Pick of the Week 09 Jan 2017

RETAIL RESEARCH
Banco Products (India) Ltd
Industry CMP Recommendation Add on dips to Sequential Targets Time Horizon
Auto Parts & Equipment Rs. 202 Buy at CMP and add on declines Rs. 184-188 Rs. 225-245 1-2 quarters

HDFC Scrip Code BANPROEQNR Banco Products (India) Ltd (BPIL) incorporated in March 1961 is one of the leading manufacturers of radiators for
automobiles and gaskets with five manufacturing plants located at Vadodara (Gujarat), Jamshedpur (Jharkhand), Rudrapur
BSE Code 500039 (Uttarakhand), Waghodia, Vadodara (SEZ), Zaheerabad (Telangana).
NSE Code BANCOINDIA
Investment Rationale:
Bloomberg BACO IN • Recovery in global economy & revival in domestic CV industry to aid growth.
CMP Jan 06 2017 Rs. 202 • Leading manufacturer and Supplier to OE for CV, PV, Agri and Industrial products.
• Vertically integrated company.
Equity Capital (Rs cr) 14.3
• Excellent product development capability and track record enables increasing OEM customers count globally.
Face Value (Rs) 2.0 • Increasing contribution from new categories like on-highway and off-way, power generation, farm equipment and
Equity Share O/S(crs) 7.2 construction equipment
• Sound Financial Profile, debt free balance sheet, large cash on books and consistent dividend payout.
Market Cap (Rs crs) 1444.7
Book Value (Rs) 96.2 Concerns:
• Dependent on Automobile and Industrial Equipment Industry.
Avg. 52 Wk Volumes 51045 • Some NRF subsidiaries are still loss making or not operational.
52 Week High 241.5 • Volatility in raw material prices and/or Volatility in foreign currency.
• Outcome of IT raid at BPIL premises after its name in Panama Paper Leak.
52 Week Low 90.3
View and Valuation:
Shareholding Pattern % (Sept 30, 16) Industry leading performance, strong relationships with OEMs across the world, proven R&D capabilities leading to rising
Promoters 67.9 count of customers, strong financial profile are some factors that could drive BPIL’s topline and margins going forward. We
expect BPIL could report 13.5% and 11.8% revenue growth in FY17E and FY18E respectively. With low requirements of capex
Institutions 4.7
spend in the near future, BPIL is all set to take advantage of the industrial uptick which is visible in the CV/LCV/HCV/ Tractors
Non Institutions 27.4 segment and its cash flow will be available for distribution to its shareholders.
Total 100.0 Taking into the consideration of rich experience of management, negligible debt status, and available production capacity,
we feel investors could buy the stock at the CMP and add on dips to Rs. 184-188 band (~9.5x Sept FY18E EPS) for sequential
Fundamental Research Analyst targets of Rs 225 (11.5x Sept FY18E EPS) and Rs 245 (12.5x Sept FY18E EPS). At the CMP of Rs 202 the stock trades at 10.3x
Abdul Karim Sept FY18E EPS and ~1.6x Sept FY18 P/BV.
abdul.karim@hdfcsec.com

RETAIL RESEARCH P age |1

Rubber Precoated Beaded Gaskets. It designs.Consolidated Particulars (Rs cr) Q2FY17 Q2FY16 YoY (%) Q1FY17 QoQ (%) FY15 FY16 FY17E FY18E FY19E Net Sales 352.6% 53.3% (Source: Company.1% 13.9 1528. TAFE. Singapore and the UK. This helps its sales in the aftermarket segment.9% 15.1% 5.0 ROCE (%) 19.5% 1128. Vadodra (SEZ).Includes clients from non-automotive companies in Infra.9 -7.5 16. Rubber Cork Gaskets. Rudrapur (Uttarakhand). BPIL offers products in various categories.5 63. Ashok Leyland. 1961.3% 87.3 12. It’s diverse Client Base: . it is one of the leading manufacturers of radiators for automobiles and gaskets in India with five manufacturing plants. BPIL plants are located at Vadodra (Gujarat).7 -21.5 3. Charge Air Coolers. Company produces over a 1000 varieties of Heat Exchangers (Radiators. develops and manufactures engine cooling modules and individual cooling products for a range of industries.5 135.7 89.9 20. Patel in Non executive Chairman of BPIL and has been served as an Executive Chairman. . JCB and Indian Railways BPIL’s brand “Banco” is among the most well known and recognized across India.6 16. Mehul K.1% 15. He served as Vice Chairman of Banco Products (India) from May 28. power generation. Nederlandse Radiaturen Fabriek B.9 118. and Copper Gaskets. 2014. Waghodia.6 18. Banco Foundation and Lake Minerals (Mauritius) Limited.4 324. such as cooling systems.3% 21.0 24. Honda and TVS Group.8 -3.2 APAT 32. there were 545 people employed in the company. jointing gaskets and sheets. BPIL has a total installed capacity of 2.2 144. Its products in jointing gaskets and sheets category include BNA 3000. Mr.000 large industrial heat exchangers per annum. Hero. Koel. and rubber products.1 12.road and off.3% 102. Over the years BPIL has strengthened its market position by adding more OEM customers in sectors like on.1 Million Aluminum and Copper-Brass automotive heat exchangers and 4. As on 31st March 2016. Vice Chairman and Managing Director of BPIL over the past. Charge Air Coolers and Oil Coolers). Multi Layered Steel (MLS) Gaskets for Cylinder Head and Exhaust Manifold applications.2 EBITDA 52.Major customers for Heat Exchangers: TATA Motors.2% 380. At present.8 1204. Its products in cooling systems category include Radiators. BNA 2900 and BNA 2500. Zaheerabad (Telangana). sealing gaskets.Major customers for Gaskets: Maruti. RETAIL RESEARCH Financial Summary.9 63. TATA Motors. Mr.3 178. As on 31st March 2016.. Its products in sealing gaskets category include Graphite Composite Gaskets.0% 16.road segments.9 17. farm equipment and construction machinery. Patel serves at Banco Aluminium Limited.5% 15. Germany. BPIL started its production of radiators from its new manufacturing plant located at EOU at Synefra Special Economic Zone in Vadodra (Gujarat). BPIL earns 30% revenue from export.7 10.5 29. . K K Patel Foundation. It exports its products to Australia.2 10. Railways and Farm Equipment.2 P/E (x) 16. Wholetime Director.3% 12. In July 2012.3 1366. Oil Coolers and Engine Cooling Assemblies.6% RoE (%) 14. 2012 to November 1. HDFC sec) Company Profile: Banco Product (India) Ltd (BPIL) was incorporated on March 16.7 214.7 -21. RETAIL RESEARCH P age |2 .7 Diluted EPS (Rs) 4.9 201.0 41.1 146.9% 20.1% 40.V.2 1693. M & M.1% 20. Jamshedpur (Jharkhand).

