fiscal year.82 %) and sequential quarter Q4 FY12 (14.Some of the companies in this sector are Siemens. Crompton Greaves. ABB.

1. Business Environment • Electrical Cables Electrical cables are the main focus area of business for the Company.13. It accounted for 82% of total sales for the year under review. Growth during the year under review was driven by the improvement shown by the construction and automobile sectors. The Company’s steps to set up new plants for cables as well as to expand the cable capacity at the existing plants will boost up the captive consumption of copper rods.496 metric tones for the earlier year. dependable and sustainable communication network.815 million) of which Rs. The Company’s communication cables meet with the requirement of local as well as international standards and therefore.106 million) and balance was inter-divisional transfers.504 million (previous year Rs.042 million for the earlier year. the order for a part of which Company secured and serviced during the year. .9.5. • Communication cables The communication cables comprise of state of art. the CCC rods division recorded a production volume of 21. The copper rod production is mainly for in-house consumption.2. find ready acceptance with domestic customers as well as in the exports market.288 metric tones as against 33. • Copper Rods Copper rod is the feed stock for copper based electrical and communications cables.• • • • Creating customer preferences Competitive pricing and extremely competitive cost structure Dynamic approach to situations Strong and dependable distribution channel spread all over the Country. Uncertainties over spectrum usage and licensing also acted as a dampener in this business. The communication cables segment (including optic fiber) recorded sales of Rs. Full fledged introduction of value added service has been delayed by telecom service providers. The long term out look for this sector remains positive since the economic growth for the country depends on industrial and infrastructural developments.051 million were sales to third parties (previous year Rs. a strong. The sales were Rs. The uncertainties that have plagued the telecom sector over the past two years have had an impact on Company’s revenues from this segment. During the year under review.2. new generation communication cables and traditional telephone cables.420 million for the year under review against Rs. BSNL after several years came out with a tender for JFTC cables. The economic development requires inter-alia.

• Electrical Switches and CFLs The manufacture and sale of these electrical products act as a logical extension of the cables business. backed by the distribution reach that the Company has it is but a logical conclusion that the future holds vast promise. Ltd. The Company has resources available at its disposal to implement and realize its business goals. it is natural that the demand for the products produced and marketed by Company would grow. the Government is promoting use of CFLs. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall India Equity Advisors Pvt. Road Ahead As the country marches ahead towards attaining the status of being a developed nation. . This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. On its part to contain the effects of global warming. With the focus being on supplying products of superior quality at a price that is attractive to the customer. Keeping in mind the expected growth in CFL demand the Company has built capacity in T3 and T4 type CFLs and has also launched the latest T5 tube lights and fittings in the market.

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