Result Update

February 2, 2018
Rating matrix
Rating Matrix Bharat Electronics (BHAELE) | 151
Rating : Hold
Target : | 155
Target Period
Potential Upside
:
:
12 - 15 months
4%
Recommend HOLD on margin headwinds…
 Bharat Electronics (BEL) reported weak Q3FY18 numbers, which were
What’s changed? below estimates on the EBITDA and PAT front. These were mostly on
Target Changed from | 215 to | 155 account of a weak operational performance and lower other income
EPS FY19E Changed from | 7.9 to | 7.4 for the quarter
EPS FY20E Changed from | 8.6 to | 8.2
 The company reported revenues of | 2513 crore up 14.7% YoY (our
Rating Unchanged
estimates | 2387 crore for the quarter)
 EBITDA came in at | 445.2 crore, down 7.8% YoY. We estimated
Quarterly performance
EBITDA of | 524 crore for the quarter. EBITDA margins came in at
Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)
17.7% vs. our estimate of 22% crore for the quarter. We believe lower
Revenue 2,512.8 2,191.3 14.7 2,476.2 1.5
EBITDA 445.2 482.8 -7.8 595.0 -25.2
EBITDA margins were on account of order booking low margin orders
EBITDA (%) 17.7 22.0 -430 bps 24.0 -630 bps during the quarter. As a result, gross margins for the quarter declined
PAT 302.8 376.2 -19.5 412.4 -26.6 to 42.2% from 50.7% YoY
 PAT came in | 302.8 crore, down 19.5% YoY, due to a weak
Key financials operational performance and lower other income. Other income
| Crore FY17 FY18E FY19E FY20E declined 36.6% YoY due to lower cash balance on account of buyback
Revenue 8,612 10,833 12,545 14,465 and dividend. We expected other income of | 60 crore for the quarter
EBITDA 1,762 2,034 2,224 2,508  The company has also declared an interim dividend of | 1.60 per share
EBITDA (%) 20.5 18.8 17.7 17.3 and a buyback of 2,03,97,780 equity shares (0.83% of equity). Outgo
Net Profit 1,548 1,453 1,650 1,838 due to buyback is likely to be | 372.3 crore at | 182.5 per share
EPS (|) 6.9 6.5 7.4 8.2
Continues strong execution, albeit on lower margin orders
Valuation summary BEL continued its strong execution for the quarter, albeit on lower margin
(x) FY17 FY18E FY19E FY20E orders like Battlefield Surveillance system (BSS), Integrated Air command
P/E 21.8 23.2 20.4 18.3 and control system (IACCS), etc. The quarter also witnessed some
Target P/E 22.4 23.8 21.0 18.8 execution of orders like Akash weapon system (Army), weapon locating
EV / EBITDA 17.0 15.2 13.7 12.2 radar, etc. Order inflows for Q3FY18 were at ~ | 1,146 crore. This has
P/BV 4.5 4.0 3.5 3.2 taken the BEL order backlog to 40,469 crore as on January 1, 2018. The
RoNW (%) 21 17.2 17.4 17.2 export order book was also healthy at $96.9 million.
RoCE (%) 27.1 23.8 23.1 22.9
New opportunities, healthy capex, focus on exports
Stock data
BEL has forayed into new opportunities like homeland security, cyber
Stock Data
security and smart cities. We believe these new areas will act as new
Average Volumes (shares) 894000 growth triggers, going forward. BEL has already received some orders in
Market Capitalization | 33727.8 Crore this area. The same has potential to contribute ~20% to the topline albeit
Total Debt (FY18E) | 26.9 Crore with lower margins over the next three to five years. With a planned
Cash and Investments (FY18E) | 2858.4 crore capex of ~| 1500 crore in FY17-20E, BEL is well placed to capitalise on
EV (FY18E) | 30896.3 Crore the emerging defence sector. BEL spends ~9% of sales on R&D for
52 week H/L (|) 1624 / 1009 developing new products. New products have historically helped BEL
Equity capital | 223.4 Crore achieve up to 25% of its turnover. With R&D spend likely to rise to 12% of
Face value |1 sales, new product development is likely to gain further momentum.
MF Holding (%) 16.5 Exports for BEL came in at ~| 425 crore for FY17 (~5.1% of turnover).
FII Holding (%) 8.6 BEL has also set up a dedicated business unit to become key supply chain
Promoter Holding (%) 66.7
partner of global defence contractors. This is likely to increase exports
Price performance contribution to 10% of topline by FY20E. BEL also has a strong balance
Return (%) 1M 3M 6M 12M sheet with near nil debt and cash balance of over | 2000 crore.
Bharat Electronics (11.0) (13.1) (1.8) 13.3 Recommend HOLD on margin softening over FY17-20E
Astra Microwave 2.9 4.1 1.1 5.1
Centum Electronics (5.4) (5.0) (16.1) (5.0)
Going forward, BEL is likely to execute large orders like IACCS, VVPAT
and Akash. We believe these orders will help BEL clock double digit
Research Analyst revenue growth in FY17-20E. However, we expect margins to moderate
Chirag J Shah going forward as some of the large integration projects have a margin
shah.chirag@icicisecurities.com profile of 5-15%. Thus, we expect BEL to deliver revenue, EBITDA and
PAT CAGR of 16.7%, 12.5% and 5.9%, respectively, in FY17-20E. We
Sagar K Gandhi value the company at 19x P/E on FY20E EPS of | 8.2 to arrive at a target
sagar.gandhi@icicisecurities.com price of | 155 per share. We have a HOLD recommendation on the stock.