CSM. RETAIL RESEARCH Business Overview: Product Overview: Cooling System Sealing Gasket Jointing Gasket and Seats. Aluminium Edge Moulded Gaskets Metal wiremesh reinforced Synthetic Copper Gaskets Synthetic / organic fibres bonded with NBR Revenue Mix Geography Mix (Source: Company. SBR. Rubber Products Multi Layered Steel (MLS) Gaskets for Cylinder Radiators Head and Exhaust Manifold applications Metal wiremesh reinforced Aramid fibres bonded with NBR/SBR Charge Air Coolers Graphite Composite Gaskets Aramid & synthetic organic fibres bonded with NBR Oil Coolers Steel Fibre Composite Gaskets Aramid fibres bonded with Neoprene (CR) Engine Cooling Assemblies Compressed Fibre Joining Sheet Gaskets Aramid fibres & lamerrar graphite bonded with NBR Rubber Cork Gaskets Glass fibres bonded with NBR Rubber Precoated Beaded Gaskets Aramid fibres bonded with NBR. HDFC sec) RETAIL RESEARCH P age |3 .

12 1.13 122. Banco has been supplying its products to NRF over the last 15 years.84 4.35 0.7 million (approx Rs 111 cr).9 NRF Switzerland AG 100% 7.48 2.77 9.27 31.16 13.83 3.1 NRF Thermal Engineering B.43 0.75 4.95 114. has operating subsidiary.47 17. 17.42 2.4 NRF Handels GmbH 100% 29. 0.91 0.13 2.67 0.46 7.07 -0.9 0.21 44.07 -0.01 -0.11 1.8 16. shipyards and of course the aftermarket are numbered among NRF’s regular customers.52 28.05 0.86 79.2 4. Banco Gaskets (India) Ltd.o.2 NRF France SAPL 100% 84.05 1.V. with effect from 31st March. (Tanzania) (KBL).69 (Source: Company.61 3.53 34.1 2. Prior to acquiring NRF. Gaskets division of the BPIL was transferred to its wholly owned subsidiary company – Banco Gaskets (India) Ltd.A 100% 86.79 2 Lake Mineral (Mauritius) Ltd 100% .28 32.06 -0.6 NRF Espana S.62 2. Leading car manufacturers.96 -22. 42.00 -0. HDFC sec) RETAIL RESEARCH P age |4 .18 4. 2012.94 5. Banco Gaskets is engaged in the manufacturing and selling of gaskets used for automotive industries.01 .13 51.64 -0.37 2. 0.99 1. KBL’s distillery converts molasses.35 3 Banco Gaskets (India) Ltd 100% 100.38 -5.05 3.11 51.K) Ltd 100% 39.4%) and Technical Grade Alcohol (94%). 0.24 -3.43 -5.3 1.11 6.10 NRF USA 100% .01 12.41 0.41 373.74 -15.48 10.97 1.7 NRF Poland SP z.73 14.35 91. into Extra Neutral Alcohol (96.65 39.79 .03 3.49 78. a waste product from Tanzanian Sugar plants.79 3.39 60.03 1. NRF’s production sites and distribution centers are strategically distributed over the whole of Western world.96 1.13 -0.4 -1. -0. (NRF) 100% 495.34 -0.21 -0.09 -0.N Company Country Type of company % of share held 1 Nederlandse Radiateuren Fabriek B.V. Financials of Wholly owned subsidiaries (NRF.Tanzania 95% 55. NRF and its subsidiaries are engaged in the business of manufacturing and distribution of heat transfer products.04 8.26 -0.V.5 75.99 8.09 420.o 100% 37.41 10. Rs PBT.5 NRF Deutschland GmbH 100% 101.26 -0.15 0.48 -2.09 1. Lake Minerals owns 95% of the KBL which is the first grass root level Bio-Chemical manufacturing company in Tanzania.58 0.87 75.9 5.1 Kilimanjaro Biochem Ltd .8 NRF Italia Srl 100% 42. RETAIL RESEARCH Subsidiaries: BPIL Products has three direct subsidiaries: S.02 1. Kilimanjaro Biochem Ltd. Lake Minerals (Mauritius) Limited Lake Minerals (Mauritius) Ltd.26 5.57 1. (NRF) Nederlands Subsidiary 100% 2 Banco Gasket (India) Ltd(BGIL) India Subsidiary 100% 3 Lake Minerals (Mauritius) Ltd (LMML) Mauritius Subsidiary 100% (Source: Company. 100% .26 -0.36 94.61 .19 -0.04 -2.38 0.09 1.86 7.65 17. industrial companies.02 0. LMML and BGIL): % of Share Turnover. Rs S.41 2.77 -0.00 -0.5 7.01 1.47 22.32 6.3 NRF(U.03 0.21 -14.25 94.65 28.88 2.78 111. HDFC sec) Nederlandse Radiateuren Fabriek BV (NRF) Banco Products (India) acquired NRF in February 2010 for €17. NRF’s products find their way into many sectors all over the world. -0.37 -0.65 17. Rs PAT.N Company holding FY14 FY15 FY16 FY14 FY15 FY16 FY14 FY15 FY16 1 Nederlandse Radiateuren Fabriek B.16 1.57 .

