This action might not be possible to undo. Are you sure you want to continue?
February 28, 2012
RESPONSIVE INDUSTRIES LTD. (RESPONSIVE)
CMP: Rs. 97
Target Price: Rs.130 Management Meet Note
Reuters code Bloomberg Code BSE Sensex 52week H/L (Rs) Monthly H/L (Rs) MktCap (Rs mn) MktCap (US$ mn) EV (Rs mn)
RSPO.BO RESP IN 505509 17,923 135/85 135/93 25,462 519 31,808
MANAGEMENT MEET We met the management of Responsive Industries which is into manufacture of PVC flooring solutions, seat covering, upholstery, pharmaceutical packaging and transparent sheeting. The company through its subsidiary Axiom Cordages Ltd. manufactures ropes used in shipping and other industries. The key takeaways from our interaction were: Capacity expansion to drive growth The company is near doubling its PVC business from 47,700 MT to 90,000 MT by end March, 2012. This expansion will drive the topline growth and will also enable the company to enjoy economies of scale thereby also driving EBIDTA margin expansion. The company also has a subsidiary Axiom which is into manufacture of ropes and has a capacity of 40,000 MT. Strong Brand Recognition Responsive is a recognised brand in the vinyl flooring and PVC leather goods segment. Product brands like Garnet, Vega, Spica, Talitha, Canopus, Regor and others are well known in the market. The company caters to a wide array of clients in government, transportation, commercial and hospitals. It has reputed customer base like Indian Railways, Mercedez Benz,Tata Motors,Volvo, SevenHills Hospital, Big Bazaar, etc. Dominant Market Share The company is a leading supplier to Indian railways for flooring and seat covers for their coaches. Responsive has a market share around 98% in this business line. The company also has 95% market share in auto canopy and 85% market share in domestic bus-body manufacturing industry. The company is also one of the largest player in global shipping ropes industry.
Valuation Parameters (FY 14)
EV/EBITDA MktCap/EBITDA EV/Sales MktCap/Sales
7.1 5.9 1.3 1.1
Greater Manufacturing Efficiency And Scale Lead To Pricing Power The company faces very little competition from domestic players as most of them are unorganized and do not match with the quality and scale that Responsive can provide. Foreign competition is easily negotiated by the company as its efficiency in manufacturing lead to lower cost which it can pass on to the consumers. Strong Financials As per FY11 annual report the company has ROCE of 15.2%, ROE of 24.9% and Debt to Equity of 0.78. The company has inventory turnover of around 16 days and receivables cycle of 31 days and a very comfortable current ratio of 2.7.
Paurav Lakhani 91-22-2498 1515 firstname.lastname@example.org RESPONSIVE INDUSTRIES LIMITED
Besides the company is also member of prestigious industry associations like US Green Building Council. Prime Broking RESPONSIVE INDUSTRIES LIMITED 2 . specialty and commercial office spaces and other real estate developers. World Floor Covering Association. It supplies to well-known clients in different industry verticals including healthcare. and Indian Green Building Council. servicing clients across diverse sectors.700 MTPA in PVC. is into manufacturing of synthetic ropes used in the oil-rigs and shipping industry. Star Net Association (USA). retail. Exhibit I: Milestone Source: Corporate Presentation. hospitality. Its export-oriented subsidiary company. pharmaceutical packaging and transparent sheeting. seat covering and upholstery solutions. It has well-established overseas presence with exports comprising more than majority of its total revenues. The company is planning to triple its capacity in vinyl flooring and doubling in PVC leather cloth.PRIME BROKING COMPANY BACKGROUND The Company is into manufacturing of wide varieties of PVC flooring solutions. The Company has presence in over 70 countries through 11 sales offices and 300+ distribution agents and retailers. transportation. Axiom Cordages Ltd. sports and fitness centres. It has a total manufacturing capacity of 47.
etc) in hospitals. The first machinery was imported for setting up of the plant and operations were begun with a focus on domestic market where there was plenty of unmet demand. The following exhibit shows various industries that the company caters to: RESPONSIVE INDUSTRIES LIMITED 3 . . The company is also leading supplier to Indian Railways for floors and seat covers in their coaches. In 1992 the first high grade vinyl and PVC processing plant was conceptualized and designed. . The Company acquired land for the plant and undertook expansion of facilities to cater to increasing demand. hotels. DOMINANT MARKET SHARE The company enjoys 85% market share in domestic bus body manufacturing industry and 95% market share in auto-canopy new use and replacement market in India. company expands its production lines to cater to growing demand. It will increase global footprint to 130 countries by FY13 and successfully cater to fast-growing domestic demand. In that process it undertook international certifica tions of products and processes.The products of the company are used in places attracting high traffic like malls. In 2000 the company increased focus on export markets. . By 2010 with established and certified products and processes in place.PRIME BROKING As per the Exhibit I: . sports centres and gymnasiums. anti-static. Investment was made in Axiom Cordages for capacity expansion and product innovation. In 2004 it undertook significant up-gradation of machinery and production capabilities. shopping complexes and commercial spaces and also fulfilling specialty flooring requirements (like anti-bacterial.