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q3FY18 Q3FY18E Q3FY17 YoY (%) Q2FY18 QoQ (%) Comments
Strong revenue growth due to booking of orders like Battlefield Surveillance system,
Operating Income 2,513 2,387 2,191.3 14.7 2,476 1.5 IACCS, etc.
Reduced other income due to lower cash balance on account of buyback and
Other income 49 60 77.6 -36.6 51 -3.5 dividend
Total Revenue 2,562 2,447 2,268.9 12.9 2,527.2 1.4
Raw materials costs 1,416 1,190 1,029.9 37.5 1,144 23.8
Employees Expenses 456 420 343.2 33.0 472 -3.3
Other Expenses 195 252 335.5 -41.9 265 -26.5
Total Expenditure 2,068 1,863 1,708.5 21.0 1,881 9.9
EBITDA 445.2 524.0 482.8 -7.8 595.0 -25.2
EBITDA margins (%) 17.7 22.0 22.0 -432 bps 24.0 -631 bps
Interest 0.0 0.0 10.6 0.0
Depreciation 59.4 55.0 45.5 30.6 59.0 0.7
Tax 132.2 121.7 128.0 3.2 174.6 -24.3
Other Income 49.2 60.0 77.6 -36.6 51.0 -3.5
PAT 302.8 407.3 376.2 -19.5 412.4 -26.6
Source: Company, ICICIdirect.com Research

Change in estimates
FY17 FY18E FY19E FY20E
(| Crore) Old New % Change Old New % Change Old New % Change
Revenue 8,612 10,848 10,833 -0.1 12,174 12,545 3.0 14,025.0 14,465 3.1
EBITDA 1,762 1,964 2,034 3.6 2,158 2,224 3.1 2,431.0 2,508 3.2
EBITDA Margin (%) 20.5 18.1 18.8 67 bps 17.7 17.7 3 bps 17.3 17.3 4 bps
PAT 1,548 1,489 1,453 -2.4 1,765 1,650 -6.5 1,917.0 1,838 -4.1
EPS (|) 6.9 6.7 6.5 -2.9 7.9 7.4 -6.5 8.6 8.2 -4.3
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Key takeaways for Q3FY18
 Strong order book: Order book at the end of Q3FY18 was at | 40,469
crore. Orders received during the quarter were at | 1,146 crore
 Major orders acquired in Q3FY18:
 Akash Weapon System
 GE Medical Systems
 Spares for THD 1955 radar
 Radar Finger Printing system
 Battery and Battery Pack

The export order book as on January 1, 2017 was at US$96.9 million.