This growth was led by production of Medium & Heavy Commercial Vehicles which registered 29.  Economic revival and higher infrastructure spending will further help to raise demand for Commercial Vehicles and Construction Equipments resulting in corresponding demand for BPIL’s s cooling products which are used by both auto as well as industrial OEMs. GEW Radiators India Pvt Ltd. As per the data provided by SIAM.  The tractor industry sales volumes are expected to grow by mid teen in FY17 compare to 9% de-growth in FY16. with a growing presence in the North American/Middle-Eastern/African and South American markets.9% growth. Laxmi Automobiles (Mumbai). the overall Commercial Vehicles segment registered a sales growth of 11. passenger vehicles and industrial products in India and is also India’s largest exporter of aftermarket radiators to the Europe. RETAIL RESEARCH Competition: BPIL is one of the leading manufacturers and suppliers of Radiators and Gaskets for commercial vehicles. The overall passenger vehicles growth was 7. Ranker suggests TYC. Industry Overview:  India’s commercial vehicle cycle seems to have bottomed out and is expected to mend from here on. while passenger vehicles are on the way of growth recovery led by expansion of road and highways by the government. Sunbelt Radiators. HDFC sec) RETAIL RESEARCH P age |5 . Koyo.2% in FY16E against the 3. Alpha Radiators Pvt. A volume CAGR of 8-9% for the tractor industry is likely to be maintained over the next five years as long term industry derivers remain favorable. A number of small players like Fsem Auto Radiators (Vadodra). One of the ranking agencies. Ltd (Rajkot. ACDelco.5% (volume) in FY16 as compared to same period last year.9% of FY15. Automotive Radiator Market Trend: How big will the global market be by year 2020 Opportunities in Key Material type Future growth Belongs to Asia (Source: GIA. Gujarat) and India Power Corp (Delhi NCR) etc offer competition to BPIL and are trying to capture market share. and Mishimoto as a top-5 best radiator brands globally.

 Aluminum radiators are welded or “aluminum brazed” and the finished piece is 100% aluminum. Both metals have pros and cons over the demand.  Most aluminum radiators use 1” wide tubes and some manufacturers like Griffin offer 1. BPIL manufactures and sells both types of radiators in the market. This eliminates the dissimilar metals and solders bloom problems that affect copper radiators.25” and 1.  Aluminum offers the advantage of about 30% to 40% less weight. Aluminum Radiators contributes 79% and Copper Contributes 21% of sales (standalone). Aluminum will oxidize if not protected from the elements. an OEM aluminum radiator lasts eight to 12 years where as a copper-brass lasts six to 10. That is why copper radiators have always been painted. RETAIL RESEARCH Percentage Split of Volume Production of Automobiles: Road Map to Growth: (Source: GIA. Traditional copper radiators usually use ½” tubes so a 4 row copper radiator has slightly less fin contact area than a 2 row aluminum core with 1” tubes when you take into account the loss of contact area at the curved ends of the tubes. It has been scientifically proven. RETAIL RESEARCH P age |6 . usually black. HDFC sec) Which Radiator is preferable. On average. To a racer this is a huge advantage over copper.5” tubes as well. cooling efficiency and corrosions of Radiators.  Copper actually transfers heat better than aluminum. cost. Aluminum or Copper? There are pros and cons to each material. The drawbacks to a copper radiator are the weight difference (aluminum is much lighter) and the solder joints that hold it together.  Copper radiator core will turn green and deteriorate rapidly especially in a damp environment. It is easier to repair in most cases than aluminum and until the last couple of years was much less expensive. Aluminum can also be polished out to a mirror like finish for those concerned with show appearance.