PRIME BROKING Exhibit II: User Industries Source: Corporate Presentation. Prime Broking RESPONSIVE INDUSTRIES LIMITED 4 .
PRIME BROKING Exhibit III: Major Clients Across Sectors GOVERNMENT TRANSPORTATION COMMERCIAL OTHERS Source: Company RESPONSIVE INDUSTRIES LIMITED 5 .
Prime Broking RESPONSIVE INDUSTRIES LIMITED 6 . with latest technology in its production lines.PRIME BROKING MANUFACTURING FACILITY The company’s manufacturing facility is located at Tarapur (i. it also has laboratory with testing and research personnel. Besides.e. outskirts of Mumbai) in Thane District. Maharashtra. The company has best-of-the-line machinery in place. It has adaptable machinery to suit current market requirements and consumer demand along with well-experienced plant managers and operating engineers to supervise and manage the operations. The production process can be summarized as Exhibit IV Exhibit IV: Production Process Source: Corporate Presentation. for quality testing and assurance and new product development and in-house logistics support is in place for critical delivery.
etc. . retail and other industries. It is available in two forms – sheets & tiles. which can be easily customized & installed. offices. Vinyl Flooring It is one of the major contributors to the top line & is a high growth product segment. The products are cost effective & is a time saving option for flooring in high traffic areas like malls.PRIME BROKING PRODUCT PORTFOLIO The products of the company are classified as Exhibit V: Exhibit V: Product Portfolio Source: Corporate Presentation. . . Prime Broking . RESPONSIVE INDUSTRIES LIMITED 7 . restaurant. sports and fitness industry. The flooring solution is used in transportation. healthcare. gyms.
PRIME BROKING The types of Vinyl Flooring are as per Exhibit VI: Exhibit VI: Types of Vinyl Flooring Source: Corporate Presentation. Prime Broking RESPONSIVE INDUSTRIES LIMITED 8 .
large array of colors. diary covers. footwear. . It is used in railways. . . . Its key features are: Sponge Leather: Long lasting properties. The various types of Rigid Blister Films are as per Exhibit VII Exhibit VII: Rigid Blister Films Source: Corporate Presentation. Synthetic leather cloth fast replacing natural leather for many product lines. garment. Its applications are numerous retail items such as purses. . shoes. wallets. . bags. . . sports goods. material for furniture. furniture. bags. cushion covers. Prime Broking RESPONSIVE INDUSTRIES LIMITED 9 .PRIME BROKING PVC Leather Cloth . printed and laminated. It is also one of the major contributors to the top line & is a high growth segment. etc Coated Leather Cloth: Process of coating is unique to RIL and mastered by us. These films are extremely versatile and can be thermoformed. welded. shoes. . . automobiles. etc Major applications of PVC Leather Cloth are: Buses/Trains Seat Covers Car Paneling Retail Items (Jackets. etc Un-foamed Leather: Extra superior tear strength. used in making soft luggage. wide array of uses such as automobile upholstery. luggage. etc) Rigid Blister Film PVC Rigid Blister Films are used in the pharmaceutical industry for blister packaging of medicines.
tablemats. . Printed films are used for raincoats. . The various types of Soft Sheeting are as per Exhibit VIII Exhibit VIII: Soft Sheeting Source: Corporate Presentation. Prime Broking RESPONSIVE INDUSTRIES LIMITED 10 .PRIME BROKING Soft Sheeting . . etc. Opaque soft sheets are used for diary and pass book covers. Soft sheeting or transparent sheeting has multiple usages across industries. Transparent films are used for stationery items. covers.
Indian Green Building Council It aims to usher in a green building movement and facilitate India’s emergence as one of the world leaders in green buildings by 2010.S. Star Net Association of USA It enables the company to become the preferred vendor for top notch U. environmental concerns. RESPONSIVE INDUSTRIES LIMITED 11 .PRIME BROKING INTERNATIONAL ACCREDIATIONS AND MEMBERSHIPS ISO 9001:2000 It certifies that company consistently provides quality products to satisfy customer needs & ensure that is enhanced continuously.S. US FDA It is awarded for DMF Registration under US FDA for Rigid Blister Films used in pharmaceutical packaging. sale and services segments. legal matters. contractors. International Maritime Organisation It develops and maintains regulatory framework for shipping and remits safety. ISO 14001:2004 It is awarded for establishment and implementation of environmental management system and assurance of adherence to environmental policy. maritime security and efficiency of shipping. World Floor Covering Association It provides practical solutions and tools to its members to streamline the business & has as its other member organizations associated with the manufacture. U. Green Building Council It is a source to provide education & training mainly to the employees of member organization in green initiatives related to constructions. technical co-operation.