Export turnover for Q3FY18 was US$6.3 million.
 Major supplies during Q3FY18:
 Homeland Security
 Hand held thermal imager - MKII,
 L 70 gun upgrade,
 Weapon locating radar
 Integrated air command and control system
 Mobile communication terminal
 Electronic voting machine – Voter verifiable paper audit trail
(VVPAT)
 Ship borne EW system

 Major orders expected in FY18

 Akash missile system (seven squadron),
 Long range surface to air missile (LRSAM) for P17A,

ICICI Securities Ltd | Retail Equity Research Page 3

 Annual report takeaways FY16-17
 For BEL, R&D has been the main focus area, which helped the
company increase indigenisation and value addition in its
products/systems. For FY17, total investment in R&D as a percentage
of turnover during the year was 8.81%, which is one of the highest
among defence PSUs. Efforts in this direction helped it achieve 87%
of turnover from indigenous products
 Defence being the mainstay of the company, contributed to 88% of
sales revenue, with the balance 12% coming from the civilian sector
 Some of the major products/systems introduced during FY17 include
 Akash Missile System (seven squadron),
 Weapon Locating Radar
 BFSR-XR (Extended Range)
 IFF MK XII
 USHUS-2
 HUMSA NG for P15B
 Gigabit Ethernet based Integrated Communication System for P15
 ACCS for Indigenous Aircraft Carrier
 Missile two way Data link for QRSAM
 RRF upgradation (High band)
 BEACON MKIII for Army
 CIDSS phase 2 (Build 2- Software)
 Air traffic control software
 SoTM
 Dual Frequency IP Modem
 2KW SSPA (for Tropo Communication)
 Modern EW system (noncom) (Varuna)
 VVPAT MKII
 Point of Sale (POS) device
 Border Surveillance System (BoSS)
 High Resolution TI for Directed Energy Weapon
 IACCS Beta version
 VCCS for IACCS
 RCWS
 Pressurised container
 BEL received orders worth | 16,300 crore during 2016-17. The order
book of the company as on April 1, 2017 was | 40,242 crore. The
order book comprises mainly major programs like integrated air
command control system, long range surface to air missile,
battlefield surveillance system, weapon locating radar, EW suite,
hand held thermal imager with laser range finder, advance
composite communication system, ground based mobile ELNIT,
command information decision support system, electronic voting
machine, fire control system, gun/tank upgrades communication
sets, new generation radars, sonars, etc
 Major orders received during the year include
 Long Range Surface to Air Missile (LR-SAM) with MFSTAR
 Advanced Composite Communication System for P17
 Electronic Voting Machine
 Static Tropo Upgrade
 Electronic Warfare Suite for Naval application
 Giga Bit Ethernet based Ship Data Network for P17
 Hand Held Thermal Imager
 Low Intensity Con ict EW System
 Homeland Security
 ALG Communication

ICICI Securities Ltd | Retail Equity Research Page 4

  On the export front, the order book as on April 1, 2017 was US$85
Million including offset orders of US$17 million. BEL has submitted
proposals for various products/systems to countries like Myanmar,
Vietnam, Sri Lanka, Malaysia, and Egypt. Accordingly, the company is
envisaging strong growth from this segment going forward. (As
highlighted in our earlier updates, the company is targeting revenues
of $100 mn by FY19E)
 In the civil segment BEL is pursuing opportunities in the field of solar
energy, homeland security, smart city elements, smart cards, cyber
security, telecom and space electronics.
 On the working capital front, the company continued to maintain 180
days of receivables at the end of March 2017
 New addressable opportunities which BEL plans to capitalise on:
 Homeland Security Solutions: BEL is planning to address the
Border Management solution requirements as part of the
Homeland Security business
 Solar: BEL is setting up utility scale solar power plants for captive
consumption in the estates of ordnance Factories at 17 locations
spread across eight states for a total capacity of 150 MW. The
commissioning of first solar power plant of 15 MW capacity is
expected to happen soon at ordnance factory, Medak. In the near
future, this sector is expected to contribute significantly to BEL’s
business
 Space: BEL is exploring collaboration with Isro leveraging their
technological capabilities in design and development of various
products/systems for possible use in defence applications

ICICI Securities Ltd | Retail Equity Research Page 5

 Company Analysis
Order inflows, strong execution to drive revenue growth of 16.7% CAGR
in FY17-20E
We expect standalone revenues to increase from | 8612 crore in FY17 to
| 14465 crore in FY20E mainly on the back of strong order inflows and
execution of backlog orders over the next two years. Order backlog as on
FY17 was at | 40,242 crore. We expect order inflows of ~| 12000 crore, |
11000 crore and ~| 11000 in FY18E, FY19E and FY20E, respectively.
Assuming, execution rate of ~30% for backlog orders and ~12%
execution rate for current year order inflows, we estimate BEL will post
revenues of | 12545 crore in FY19E and | 14465 crore in FY20E.