7% 28. normal monsoon after consecutive years of deficient rainfall and expected pickup in economic activity. De-Aeration tank. Middle East and African markets.8% 13.6% 1. Strengthening labor markets and improving financial conditions suggest that the upswing will continue in 2017.5% -2.5%-9. Radiator. Apart from existing order.9% (Source: SIAM.3% 18.  Overall domestic PV (Passenger Vehicles) segment is likely to register a growth of 10-12% during FY17 as compared to 8. climbing 5% above a year earlier.2% 4.5% 25.2% -2.4% -5. which is expected to grow at a CAGR of 10.3% 28.0% -10. In addition.5 lakh units. BPIL has also started focusing on non auto sectors like railways. power sector. RETAIL RESEARCH P age |7 .7% 12.9% 12.4% in 2017). three years of declining sales).2% 33. Also. The global economy which witnessed couple of difficult years is now showing recovery signs (IMF forecasts global economic growth of 3.7% -4.1% Total(PV+CV+3W+2W) 12. the M&HCV (Truck) segment is likely to register a growth of 13-15% in FY17 driven by continuing trend towards replacement of ageing fleet.7% 26.0% -20. Condenser.6% 18.5% PV+CV 8.9% 2.5% -9.3% 23. Transmission Cooler. Global car sales have gained momentum this year.0% -8.  In addition.1% 28.8% 11. the domestic bus sales are also likely to benefit from.8% 3.1% 25. production in the domestic CV industry (contributes ~80% to domestic revenue) is to grow at a CAGR of ~11% over FY2012-21E to 23.5% 8. posted a solid advance in October. (a) Government’s recent proposal of opening up the passenger transport sector to private players.8% Tractors 30. Fan cowl.9% 7. earth moving and construction segment etc.7% over FY15-19E to Rs 1693. Diesel cooler and Intercooler. BPIL offers complete cooling modules including steel mounting frame.3% 4.7% 38. Further. with gains buoyed by a 23% surge in China.3% 7. Currently low levels of tractor penetration in India. RETAIL RESEARCH Investment Rationale: Recovery in global economy & revival in domestic CV industry to aid growth: BPIL is a leading exporter of aftermarket radiators to Europe.2% -2.2% 2.1% 26.3% 0. demand is likely to pick-up for LCV (Goods) segment as well on back of expectation of replacement-led demand (i. strong governmental focus on availability of finance for agriculture mechanization tools and on rural development and high irrigation potential will drive the overall growth of the tractor industry. with a growing presence in the America. government initiatives such as the implementation of National Rural Employment Guarantee Act (NREGA) and increased usage in non-agricultural domains such as haulage in construction and infrastructure projects will further increase demand of tractors.5% 3.1% in 2016 and 3. some pre-buying ahead of the implementation of BS-IV norms (by April 2017) and gradual improvement in viability on back of lower diesel prices (SCV freight rates remain relatively sticky) and pick-up in consumption-driven sectors. in ICRA’s view.5% earlier in the backdrop of improved customer sentiments post 7thpay commission implementation. HDFC sec)  Despite lower growth in the past two months.1% 3.4% 7.7% 20. We expect these factors to aid the company’s revenue.e. We believe that once the Indian economy starts recovering BPIL is likely to see a big traction from its industrial customers apart from automotive customers.7% 10. pre-buying before BS-IV is implemented across India and expectations of pick-up in demand from infrastructure and industrial sectors led by government’s initiatives.0% 18.9% 23.8% 11. TMA.7% 2. Asia continued to lead the way.6% 0.9% -21. Indian Auto Industry growth over the last decade: Vehicles FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 PV 7.2% CV 10. (b) Higher allocation towards urban development projects and other initiatives such as “Smart Cities” etc.6% -6.8% 18.2cr in FY19E.7% 28.3% 0.

1 million aluminum and copper-brass automotive heat exchangers and 4. BPIL’s manufacturing plants are equipped with latest SPM production equipment and sophisticated brazing machines with online controls and error control as well as monitoring systems. On the back of expected growth in domestic CV industry. BPIL has designed multiple production line layouts to be able to process both large quantity orders as well as smaller production orders. Rudrapur (Uttarakhand). which includes non-automotive companies in infrastructure. The major customers include companies like Tata Motors. railways and farm equipment segments. In addition.000 large industrial heat exchangers per annum. Company has achieved healthy reputation of being a reliable partner and supplier to OEM customers in almost all sectors. to be able to supply the order quantity. Agri and Industrial products: BPIL brand is a respected brand in the market and the brand is in demand over the last 50+ years. simultaneously.5% and 11. Mahindra & Mahindra. Zaheerabad (Telangana) for production. The total installed capacity is 2. we expect the revenue for the consolidated business to grow at 13. JCB and Indian Railways. BPIL has installed solar power plant at Lucknow. BEML. Koel. Vadodra (SEZ). the company has invested in In-house R&D Center.8% to Rs 1367 cr and 1528cr in FY17E and FY18E respectively. Tool Room and Standards Room. BPIL has not seen pressure of price competition by other peers. HDFC sec) Strong Vertically integrated company: BPIL employs the state of art manufacturing technologies in its factories conforming to customers’ quality standards and in accordance with ISO 9001 – 2008 Certified. All the manufacturing processes are eco-friendly. Zaheerabad for utilizing alternate sources of energy. BPIL supplies to most of the OEMs within India and controls 85% in the OEM segment and has ongoing supplier relationships with both Indian OEMs as well as for Indian affiliates of Japanese/European MNCs for many of their future projects. within the shortest lead time. To ensure quality compliance. BPIL is promoting its brand to every corner of the country as well as abroad. TAFE. it enjoys relationships with diverse clients. RETAIL RESEARCH Leading manufacturer and Supplier of OE for CV. design. PV. RETAIL RESEARCH P age |8 . Ashok Leyland. tanks. Waghodia. To ensure the system of total quality control. and gaskets and fabricated parts In-house. BPIL has the main heat exchanger manufacturing plants in Gujarat and two satellite facilities in Jamshedpur and Rudrapur. BPIL produces every critical component like tubing. ISO 14001 – 2004 Certified and OHSAS Initiated system requirements. BPIL plants are located at Vadodara (Gujarat). development and quality assurance. Jamshedpur (Jharkhand). Sales Growth-% (Source: Company. ISO/TS 16949 – 2009 Certified.