The ropes are classified into the user based industries that they serve and are shown in Exhibit IX: Exhibit IX: User Industries Source: Corporate Presentation. A subsidiary of Responsive Industries Ltd and a 100% export oriented unit (EOU) engaged in manufacturing wide range of synthetic ropes using Polypropylene (PP).The ropes are custom made to customer requirements and its characteristics regularly adjusted for geographical differences. It caters to the requirements of shipping. The products of the company can further be classified as per Exhibit X: RESPONSIVE INDUSTRIES LIMITED 12 . longer life span and lower production cost. Nylon and Polyester. etc.The company has sophisticated machinery which allows the company to make efficient use of its resources. oil exploration and telecom industries across 65 countries globally. possessing outstanding technical knowhow to deliver next generation ropes to clients globally. The properties can be adjusted – ex: higher breaking strength requirement. transport. Prime Broking The company through its processes has cost-advantages which are passed onto customers and its constant innovation is the key driver of lower cost. Polyethylene (PE). The new formulations result in better product with higher breaking strengths.PRIME BROKING AXIOM CORDAGES LIMITED Axiom Cordages Ltd (formerly known as Axiom Impex International Ltd) is among India’s largest exporters of new generation synthetic ropes.
PRIME BROKING Exhibit X: Types of Ropes Source: Corporate Presentation. Prime Broking RESPONSIVE INDUSTRIES LIMITED 13 .
323 23.682 5.787 1.225 986 927 4.528 11.379 8.PRIME BROKING PERFORMANCE The company is expected to grow at 27% CAGR in revenue terms. (Exhibit XI) Exhibit XI: Performance Outlook Revenues (Rs mn) (Rs mn) CAGR = 27% 19.486 FY 11 FY 12 FY 13 FY 14 Source: Company.338 (Rs mn) 1.903 EBIDTA CAGR = 33% 3. 33% CAGR in EBIDTA terms and 17% CAGR on the bottom line.919 15.585 4. Prime Broking FY 11 FY 12 FY 13 FY 14 RESPONSIVE INDUSTRIES LIMITED 14 .816 FY 11 FY 12 FY 13 FY 14 FY 11 FY 12 FY 13 FY 14 Net Profit (Rs mn) CAGR = 17% 1.303 2.578 CAGR = 22% 6.
luggage industry and furniture & furnishings. Due to large. mtrs (turnover Rs. The global flooring market grew by 4. China. Domestic demand for PVC synthetic leather primarily comes from railways. RESPONSIVE INDUSTRIES LIMITED 15 . with 5% of the demand by Vinyl floorings would work out to 35 Mn sq. The domestic market would increase from the present Rs. 1500 mn to about Rs. sports goods industry. Turkey. water-vapor permeability. excellent resistance to sunlight & degradation. It is estimated that China will account for 44% of the global PVC demand by 2020. greater wash ability. Indonesia.1% upto 2015 with increasing demand in China. with Chinese Government estimating an expenditure of USD 600 bn towards investment in infrastructure. 5000 mn). India and Brazil. low income & agricultural population. Global Vinyl Flooring Scenario: The Vinyl Flooring industry is a part of a USD 150 bn global flooring & carpet sector of which Vinyl accounts for 10%. Domestic PVC Synthetic Leather Scenario: The PVC synthetic leather is fast replacing natural leather for many products all over the world due to its distinct properties such as durability.6000 mn by 2015. India.a.6% from 2000 to 2005 & is projected to grow at 4. printability & competitive prices. growing at 15% p. footwear industry.PRIME BROKING INDUSTRY SCENARIO Global PVC Scenario The Demand for PVC is driven by fast growing developing countries viz. Domestic Flooring Scenario: The Indian flooring market is the third largest in the Asia. PVC Demand from developing countries is estimated at 61% of the total demand by 2020. Chinese demand will be the major driver in 2020. Their demand is largely compensating the slowdown in the developing economies of North America and Europe. automobile industry. broad plasticity range. there is low base flooring in India. Iran. mtrs. garments industry. which will result in increase in demand for PVC Leather Cloth in the domestic market. The total flooring demand in the year 2015 would be around 705 mn sq. Indian Railways will replace all wooden seats in the trains with cushioned ones and add third berth on the aisle side in all 14000 AC-3 tier and sleeper coaches and replace the floorings in these new coaches. over the years. Ukraine and Saudi Arabia. weather resistance.