Exhibit 1: Revenue trend

16,000 14,465
14,000 12,545
12,000 10,833
10,000 8,612
| crore

7,295
8,000
6,000
4,000
2,000
-
FY16 FY17 FY18E FY19E FY20E

Source: Company, ICICIdirect.com Research

Order book growth to keep ticking

Exhibit 2: Order backlog trend

45000 40000 40775 39365

40000 36054
35000 32022
30000
25000 21617
| crore

20000
15000
10000
5000
0
FY15 FY16 FY17 FY18E FY19E FY20E

Order Backlog

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

 Strong order inflows over next five to seven years
BEL is expected to receive significant number of orders over the next five
to seven year. Major orders are expected to be finalised in FY17-19E
including orders Akash Missile (~| 4700 crore), Samyukta upgrade,
mobile cellular communication system, L- band Tropo upgrade, low level
lightweight radar, integrated sonar suite, passive night vision devices, etc.
Apart from the above-mentioned orders the company is also a contender
for large orders like battlefield management system (BMS), the order size
of which is | 35,000 crore. Also, with Hindustan Aeronautics (HAL)
commencing its production line for indigenous aircraft Tejas, BEL is
expected to receive significant orders for its electronic components and
systems. Thus, we expect the order pipeline for BEL to remain strong in
FY17-20E. For FY18E, FY19E and FY20E, we have estimated order inflows
of | 12,000 crore, 11,000 crore & | 11,000 crore, respectively.
Exhibit 3: Order inflows robust over FY17-19E

17094
18000 16300
16000
14000 12000
12000 11000 11000
| crore

10000
8000
5260
6000
4000
2000
0
FY15 FY16 FY17 FY18E FY19E FY20E

Orders Inflows

Source: Company, ICICIdirect.com Research

EBIDTA margins to stabilise to 17.3% in FY20E

BEL reported strong EBITDA margins of 20.5% for FY17. A sharp increase
in margins was due to an overall reduction in material consumption
mainly because of commodity correction and indigenisation initiatives of
the company. However, we believe the same is unsustainable, going
forward. Also, BEL has got transformed from a pure product-selling
company to one that takes the contract as a system integrator. For
instance, BEL used to win 25-30% of the contract for Akash missiles to
supply its radars and related electronics. However, now BEL receives
turnkey orders to supply Akash missiles. From just supplying the product,
it now purchases equipment i.e. missiles from HAL and launchers from
L&T, assembles the product and then supplies it to the air force. Though
this has increased revenues and order inflows for the company, margins
are expected to come off as the profitability on purchased equipment is
not as high as its own product.

EBITDA has grown at 28.7% CAGR in FY13-17. Going ahead, we expect

growth rates to soften on account moderation in margins from 20.5% in
FY17 to 17.3% in FY20E. Accordingly, we expect EBITDA to grow 12.5%
over FY17-20E.

ICICI Securities Ltd | Retail Equity Research Page 7

 Exhibit 4: EBITDA and EBITDA margin trend

16,000 21
14,000 20.5
20.0 20

14,465
12,000

12,545
10,000 18.8 19
17.7

10,833
8,000 17.3 18

| crore

%
8,612
6,000

2,508
2,224
7,295

2,034
17

1,762
1,461
4,000
2,000 16
- 15
FY16 FY17 FY18E FY19E FY20E

Revenues EBITDA EBITDA margin (%)

Source: Company, ICICIdirect.com Research

PAT to grow at 5.9% CAGR in FY17-20E

In FY13-17, PAT grew at 14.8% CAGR. This was mostly due to healthy
topline growth and improvement in execution in FY16 and FY17. Going
forward, we expect the bottomline to grow at 5.9% CAGR in FY17-20E.
Exhibit 5: PAT trend