5% to Rs 90 crore.2%. Sound Financial Profile and consistent Dividend Payout: BPIL has registered 6. Japan Metals Gasket currently holds 0. Company reported 14.3cr and 37.78% in March 2008). Due to its excellent product development track record. while the profit after tax (PAT) during the same period has grown by 7. as on 31st March 2015 and 4.8% stake in BPIL (down from 1. Indian Railways. Honda. Japan on January 1995. Reduction in debt had a cascading effect on the finance cost for the company which more than halved to Rs 3. farm equipment and construction equipment: BPIL emphasizes on continuous Research & Development. JCB. Key initiatives are as follow:  Continuous research and development: BPIL has been continuously investing in Research & Development to develop value engineering products. Total debtors as of March 31. Debtors Sales Outstanding (DSO) increased from 57 days to 67 days in FY16. development and general engineering activities. The company counts Auto OEMs like Yamaha. the BPIL has become a preferred supplier to most prestigious OEMs who have a global reach. etc.  Adoption of new technology and processes: Incremental investments have also been made by the company in equipments and software development for manufacturing advanced engine cooling products.7% revenue growth in FY16 to Rs 1204 cr. especially to various esteemed Original Equipment Manufacturers (OEM).4. and enable OEM customers to successfully migrate to Euro IV standards. BPIL financial risk profile has historically benefited from a conservative capital structure and cost optimization strategies. Bombardier. Caterpillar. 2016). M&M. adoption of new technology and quick product development to lead the market. company has cash and cash equivalent per share of Rs 18. It helps in developing new cylinder head gaskets for the latest generation Euro 4 / Euro 5 Engines. therefore its return ratio looks steady at 13-18% over the previous 5 years. BPIL is successfully operating SAP (ERP) system with the use of advanced licensed software packages for product simulation.6% (YoY) revenue growth to Rs 733. Excellent product development capability and track record enables increasing OEM customers count globally BPIL has delivered robust performance to its customers.  Provide training facilities for better customer services: BPIL keeps its manufacturing facilities on constant upgrade and change mode along-with undertaking continuous skills up-gradation and training for its employees which is recognized by all of its OEM customers during their stringent process audits. 2015. innovation. Company has modernized its manufacturing facilities to enable it to produce complex cooling modules of higher quality standards.4% (YoY) PAT growth in H1FY17. developing and supplying various Engine Cooling modules and Individual Radiators. which is 9% of CMP. Banco’s wide range of core configurations cover all applications. BPIL has no long term debt in his book and also company is reducing its short term debt over the past few years. 2016 stood at Rs 221 crore (18% of sales) against Rs 176 crore (16% of sales) of March 31. Tata Motors. enhancing liquidity.  Collaboration with Japanese company for sales promotion: BPIL has entered into technical as well as financial collaboration with Japan Metal Gaskets Co Ltd. Industrial OEM customers include names like Cummins. Charged Air Coolers and Oil Coolers. 132 cr as on Sept 30. As on 30th Sept 2016.24 cr in FY16 from Rs 8. power generation. Maruti Suzuki. albeit improving. Modest. RETAIL RESEARCH P age |9 . by designing.  Innovation and quick product development: BPIL keeps its manufacturing facilities on constant upgrade and change mode along-with undertaking continuous skills up-gradation and training for its employees which is recognized by all of its OEM customers during their stringent process audits. BPIL Net profit margin stands at 7-8%. The debt to equity ratio of the company stands almost negligible at 0. cash accrual and low capital spending led to build-up of cash and cash equivalent surplus (Rs. RETAIL RESEARCH Increasing contribution from new categories like on-highway and off-way. and Ashok Leyland among others as its customers. Kirloskar Engines.04%. Bajaj. John Deere.38 cr in FY15.