1 and Rs. The EPS estimates for FY12E.4% 986 8.6x. Fiscal Year FY09 (A) FY10 (A) FY11 (A) FY12 (E) FY13 (E) FY 14(E) Revenues (Rs.3% 667 7.903 4. 6.528 16.1x times & EV / EBIDTA of 12. FY13E and FY14E are at Rs.) P/E EV/EBITDA KEY RISKS 6.287 15.5 27.1 The key downside risks are as follows: i) Volatility in PVC prices could affect the performance of the company drasticially.303 18.8 23.0 16.5 - 15.1% 262 3.1 19.6 19. mn) Net Profit (%) No.502 889 13.0% 1.0% 1. 130 on an P/E multiple of 21.6% 262 6.393 1.7% 494 7.816 15.338 6.0 respectively.7% 262 5.323 2.919 3.4% 257 3.5x times FY14E numbers.787 1. FY13E and FY14 numbers. mn) EBITDA (%) PAT (Rs.9 - 8. In our EV calculation we have reduced the Compulsory Convertible Debentures CCD) from net debt. Rs. 8. 3.5. mn) EBITDA (Rs. 5.6% 218 1.0x and 16.PRIME BROKING VALUATION We expect a 27% CAGR in topline growth and 33% EBIDTA growth over the period FY11A to FY14E .5% 927 6.585 18.578 6.0 8.5x. ii) Exposure to foreign exchange fluctuations RESPONSIVE INDUSTRIES LIMITED 16 .6 - 11.1 7. 19.9% 244 2. We are bullish on the stock with a price target of Rs. of Shares (mn) EPS (Rs.5 12.8x and 7.1x its FY12E. The stock is currently trading at an P/E multiple of 27.
087 3.132 8.7% 262 5.011 11.8% 111 (4) 1.338 0 0 1.3% 373 1.0% 262 3.128 45 351 191 277 586 1.083 3.820 224 136 7. Prime Broking. Other Income) Total Expenses PBITDA PBITDA Margin (%) Depreciation PBIT PBIT Margin (%) Interest EO PBT PBT Margin (%) Tax PAT Less: Minority Interest Add: Share of Profit from Associates Adjusted PAT Net Profit Margin No.267 FY11 (A) 842 3.704 492 213 15.245 3.6% 967 1.682 7.348 12.613 912 14.492 FY13 (E) 262 6. (E) Estimated RESPONSIVE INDUSTRIES LIMITED 17 .492 11.904 619 213 16.8% 249 667 41 0 626 7.385 16.912 9.761 913 318 2.433 7.537 163 573 2.379 7. (E) Estimated Annexure II: Consolidated Balance Sheet Statement Rs mn Share Capital & Application Money Reserves & Surplus Networth Loan Funds Deferred Tax Liability (Net) Minority Interest Total Liabilities Net Fixed Assets Investments Cash and Bank Balances Debtors Inventory Loan.223 163 1.601 4. Prime Broking.225 7.549 13.578 0 0 1.6% 574 1.334 3.1% 1.106 1.794 2.553 16.267 5. of shares EPS FY09 (A) 6.166 1.9% 95 0 916 10.504 396 213 13.410 11.091 12.655 10.963 8.961 13.525 5.575 16. (A) Audited.4% 244 2.420 6.578 6.1 FY14 (E) 23.6% 397 927 0 0 927 6.780 163 146 1.491 7.091 FY14 (E) 262 7.644 4.4% 218 1.333 72 3.243 2.1% 1.6% 262 6.0 Source: Company.734 1.7% 257 3.047 3.5 FY13 (E) 19.8% 24 (1) 617 9.4% 120 496 32 (46) 418 6.928 19.315 3.8% 330 0 1.013 12.6% 468 0 2.491 1.6% 898 1.467 FY12 (E) 262 5.245 FY10 (A) 1.116 5.6 FY12 (E) 15. (A) Audited.770 596 204 1.368 11. Advances & Other Current Assets Current Liabilities Net Current Assets Total Assets FY09 (A) 244 1.961 Source: Company.504 264 213 8.944 16.9% 308 995 76 0 918 7.273 143 95 3.6 FY11 (A) 11.300 761 265 1.338 6.611 18.303 10.0% 272 639 9.9 FY10 (A) 8.467 7.3% 531 1.172 163 205 903 535 157 668 1.PRIME BROKING Annexure I: Consolidated Profit & Loss Statement Rs mn Total Income (incl.390 15.9% 456 0 1.004 2.486 3.508 2.328 18.545 10.325 8.067 449 162 608 1.631 2.941 16.971 1.912 9.494 340 364 1.