2,000 20
1,800 19
18.6
1,600 18.0 18
1,400 17
| crore

1,200 16

%
1,000 15

1,838
1,650
1,548

800 14
1,453

13.4
1,358

13.1 12.7
600 13
400 12
200 11
- 10
FY16 FY17 FY18E FY19E FY20E

Net Profit Margins (%)

Source: Company, ICICIdirect.com Research

RoE, RoCE of 17.7% and 23.5% in FY20E

With moderate capex plans (| 1500 crore over FY18E-20E) and demand
growth revival, capacity utilisation levels are expected to improve leading
to stable return ratios. BEL has been a consistent debt-free company with
a cash balance of over ~| 2000 crore in FY18E (even after the buy-back of
~| 2100 crore in H1FY17 and a proposed buyback of | 372 crore in
H2FY18). However, due to dilution of operating margins, we expect RoE
and RoCE to marginally head southwards. Accordingly, we expect RoE
and RoCE to drop from 20.6% and 27.1% in FY17 to 17.2% and 22.9%,
respectively, in FY20E.

ICICI Securities Ltd | Retail Equity Research Page 8

 Exhibit 6: RoE, RoCE trend

30 27.1
23.8 23.1 22.9
25 20.3
20
20.6

%
15
17.2 17.4 17.2
15.1
10

-
FY16 FY17 FY18E FY19E FY20E

RoCE (%) RoE (%)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 9


BEL is among the few defence PSUs that has strong
financials and a long history of efficient capital allocation.
The company has delivered a topline and bottomline CAGR
of ~6% and 7.3% over the past 15 years (FY01-16), with
average RoCEs and RoEs of 21% and 18.8%, respectively.
The company is characterised by consistent dividend
payout of 20%, clean corporate governance, efficient
working capital management, adequate R&D spend, ability
to absorb latest technologies, timely execution of large
projects, strong cash flow generation and prudent capital
allocation
ICICI Securities Ltd | Retail Equity Research
Outlook and valuation
BEL is among the few defence PSUs that has strong financials and a long
history of efficient capital allocation. The company has delivered a topline
and bottomline CAGR of ~6% and 7.3% over the past 15 years (FY01-16),
with average RoCEs and RoEs of 21% and 18.8%, respectively. The
company is characterised by consistent dividend payout of 20%, clean
corporate governance, efficient working capital management, adequate
R&D spend, ability to absorb latest technologies, timely execution of large
projects, strong cash flow generation and prudent capital allocation.
With large participation of private sector players kicking in the defence
space, there have been apprehensions about BEL’s ability to bag large
orders in this space. However, we believe the same is not a major threat
as BEL has proactively taken major steps including technology tie-ups
with foreign majors to bid for the upcoming platform-based orders.
Going forward, BEL is likely to execute large orders like IACCS, VVPAT
and Akash. We believe these orders will help BEL clock double digit
revenue growth over FY17-20E. However, we expect margins to
moderate, going forward, as some of the large integration projects have a
margin profile of 5-15%. Thus, we expect BEL deliver revenue, EBITDA
and PAT CAGR of 16.7%, 12.5% and 5.9% over FY17-20E. We value the
company at 19x P/E on FY20E EPS of | 8.2 to arrive at a target price of |
155 per share. We recommend HOLD on the stock.
Page 10
Recommendation history vs. consensus
250 90
80
200 70
60
150
50
(|)

(%)
40
100
30
50 20
10
0 0
Jan-15 Apr-15 Jun-15 Aug-15 Nov-15 Jan-16 Apr-16 Jun-16 Sep-16 Nov-16 Feb-17 Apr-17 Jun-17 Sep-17 Nov-17 Feb-18

Series1 Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research, Initiated coverage on 27th Jan 2016