some of the NRF subsidiaries are still loss making or yet to commence operations. reality of this news is not verified. NRF subsidiaries are still loss making or not operational: As of 31st March 2016. If growth factors like rise in industry demand and industry growth will not be up to the mark. However. Volatility in foreign currency: Fluctuations in forex can also have a negative impact as it may dent the operating levers of the company. It recently did not approve a proposal to go for buy-back of shares indicating some other potential use of cash in the near future.9% CAGR over the FY11- FY16. Out of 10 subsidiaries only few are operational and reported profit during the previous year. It may not change the performance of the company. We expect BPIL could pay dividend Rs 5 and Rs 5. this news could adversely impact the investor’s sentiment for a while. Company has taken many initiatives to improve the situation during the FY16. RETAIL RESEARCH BPIL has good track record to pay dividend to its share holders. BPIL has been able to raise its topline by 5. Metal prices are increasing and cost of energy and power are on constant increase. Volatility in raw material prices: Metals like Copper and Aluminum are the major raw materials used by the company to manufacture its final product. outcome of which is unknown. Still. Despite such times in the industry. therefore substantial volatility in the prices of copper and aluminum can impact the company’s operating margin adversely. However. management expects steady improvement in demand in the Industry in FY18. Further the IT officials conducted a search /survey operations in BPIL and its promoters in Aug 2016. Dividend Payout-% PATM and Returns ratio-% (Source: Company. then again industry could see such a phase in near future. HDFC sec) Risk and Concerns: Dependent on Automobile and Industrial Equipment Industry: BPIL largely depends on Automobile and Industrial Equipment Industry in India and these industries have witnessed a slowdown phase over the 5 years. it is not the "company" which is at the centre of question but its few of the promoter group persons. RETAIL RESEARCH P a g e | 10 .5 per share in FY17E and FY18E respectively. IT raid at BPIL premises after the name in Panama Paper Leak: Panama Paper leak regarding undisclosed income reveals the name of BPIL promoter.

BPIL’s diversification into unrelated business was against the company’s strategy and investor’s confidence. Later Praveen Rao has been appointed as a CEO on November 12. the BPIL had acquired 51% stake in Lake Cement (a cement manufacturer). HDFC sec) Key Raw materials Aluminum and Copper Prices over the last 10 years: (Source: Index Mundi. Company in total received Rs 107. Post exit from this cement business.7 million (at an ~ premium of 52% over the original investment) in May’ 14. . BPIL is on the way of utilizing its proceeds for acquisition in auto component related business in Europe which will further strengthen its foothold in global auto component market. and Nederlandse Radiateuren Fabriek B. RETAIL RESEARCH Frequent changes in CEO in the recent past: Mr Subhasis Dey Joined as a CEO on Nov 06. 2015 (post redesignation of Mehul Patel from CMD to Executive Chairman and wholetime Director). but resigned wef April 30. which led to sharp correction in the stock price. HDFC sec) RETAIL RESEARCH P a g e | 11 .V. Why the BPIL stock prices was steady from FY10 to FY13 In July 2010. a project to manufacture cement in Tanzania for total consideration of US$ 17. BPIL along with its subsidiaries – Lake Minerals Ltd. (Source: Company. sold off their combined holding of 178.25 cr as sales proceeds from sale of its holding in Lake Cements. 2016. 2016.956 equity shares in Lake Cements.

2% Total Expenses 306.5x Sept FY18E EPS) and Rs 245 (12.4% EPS (Adj) 4.2% 380.8% 10. we feel investors could buy the stock at the CMP and add on dips to Rs.9 1528.2 EBT 112.5 142.9 37.2 14.8 40.8 34.0% 14.1 -1.0 182.3 -62.5 29.4 3.2 677.5 159.7% Profit before Tax 46.3% 30.9 -7.1 17.6 52.7 -7.9 -7.4% 331.3% 8.7% 638.8 196. 33.5% and 11.2 7. HDFC sec) Financials – Consolidated Income Statement Cash Flow Particulars (Rs in Cr) FY15 FY16 FY17E FY18E FY19E Particulars (Rs in Cr) FY15 FY16 FY17E FY18E FY19E Net Sales 1128.7 3.4 287.9 113.4% 0.8% Reported Profit After Tax 32.5 -14.8 1204.9 145.4% EBIT 43.6 33.0 21. BPIL is all set to take advantage of the industrial uptick which is visible in the CV/LCV/HCV/ Tractors segment and its cashflow will be available for distribution to its shareholders.8 78.9% 1.5x Sept FY18E EPS).3 31.0% 41.9 Cost of materials consumed 609.6 1.7 6.9% 81.2% 385.1% 40.9% Stock Adjustment -6.7 -21.7 -21.3% 10.5 14.8 26.6 74.8% Raw Material Consumed 188.8 -3.6 38.0 -15.6 -191.4 3. proven R&D capabilities leading to rising count of customers.0 24.3 1366.5x Sept FY18E EPS) for sequential targets of Rs 225 (11.9% 102.8% 88. strong relationships with OEMs across the world.6% 53.0 822.6% EBITDA 52.5 1.2 917. and available production capacity.5 3. We expect BPIL could report 13.5 329.5% 733.7 RETAIL RESEARCH P a g e | 12 .5 63.4 561.1 36.6x Sept FY18 P/BV.7 10.1 14.6 15.0% 202.9 69.8 119.3 639.8 14.8 13.4% 6.0% 55.4 1.0 9.7% 45.3% 4.6 202.2 22.6% 16.2 76.9 17.3% 72.1 4.1% Other Expenses 84.8 86.8 3.8% Interest 0.1% 165.8% 0.3 -3.5 -0.3 14.9 63.4 37.0 2.9 10.9 8.3x Sept FY18E EPS and ~1. strong financial profile are some factors that could drive BPIL’s topline and margins going forward.8 732.7% Depreciation 8. RETAIL RESEARCH View and Valuation: Industry leading performance. 184-188 band (~9.9 16. At the CMP of Rs 202 the stock trades at 10.9 35.0 41.1 352.7% Employee Expenses 39. With low requirements of capex spend in the near future.8% 15.6 42.0 -2.8% revenue growth in FY17E and FY18E respectively.2 36. negligible debt status. Taking into the consideration of rich experience of management.6% Other Operating Income 6.4 324.1% 744.4% (Source: Company.9% Total incme from Operations 358.7 Depreciation and Amort.9 -65.2 648.5 37.5 57.8% Tax 14. Quarterly Financials – Consolidated Particulars (Rs cr) Q2FY17 Q2FY16 YoY (%) Q1FY17 QoQ (%) H1FY17 H1FY16 YoY (%) Net Sales 352.4 186.8 -7.9 27.5 6.3% Other Income 3.0% 391.2 1693.3% 105.0 36.7 -15.4 8.3 -55.7 35.9% 80.2% 10.5 103.1% 5.

