RESULTS REVIEW 3QFY17 13 FEB 2017

Sanghvi Movers
BUY
INDUSTRY INFRASTRUCTURE Compelling valuations
CMP (as on 10 Feb 2017) Rs 244 Sanghvi Movers’ (SGM) 3QFY17 revenue (Rs 1.3bn, FY19E. Nevertheless, SGM would be able to
+2% YoY) was ~8% below our estimates, as gross generate strong OCFs (~Rs 3.2bn) going ahead.
Target Price Rs 325 block yield declined to ~2.58% (vs. ~2.77% QoQ). We reiterate BUY with a revised TP of Rs 325/sh (12x
Nifty 8,794 Utilisation of cranes improved to ~80% (vs. ~66% Dec-18E EPS).
Sensex 28,334
QoQ). While lower freight charges and employee
costs led to better-than-expected EBTIDA margins Highlights of the quarter
KEY STOCK DATA
(66.9%, +110bps YoY), higher depreciation and taxes
Bloomberg SGM IN led to a 23% miss in our APAT (Rs 234mn, -8% YoY)  Update on capex plans: SGM imported five 650 MT
No. of Shares (mn) 43 estimate. cranes, of which three have been capitalised in
MCap (Rs bn) / ($ mn) 11/158
3QFY17. The management plans to incur a net capex of
SGM has already deployed five imported cranes of Rs 3.0bn in FY18E by trading 12 cranes of 400 MT for
6m avg traded value (Rs mn) 33 650 MT each in Dec-16. It has also planned to import seven 650 MT and eighteen 300 MT cranes.
STOCK PERFORMANCE (%) seven cranes of 650 MT each and eighteen of 300 MT
52 Week high / low Rs 317/195 in FY18E. With an increase in the height of wind  Update on Debt: SGM plans to borrow Rs 2.9bn for its
turbines from 90 to 120 metres (140 metres going capex for FY18E. Post the pre-payment of its term
3M 6M 12M
ahead), the management believes that the demand loans (Rs 500mn), SGM has an obligation amounting to
Absolute (%) 2.0 (10.2) (18.6)
for 650 MT cranes will improve. With enquiries Rs 1.7bn in FY18E. With the ability to generate
Relative (%) (1.0) (12.2) (37.9) flowing in from the power sector, we believe order operating OCF’s of ~Rs 3.2bn, debt servicing is not a
SHAREHOLDING PATTERN (%) inflows for 300 MT cranes are also likely to improve. major concern for SGM.
Promoters 46.88 However, with the medium-term outlook capped for
DIIs & Local MFs 17.08 the wind sector (~4 GW p.a) and delays in the  Near-term outlook: With the outlook on wind capex
finalisation of replacements for power plants, we capped at ~4 GW per annum, we expect yields to
FPIs 3.19
expect tepid revenue growth of ~5.9% over FY16- remain under pressure. Maintain BUY.
Public & Others 32.85
Source : BSE
Financial Summary - Standalone
(Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY15 FY16 FY17E FY18E FY19E
Ashutosh Mehta, ACA Net Sales 1,327 1,299 2% 1,095 21% 3,082 5,315 5,436 5,930 6,263
ashutosh.mehta@hdfcsec.com EBITDA 887 854 4% 650 37% 1,785 3,544 3,480 3,839 4,055
+91-22-3078-8241 APAT 234 255 -8% 105 123% 23 1,099 944 1,110 1,195
Diluted EPS (Rs) 5.4 5.9 -8% 2.4 123% 0.54 25.38 21.8 25.7 27.6
P/E (x) 452.7 9.6 11.2 9.5 8.8
Pawan Parakh, CFA EV / EBITDA (x) 7.6 4.7 4.5 4.3 3.6
pawan.parakh@hdfcsec.com RoE (%) 0.4 15.6 12.0 12.7 12.2
+91-22-6171-7314 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

Quarterly Financial - Standalone

Particulars (Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Net Revenues 1,327 1,299 2.2% 1,095 21.1%
Higher depreciation (+22.5% Employee Expenses 58 68 -15.9% 56 3.0%
YoY) and interest costs Freight & Charges 97 110 -11.6% 103 -5.5%
(+20.3% YoY) led to a decline Other Operating Expenses 290 268 7.9% 303 -4.4%
in APAT by 8.2% YoY Operating Profits 883 852 3.6% 634 39.3%
Other Operating Income 4 2 96.6% 16 -72.3%
EBITDA 887 854 3.8% 650 36.5%
Depreciation 394 322 22.5% 334 17.8%
EBIT 493 532 -7.4% 315 56.4%
Other Income (Incl EO Items) 33 3 1009.7% 32 3.4%
Interest Cost 174 145 20.3% 162 7.6%
PBT 352 391 -9.8% 186 89.6%
Tax 118 135 -12.9% 60 94.9%
RPAT 234 255 -8.2% 125 87.1%
E/o (Adj For Tax) - - - (20) -
APAT 234 255 -8.2% 105 123.2%
Source: Company, HDFC sec Inst Research