Key events
Date/Year Event
Dec-12 BEL signs an MoU with Israel Aerospace Industries (IAI) for cooperation on future Long Range Surface to Air Missile (LRSAM) Ship-defence Systems
Sep-14 BEL establishes a Joint Venture Company (JVC) with M/s. Thales Air Systems SA, France and M/s. Thales India Pvt. Ltd in Radar Business Area.
Nov-15 BEL delivers L70 upgraded guns to Indian Army
Feb-15 Ministry of Defence selects BEL - Rolta consortium as a Development Agency for the Battlefield Management System Project
Mar-15 BEL issues bonus shares in the ratio of 2:1
Oct-15 BEL signs | 8000 crore IACCS (Integrated Air Command and Control System) deal with Indian Air Force
Mar-16 BEL, Rosoboronexport sign defence offset partnership agreement
May-16 BEL and HAL sign deal to co-develop avionics
May-16 BEL registers highest-ever order inflow of | 17,094 for FY16.
May-16 BEL inaugurates 8.4 MW wind energy power plant at Harappanahalli, Karnataka. With this wind energy plant, 90% of BEL's energy requirement will be met through
renewable energy resources.
Jan-17 BEL announces split, new face value at | 1 per share, from existing | 10 per share
Feb-17 BEL order book touches all-time of | 40000 crore
Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date O/S Position Position Change (in %) Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
1 Government of India 30-09-2017 61.76% 1,517.46M -157.89M Promoter 74.4 68.2 68.2 67.9 66.7
2 Life Insurance Corporation of India 30-09-2017 3.45% 84.84M -8.48M FII 4.3 6.7 7.6 8.1 8.6
3 HDFC Asset Management Co., Ltd. 30-11-2017 1.80% 44.27M 0 DII 15.8 17.7 16.8 16.1 16.5
4 Aditya Birla Sun Life AMC Limited 31-12-2017 1.42% 34.88M +0.36M Others 5.6 7.4 7.4 7.8 8.2
5 SBI Funds Management Pvt. Ltd. 30-11-2017 1.29% 31.74M -1.07M
6 ICICI Prudential Asset Management Co. Ltd. 31-12-2017 1.23% 30.18M +0.76M
7 The Vanguard Group, Inc. 30-11-2017 0.87% 21.37M 0
8 Kotak Mahindra Asset Management Company Ltd. 30-11-2017 0.75% 18.47M -0.56M
9 DSP BlackRock Investment Managers Pvt. Ltd. 30-11-2017 0.75% 18.42M -0.93M
10 UTI Asset Management Co. Ltd. 30-11-2017 0.53% 12.91M -0.37M
Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
Morgan Stanley Investment Management Inc. (US) +10.31M +3.58M Government of India -393.60M -157.89M
CI Investments Inc. +4.48M +1.80M Life Insurance Corporation of India -21.15M -8.48M
Grantham Mayo Van Otterloo & Co LLC +2.84M +1.05M Reliance Nippon Life Asset Management Limited -14.42M -5.00M
William Blair Investment Management, LLC +2.82M +0.98M Goldman Sachs Asset Management (US) -5.11M -2.02M
William Blair & Company, L.L.C. (Research) +2.21M +0.97M Goldman Sachs Asset Management International -3.59M -1.42M
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 11