2% FY10 (A) 29.6% 6.9% 12.693 -2.6 16 27 9.209 0 4 184 -2.2 9. Prime Broking.0% 20. (A) Audited.336 -2.6% Return on CE 19.631 Source: Company.5% 7.6% 0.8% 11.6% 1.9% 8.100 3 0 6 -1.784 -2.3% 17.PRIME BROKING Annexure III: Consolidated Cash Flow Statement Rs mn Profit Before Tax Depreciation Interest Other Items Change in Working Capital Income Tax Paid & Other Adjustments Cash Flow from Operations Change in Net Fixed Assets Change in Investments & Interest Received Dividend Received Other Items Cash Flow from Investing Change in Capital Debt Raised Interest Paid Dividend Paid Cash Flow from Financing Change in Cash Opening Cash & Bank Balance and others Closing Cash & Bank Balance FY09 (A) 615 272 21 -44 150 -84 931 -1.8% 9.7 15 10 15.0% 12.090 899 -415 -21 -20 444 284 79 363 FY10 (A) 916 373 95 -200 -1.740 -295 4 25 -3.2% 10.635 -58 204 146 FY13 (E) 1.000 0 25 0 -1.299 531 111 -100 211 -268 1.243 456 -190 -250 -478 2.2% FY11 (A) 40.480 0 4.0% 41.6% Source: Company.9% 15.1% 10.2% FY12 (E) 30.912 1.325 898 330 -86 -415 -265 1.4% 0.0% 12.0 6.1% FY13 (E) 30.021 524 -303 -33 -111 77 -160 345 185 FY12 (E) 1.8 11.315 468 -177 25 -840 3.975 0 200 -35 -456 -291 427 146 573 FY14 (E) 2.545 1.787 -5.5 16 31 11.4% 41.341 -17 -174 -2. (A) Audited.0% 39.9% 7.8% 6.000 -35 -330 3.5% FY14 (E) 20. (E) Estimated Annexure IV: Key Financial Ratios FY09 (A) Net Sales Growth EBITDA Growth EBIT Margin Net Profit Margin Debt to Equity Ratio Interest Coverage Ratio Inventory Turnover (Days) Debtor Turnover (Days) Return on Asset 59. Prime Broking.2 5.000 0 25 0 -1.7% 42.1% 1.7% 1.507 0 25 1 -5.058 573 1. (E) Estimated RESPONSIVE INDUSTRIES LIMITED 18 .7 25.1 12 37 8.7% 15.8% 10.192 12 443 456 FY11 (A) 1.1% 44.560 -33 -95 3.4 13 39 9.006 760 2.9% 1.975 0 200 -35 -468 -303 1.5% 6.9 13 32 6.4 4.
This document is not to be considered as an offer to sell. RESPONSIVE INDUSTRIES LIMITED 19 . analysis and estimates contained herein are based on Prime’s assessment and have been obtained from sources believed to be reliable. Prime or its affiliates may from time to time solicit from or perform investment banking or other services for any company mentioned in this document. Prime expressly disclaims any and all liability that may arise from information. Prime. or a solicitation to buy any securities. Prime. The information. its Directors. This document is meant for the use of the intended recipient only.Equity Sales VP . at best.PRIME BROKING EQUITY SALES / DEALING TEL.com email@example.com nitin@primesec. its affiliates and their employees may from time to time hold positions in the securities referred to herein. represents Prime’s opinion and is meant for general information only.This document. errors or omissions in this connection.: +91-22-24982525 Vinay Motwani Hemang Dagli Sumeet Rewari Nitin Shah Head of Sales & Distribution VP . Officers or Employees shall not in any way be responsible for the contents stated herein.com firstname.lastname@example.org STOCK OWNERSHIP / CONFLICT DISCLOSURE Prime / Prime Subsidiaries Key Prime Management &/or Other Employees Any Other Corporate Finance Conflict of Interest No No No ANALYSTS’ RATINGS DEFINITIONS STRONG BUY BUY HOLD SELL Expect 25% CAGR return Expect a CAGR return 15% and 25% Expect 15% CAGR return Expect 5% CAGR return CONTACT NUMBERS Dealing: +91 22 24982525 Research: +91 22 24981515 This document has been prepared by Prime Broking Company (India) Limited (“Prime”).Equity Sales Dealer .Equities vinay@primesec.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.