Margin Analysis - Standalone

3QFY17 3QFY16 YoY (bps) 2QFY17 QoQ (bps)
Employee Expenses % Net Sales 4.3 5.3 (93) 5.1 (76)
Lower freight charges and
Freight & Charges % Net Sales 7.3 8.5 (115) 9.4 (206)
employee costs led to
Other Operating Expenses % Net Sales 21.8 20.7 115 27.7 (584)
~110bps expansion in EBTIDA
EBITDA Margin (%) 66.9 65.8 108 59.3 754
margins to 66.9%
Tax Rate (%) 33.4 34.6 (117) 32.5 90
APAT Margin (%) 17.7 19.7 (200) 11.4 623
Source: Company, HDFC sec Inst Research

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 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

Revenues, EBITDA And EBITDA Margins (%) Utilisations And Average Yields (%)
Sales EBITDA EBITDA Margin (%) Utilisation Average Yield - RHS
90.0% 3.5%
7,000 Rs mn 90.0%
85.0% 3.3%
6,000 80.0% 3.1%
Expect tepid revenue CAGR 80.0%
70.0% 2.9%
of ~5.6% with ~200bps 5,000
60.0% 75.0% 2.7%
contraction in EBITDA 4,000 50.0% 70.0% 2.5%
margins over FY16-19E 3,000 40.0% 65.0% 2.3%
30.0% 2.1%
2,000 60.0%
20.0% 1.9%
1,000 55.0% 1.7%
10.0%
0 0.0% 50.0% 1.5%

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E
Source : Company, HDFC sec Inst Research Source : Company, HDFC sec Inst Research

Net Debt And Net D/E Ratio Revenue Mix – 9mFY17

Net Debt Net D/E Ratio Infra
The wind sector continues to 7,500
Rs mn
1.4
5%
Power
be the largest contributor to 14%
6,500 1.2
SGM’s revenues (66% in
9mFY17), followed by Power 5,500
1.0
Refineries
(14%) and Refineries (10%). 0.8 10%
4,500
0.6
3,500 Cement
0.4 1%
2,500 Windmill
0.2
Metals 66%
1,500 0.0 4%
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

FY18E

FY19E

Source : Company, HDFC sec Inst Research Source : Company, HDFC sec Inst Research

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 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

Key Assumptions - Standalone

With the wind capex looking (Rs mn) FY15 FY16 FY17E FY18E FY19E
capped at ~4 GW over FY17- Utilisation Rates (%) 66.00% 80.50% 77.00% 77.50% 77.50%
19E across India, we expect Yield per month (on avg gross block) (%) 2.40% 2.92% 2.78% 2.75% 2.75%
SGM’s corresponding crane
utilisation rates to remain Revenues 3,082 5,315 5,436 5,930 6,263
under pressure between 77- EBITDA 1,785 3,544 3,480 3,839 4,055
78% EBITDA margins 57.9% 66.7% 64.0% 64.7% 64.7%
APAT 23 1,099 944 1,110 1,195
APAT margins 0.8% 20.7% 17.4% 18.7% 19.1%

Net Debt 3,059 6,030 5,210 5,841 4,139

Source: Company, HDFC sec Inst Research

Change in Estimates
Previous Estimates Revised Estimates Change
Higher depreciation and (Rs mn)
FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
interest costs led to a decline
Revenue 5,428 5,767 6,046 5,436 5,930 6,263 0.1% 2.8% 3.6%
in APAT estimates by
EBITDA 3,501 3,736 3,929 3,480 3,839 4,055 -0.6% 2.8% 3.2%
9.4%/17.2% for FY18E/FY19E
APAT 1,047 1,225 1,443 944 1,110 1,195 -9.8% -9.4% -17.2%
respectively Source: Company, HDFC sec Inst Research

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 SANGHVI MOVERS: RESULTS REVIEW 3QFY17