Financial summary (Standalone)
Profit and loss statement | Crore Cash flow statement | Crore
(| Crore) FY17 FY18E FY19E FY20E (| Crore) FY14 FY17 FY18E FY19E FY20E
Net Sales 8,296 10,615 12,287 14,167 Profit after Tax 1,548 1,548 1,650 1,838
Other operating income 316 219 258 298 Depreciation 192 192 263 304
Revenue 8,612 10,833 12,545 14,465 Interest 12 12 30 35
% Growth 25.9 25.8 15.8 15.3 Cash Flow before WC changes 1,751 1,751 1,943 2,177
Other income 471.0 220.0 240.0 250.0 Changes in inventory (737) (734) (891) (999)
Total Revenue 9,109 11,079 12,545 14,465 Changes in debtors (643) (1,136) (867) (973)
% Growth 24.4 21.6 13.2 15.3 Changes in loans & Advances 519 (786) (137) (154)
Total Raw Material Costs 4,413 5,647 6,672 7,735 Changes in other current assets (549) 521 (14) (15)
Employee Expenses 1,548 2,017 2,334 2,692 Net Increase in Current Assets (1,781) (2,135) (1,909) (2,141)
other expenses 889 1,136 1,315 1,530 Changes in creditors 185 345 267 300
Total Operating Expenditure 6,850 8,800 10,321 11,957 Changes in provisions 139 (1,131) 27 30
Operating Profit (EBITDA) 1,762 2,034 2,224 2,508 Net Inc in Current Liabilities 314 432 1,492 950
% Growth 54.1 15.4 9.3 12.8
Interest 12 25 30 35 Net CF from Operating activities 285 47 1,526 986
PBDT 2,221 2,229 2,434 2,723
Depreciation 192 238 263 304 Changes in deferred tax assets (160) - - -
PBT before Exceptional Items 2,029 1,990 2,170 2,419 (Purchase)/Sale of Fixed Assets (546) (450) (450) (450)
Total Tax 482 537 521 581 Net CF from Investing activities (903) (450) (450) (450)
PAT before MI 1,548 1,453 1,650 1,838
Minority Interest - - - - Dividend and Dividend Tax (741) (490) (556) (620)
PAT 1,548 1,453 1,650 1,838 Net CF from Financing Activities (3,016) (529) (619) (692)
% Growth 32.6 (6.1) 13.5 11.4
EPS 6.9 6.5 7.4 8.2 Net Cash flow (3,634) (932) 457 (156)
Source: Company, ICICIdirect.com Research Opening Cash/Cash Equivalent 7,424 3,790 2,858 3,315
Closing Cash/ Cash Equivalent 3,790 2,858 3,315 3,160
Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(| Crore) FY17 FY18E FY19E FY20E (Year-end March) FY17 FY18E FY19E FY20E
Equity Capital 223.4 223.4 223.4 223.4 Per Share Data
Reserve and Surplus 7,285 8,219 9,280 10,461 EPS 6.9 6.5 7.4 8.2
Total Shareholders funds 7,509 8,443 9,503 10,685 Cash per Share 17.0 12.8 14.8 14.1
Minority Interest - - - - BV 33.6 37.8 42.5 47.8
Other Non Current Liabilities 14.7 14.7 14.7 14.7 Dividend per share 2.8 1.8 2.1 2.3
Total Debt 25 27 27 27 Dividend payout ratio 0.4 0.3 0.3 0.3
Operating Ratios
Total Liabilities 7,549 8,485 9,545 10,727 EBITDA Margin 20.5 18.8 17.7 17.3
PAT Margin 18.7 13.7 13.4 13.0
Gross Block 1,616 2,222 2,672 3,122 Return Ratios
Acc: Depreciation 361 599 863 1,166 RoE 20.6 17.2 17.4 17.2
Net Block 1,255 1,623 1,810 1,956 RoCE 27.1 23.8 23.1 22.9
Capital WIP 657 500 500 500 RoIC 41.9 32.0 31.5 29.2
Total Fixed Assets 1,912 2,123 2,310 2,456 Valuation Ratios
Non Current Assets 677 677 677 677 EV / EBITDA 17.0 15.2 13.7 12.2
Inventory 4,905 5,639 6,530 7,530 P/E 21.8 23.2 20.4 18.3
Debtors 4,355 5,491 6,358 7,331 EV / Net Sales 3.5 2.9 2.4 2.1
Loans and Advances 81 867 1,004 1,157 Sales / Equity 1.1 1.3 1.3 1.4
Other Current Assets 608 87 100 116 Market Cap / Sales 3.9 3.1 2.7 2.3
Cash 3,790 2,858 3,315 3,160 Price to Book Value 4.5 4.0 3.5 3.2
Total Current Assets 14,108 15,312 17,678 19,663 Turnover Ratios
Current Liabilities 1,347 1,692 1,959 2,259 Asset turnover 1.1 1.3 1.3 1.4
Provisions 1,300 169 196 226 Debtors Turnover Ratio 2.1 2.2 2.1 2.1
Net Current Assets 4,501 5,273 6,147 7,182 Creditors Turnover Ratio 6.9 7.1 6.9 6.9
Solvency Ratios
Total Assets 7,549 8,485 9,545 10,727 Debt / Equity 0.0 0.0 0.0 0.0
Source: Company, ICICIdirect.com Research Current Ratio 3.1 4.9 5.1 5.2
Quick Ratio 1.6 2.6 2.7 2.8
Source: Company, ICICIdirect.com Research
.

ICICI Securities Ltd | Retail Equity Research Page 12

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 13

Disclaimer
ANALYST CERTIFICATION
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ICICI Securities Ltd | Retail Equity Research Page 14