9% 20.4 21.4 PE(x) 16.1 1.8% 7.1% 13.3 14.2 Inc/(Dec) in Debt -121.7 18.1 122.5 2.1 146.6% Deferred tax assets (Net) 2.3 1.5 135.9 6.9 -5.3 P/BV (x) 2.0 36.6 1250.7% TOTAL 821.and amort.2 -50.4 7.3% 21.4 4.7 30.5 944.3 8.2% 12.6 749.7 Capital expenditure -24.2 EBITDA 102.9 CF from Investing Activities 88.4 4.2 1.1 28.5 375.8 119.8 249.2 24.8 687.7 (Source: Company.2 61.5 46.3 14.2 144.2 112.0 Current liabilities 167.1 132.4 851.3 121.9 168.7 89.7 96.5 159.4 -54.2 Net Cash Flow 36.7 165.3 0.7 Employee benefit exp 162.7 35.0% 12.9 4.2 7.1 837.7 10.0 -5.3 -58.4 -49.3 Other expenses 252.9 168.7 Reserves and surplus 605.7 EPS 12.5 1039.0 0.2 7.2 (Purchase)/Sale of Inv 107.0 -5.9 3.3 0.5 5.0 181.9 962.0 20.3 178.5% ASSETS PATM (%) 7.8 177.8 35.4 Closing Balance 63.3 0.0 237. RETAIL RESEARCH Changes in inventories 3.5 23.5 -6.7 9.5 6.5 Trade payables 65.9 EBITM (%) 6.9 25.0 (Inc)/Dec in working Capital 19.1% 9.5 52.1 29.0 74.3 -22.0 17.9 20.4 3.3 14.5 2.7 138.4 -15.8 4.2 2.1 1.0 3.6 24.9 81.2 -45.6 18.1 25.0 108.1 1.5 8.5 Total Expenses 1026.1 -16.7 1.3 14.3 -53.2 Share capital 14.2 106.9 11.8 EV/EBITDA 13.4 214.1 -16.5 -47.9% 15.8 0.3 31.1 1302.3 -53.3 ROCE (%) 19.9 763.9% 8.7 214.8 249.9 203.7 Others 4.9 26.0 100.3% 10.4 Deferred tax liabilities 23.7 143.1% 15.0 22.8% 10.4 129.3 2.0 0.6 1058.9 -3.1 21.9 201.3 Enterprise Value-cr 1399.0 182.8 68.1 12.3 -59.) 86.0 Adjusted PAT 87.0 0.2 29.2 0.5 47.0 0.1 56.5 Proceeds from sale of f.6 -33.9 -40.8 19.4 1479.7 Dividend and Interest Paid -14.0 232.0 -5.0 0.7 -63.9 118.0 4.8 Short term provisions 19.6 249.9 Interest /Dividend paid 8. HDFC sec) Balance Sheet Key Ratios Particulars (Rs in Cr) FY15 FY16 FY17E FY18E FY19E Particulars FY15 FY16 FY17E FY18E FY19E EQUITY AND LIABILITIES No of Equity Shares-cr 7.2 164.4 3.5% Fixed assets 237.2 7.7% 8.2 224.7 -25.5 307.2 -20.2 EPS 12.5 76.9 34.1 30.0 156.5 3.4 Shareholders funds 619.3 12.1% 13.5 Non current liabilities 34.3 21.9 1.8 249.0 Non-current investments 0.2 RONW (%) 14.7 -19.2 Tax Paid 25.0 EBIT 68.9 Other current liabilities 73.1 0.exp 33.0 227.6 16.5% 10.2 CF from Operating Activities 84.8 34.1 4.0 1326.3 4.6 63.5 -52.2 Other Adjustment -62.0 17.0 Other income 52.1 Long term provisions 3.0 Finance cost 8.5 16.2 7.6 36.0 Tax Paid -27.2 10.4 -49.6 16.3 26.0 Short term borrowings 9.3 0.8 7.3 0.a 0.0 Cash EPS (PAT + Depr) 17.8 196.4 Opening Balance 26.9 Mcap/Sales(x) 1.5% 15.3 2.0 1188.3 1126.2 2.7 341.2 Long term borrowings 7.9 20.3% RETAIL RESEARCH P a g e | 13 .5 1218.3 111.9 Book Value/Share(Rs.6 40.3 -25.0 108.9 0.9 19.4 45.0 273.2 930.1% 20.7 138.0 21.6 18.9 68.0% 16.2 36.5% 8.8 5.1 4.5 673.3 Depr.3 Profit before Tax 112.9 -33.2 6.8 2.2 1337.8 EBITDAM (%) 9.7 119.0 -5.7 2.2 CF from Financing Activities -136.3 12.2% 13.1 -62.0 1372.