Peer Valuation
MCap CMP TP EPS (Rs/sh) P/E (x) EV/EBITDA (x) ROE (%)
Company Rating
(Rs bn) (Rs) (Rs) FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
Larsen & Toubro ^ 1,399 1502 BUY 1,625 64.8 69.2 69.8 18.0 16.9 16.7 17.2 15.7 13.9 13.1 12.8 11.9
Cummins India * 247 892 BUY 1,005 27.3 30.6 34.4 32.6 29.2 25.9 29.6 26.1 22.8 22.8 23.3 23.6
Voltas 115 347 BUY 351 12.4 14.5 16.6 27.9 23.9 20.9 20.5 16.8 14.1 16.2 16.8 17.1
Engineers India * 106 157 BUY 178 5.9 6.2 8.0 26.7 25.2 19.6 22.0 19.5 13.7 14.4 14.5 18.0
Thermax 104 873 SELL 770 26.3 27.8 31.8 33.1 31.4 27.4 23.3 20.5 17.3 12.8 12.4 13.0
Suzlon 103 17 BUY 24 0.9 1.2 1.5 19.7 14.4 11.5 9.9 8.9 8.1 NA NA NA
Carborundum
50 264 BUY 340 8.9 11.5 13.6 29.5 22.8 19.4 14.1 12.1 10.5 13.4 15.4 15.9
Universal
Crompton Greaves ^ 45 71 BUY 82 -1.2 1.6 1.6 NA 38.0 36.8 13.4 11.7 10.8 -1.7 2.2 2.3
Kalpataru Power * ^ 44 284 BUY 363 17.2 18.5 21.3 12.7 11.9 10.3 9.1 8.3 7.3 11.1 10.8 11.2
Techno Electric ^ 42 370 BUY 371 15.9 19.3 21.9 20.0 16.5 14.5 14.8 13.0 11.4 17.3 18.6 18.5
KEC International 42 164 BUY 179 10.2 11.1 12.7 16.1 14.8 12.9 8.6 7.9 7.1 16.1 15.2 15.3
Triveni Turbine 41 125 BUY 148 4.0 4.5 5.1 31.5 27.9 24.5 22.3 19.3 16.5 39.0 34.5 31.1
Inox Wind 40 182 BUY 298 21.4 24.9 25.8 8.5 7.3 7.0 5.6 4.7 4.4 22.8 22.0 19.8
Sanghvi Movers * 11 244 BUY 325 21.8 25.7 27.6 11.2 9.5 8.8 4.5 4.3 3.6 12.0 12.7 12.2
*Represent SA numbers ^ P/E adjusted for value of Subs /JV's / non-core businesses
Source: Company, HDFC sec Inst Research

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 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

Income Statement - Standalone Balance Sheet - Standalone

Rs mn FY15 FY16 FY17E FY18E FY19E Rs mn FY15 FY16 FY17E FY18E FY19E
Net Revenues 3,082 5,315 5,436 5,930 6,263 SOURCES OF FUNDS
Growth (%) 26.1 72.4 2.3 9.1 5.6 Share Capital - Equity 87 87 87 87 87
Employee Expenses 164 229 223 267 294 Reserves 6,457 7,412 8,200 9,154 10,192
Freight & Carriage Expenses 229 452 516 522 532 Total Shareholders’ Funds 6,544 7,498 8,286 9,240 10,279
Other Operating Expenses 904 1,090 1,217 1,303 1,382 Long-term Debt 2,711 4,692 4,342 4,842 3,842
Total Expenses 1,297 1,772 1,956 2,091 2,209 Short-term Debt 629 1,379 1,379 1,379 1,379
EBIDTA 1,785 3,544 3,480 3,839 4,055 Total Debt 3,340 6,070 5,720 6,220 5,220
EBITDA Margin (%) 57.9 66.7 64.0 64.7 64.7 Deferred Taxes 862 929 929 929 929
EBITDA Growth (%) 30.8 98.5 (1.8) 10.3 5.6 Other Long-term Liabilities &
- 49 49 49 49
Depreciation 1,200 1,263 1,484 1,596 1,723 Provisions
EBIT 585 2,280 1,996 2,243 2,332 TOTAL SOURCES OF FUNDS 10,746 14,547 14,985 16,439 16,477
Other Income (Including EO APPLICATION OF FUNDS
74 80 121 130 138
Items) Net Block 8,913 12,511 12,627 14,031 13,308
Interest 427 542 707 716 686 CWIP 175 247 247 247 247
PBT 232 1,818 1,409 1,657 1,783 Investments, LT Loans & Advances 70 60 60 60 60
Tax (Incl Deferred) 151 649 465 547 588 LT Loans & Advances 143 91 89 130 137
RPAT 81 1,169 944 1,110 1,195 Total Non-current Assets 9,300 12,908 13,022 14,467 13,752
EO (Loss) / Profit (Net Of Tax) (57) (70) - - - Inventories 102 106 119 130 137
APAT 23 1,099 944 1,110 1,195 Debtors 1,235 1,551 1,489 1,625 1,716
APAT Growth (%) (113.2) 4,613.6 (14.1) 17.6 7.6 Cash & Equivalents 85 341 149 163 172
Adjusted EPS (Rs) 0.5 25.4 21.8 25.7 27.6 ST Loans & Advances, Others 281 41 510 379 1,081
EPS Growth (%) (113.2) 4,613.6 (14.1) 17.6 7.6 Total Current Assets 1,703 2,038 2,268 2,296 3,106
Source: Company, HDFC sec Inst Research Creditors 109 202 204 218 230
Other Current Liabilities & Provns 149 197 101 107 150
Total Current Liabilities & Provns 258 399 305 324 380
Net Current Assets 1,445 1,639 1,963 1,972 2,726
TOTAL APPLICATION OF FUNDS 10,746 14,547 14,985 16,439 16,477
Source: Company, HDFC sec Inst Research