2 48.9 243.0 Quick Ratio 1.4 Current assets 549.3 2.3 1126.9 327.6 220.6 269.2 385.6 53.2 288.0 108.1 36.4 215.9 2.9 (Source: Company.4 259.9 6.4 4.0 Trade receivables 175.0 0.5 40.8 5.3 337.0 364.4 267.8 1.0 0.7 1.3 Short-term loans and adv 54.2 278. HDFC sec) One Year forward P/E One Year Price Chart (Source: Company.0 3.7 Current investments 0.4 Non-current assets 272.1 44.1 0. HDFC sec) RETAIL RESEARCH P a g e | 14 .5 1039.3 0.1 Inventories 255.8 3.1 Debt-Equity 0.7 138.9 962.0 36.1 838.5 1.0 0.0 Cash and bank balances 63.0 Current Ratio 3.0 0.8 44.5 695.9 TOTAL 821.3 33.4 3.9 168.1 919.0 0. RETAIL RESEARCH Long-term loans and adv 32.4 0.3 761.3 299.1 Other current assets 0.3 5.5 1218.

The views. If this report is inadvertently send or has reached any individual in such country. state. entry prices and/or other parameters mentioned in this document may or may not match or may be contrary with those of the other Research teams (Institutional. investment banking or merchant banking. The information and opinions contained herein have been compiled or arrived at. INH000002475. which could have an adverse effect on their value or price. brokerage services or other advisory service in a merger or specific transaction in the normal course of business. including but not restricted to. reproduction. This report is not directed to. (a) from time to time. director or employee of the subject company. financial or otherwise.com) HDFC securities Limited. In addition. HDFC Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Building . have a long or short position in. hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. based upon information obtained in good faith from sources believed to be reliable. the same may be ignored and brought to the attention of the sender. We also certify that no part of our compensation was. Kanjurmarg (East). to buy or sell any securities or other financial instruments. associates. PCG) of HDFC Securities Ltd. corporate finance. or intended for display. country or other jurisdiction where such distribution. Mumba i 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www. This report has been prepared by the Retail Research team of HDFC Securities Ltd.hdfcsec. printing. ____________________________________________________________________________________________________________________________________________________________ _______________________________ "HDFC Securities Ltd. reproducing or for distribution to or use by. neither HDFC Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. Crompton Greaves. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not. the values of which are influenced by foreign currencies effectively assume currency risk. distributed or published for any purposes without prior written approval of HDFC Securities Ltd. are subject to exchange rate fluctuations. or will be directly or indirectly related to the specific recommendation(s) or view(s) in thi s report. opinions. Research Analyst or his/her relative or HDFC Securities Ltd. "Alpha". This document i s for information purposes only. is a SEBI Registered Research Analyst having registration no. fluctuation in the prices of shares and bonds. changes in the currency rates.com Email: hdfcsecretailresearch@hdfcsec. Compensation of our Research Analysts is not based on any specific merchant banking. This document may not be reproduced. authors and the names subscribed to this report.B. HDFC Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. completeness or correctness. Further Research Analyst or his relative or HDFC Securities Ltd. Office Floor 8. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. or may make sell or p urchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HDFC Securities Ltd and other group companies. and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower t o such company(ies) or may have any other potential conflict of interests with respect to any recommendatio n and other related information and opinions. reduction in the dividend or income. Research entity has not been engaged in market making activity for the subject company. securities and financial instruments dealt in the report. Research ana lyst has not served as an officer." Disclosure: We /I. investors in securities such as ADRs.karim@hdfcsec. and should not be construed as an offer or solicitation of an offer. its directors. HDFC Securities Ltd may from time to time solicit from. estimates. HDFC Securities and its affiliated company(ies). of the losses or the damages sustained due to the investments made or any action taken on basis of this report. especially. or the income derived from them. employees may have various positions in any of the stocks. investment banking or brokerage service transactions. Near Kanjurmarg Station. representation of warranty. Accordingly. USA. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. express or implied. Abdul Karim. Also Research Analyst or his relative or HDFC Securities Ltd. does not have any financial interest in the subject company. HDFC Securities Ltd. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. or its associate does not have any material conflict of interest. any person or entity who is a citizen or resident or located in any locality. HDFC Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. RETAIL RESEARCH Fundamental Research Analyst: Abdul Karim (abdul. or other services for. publication. is. Foreign currencies denominated securities. availability or use would be contrary to law or regulation or what would subject HDFC Securities Ltd or its a ffiliates to any registration or licensing requirement within such jurisdiction. downloading. ratings. Any holding in stock – No Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation.com. its directors. their directors and employees may. I Think Techno Campus. target price. Opp. analysts or employees do not take any responsibility. Such information has not been independe ntly verified and no guaranty. or perform broking. etc. diminution in the NAVs. All such information and opinions are subject to change without notice. RETAIL RESEARCH P a g e | 15 . is made as to its accuracy. any company mentioned in this mail and/or its attachments. wherever mentioned. HDFC Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings. (MBA).