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 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

Cash Flow - Standalone Key Ratios - Standalone

Rs mn FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 232 1,818 1,409 1,657 1,783 PROFITABILITY (%)
Non-operating & EO items (74) (80) (121) (130) (138) EBITDA Margin 57.9 66.7 64.0 64.7 64.7
Interest expenses 427 542 707 716 686 EBIT Margin 19.0 42.9 36.7 37.8 37.2
Depreciation 1,200 1,263 1,484 1,596 1,723 APAT Margin 2.6 22.0 17.4 18.7 19.1
Working Capital Change 457 (267) 148 (181) (59) RoE 0.4 15.6 12.0 12.7 12.2
Tax Paid (151) (649) (465) (547) (588) Core RoCE 2.0 10.2 9.3 9.5 10.3
Other operating items (58) RoCE 1.5 11.4 9.6 10.1 10.1
OPERATING CASH FLOW ( a ) 2,090 2,570 3,163 3,111 3,407 EFFICIENCY
Capex (237) (4,933) (1,600) (3,000) (1,000) Tax Rate (%) 65.3 35.7 33.0 33.0 33.0
Free Cash Flow 1,853 (2,363) 1,563 111 2,407 Fixed Asset Turnover (x) 0.3 0.4 0.4 0.4 0.5
Investments (70) 10 - - - Inventory (days) 12.1 7.3 8.0 8.0 8.0
Non-operating Income 74 80 121 130 138 Debtors (days) 146.3 106.5 100.0 100.0 100.0
INVESTING CASH FLOW ( b ) (233) (4,843) (1,479) (2,870) (862) Other Current Assets (days) 26.9 29.7 16.0 18.0 18.0
Debt Issuance/(Repaid) (1,309) 2,731 (350) 500 (1,000) Payables (days) 12.9 13.9 13.7 13.4 13.4
Interest expenses (427) (542) (707) (716) (686) Other Current Liab & Provns (days) 17.7 16.9 10.1 9.6 8.8
FCFE 121 (84) 626 25 859 Cash Conversion Cycle (days) 154.7 112.6 100.2 103.0 103.8
Share Capital Issuance - - - - - Debt/EBITDA (x) 1.9 1.7 1.6 1.6 1.3
Dividend (26) (156) (156) (156) (156) Net D/E (x) 0.47 0.80 0.63 0.63 0.40
FINANCING CASH FLOW ( c ) (1,762) 2,033 (1,214) (373) (1,843) Interest Coverage (x) 1.4 4.2 2.8 3.1 3.4
NET CASH FLOW (a+b+c) 95 (240) 470 (131) 702 PER SHARE DATA
Closing Cash & Equivalents 281 41 510 379 1,081 EPS 0.5 25.4 21.8 25.7 27.6
Source: Company, HDFC sec Inst Research CEPS 29.6 56.2 56.1 62.5 67.4
Dividend 0.5 3.0 3.0 3.0 3.0
Book Value 151.2 173.2 191.4 213.5 237.5
VALUATION
P/E (x) 452.7 9.6 11.2 9.5 8.8
P/BV (x) 1.6 1.4 1.3 1.1 1.0
EV/EBITDA (x) 7.6 4.7 4.5 4.3 3.6
EV/Revenues (x) 4.4 3.1 2.9 2.8 2.3
OCF/EV (%) 15.4 15.5 20.1 19.0 23.2
FCF/EV (%) 13.6 (14.3) 9.9 0.7 16.4
FCFE/Mkt Cap (%) 1.1 (0.8) 5.9 0.2 8.1
Dividend yield (%) 0.2 1.2 1.2 1.2 1.2
Source: Company, HDFC sec Inst Research

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 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

RECOMMENDATION HISTORY
Sanghvi Movers TP Date CMP Reco Target
500 9-Feb-16 327 BUY 444
450 27-May-16 285 BUY 456
400 13-Aug-16 262 BUY 422
350
11-Nov-16 226 BUY 370
300
13-Feb-17 244 BUY 325
250
200 Rating Definitions
150 BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Feb-16

Sep-16

Feb-17
Nov-16
Jun-16
May-16

Dec-16
Mar-16

Oct-16
Aug-16
Apr-16

Jan-17
Jul-16

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 SANGHVI MOVERS : RESULTS REVIEW 3QFY17

Disclosure:
We, Ashutosh Mehta, ACA & Pawan Parakh, CFA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in
this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. 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. Further
Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock – No

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