Munjal show ltd

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Munjal show ltd

  1. 1.     K E Y N O T E  Munjal Show Ltd. wa  Deep A. K pak Kolhe, An nalyst deepa ak@keyno otecapitals.net  Keynote Cap pitals Institutio onal Research is also available on h Blo oomberg KNT <GO>, Th TE homson One AAnalytics, Reu uters Knowledge, Capital I TheMarke IQ, ets.com and s securities.com m Keynote Cap pitals Institu utional Resea arch –awarde “India’s B ed Best IPO Ana alyst 2009” by MCX-Zee B Business
  2. 2. K E Y N O T EMunjal Showa Ltd Date: 21-Dec-2012 Key Stock Data Investment SummarySector Auto Parts Dominant position in shock absorbers: At present only two domestic players,CMP `63.25 Gabriel India (GIL) and MSL dominate the industry by contributing 80% of total industry52wk High/Low 88.0/60.0 volumes. MSL commands a market share of above 55% in two-wheeler shockMarket Cap `255Cr absorbers.6m Avg. daily vol 13132 Munjal Showa is not affected due to separation of Hero and Honda: Munjal showaBSE Sensex 19453.9Reco ‘Buy’ supply its product to Hero Motocorp and Honda Motorcycle & Scooter India. BothTarget Price `85.71 clients have aggressive expansion plans, which would be beneficial for the Munjal Showa. Stock Codes Strong growth going forward, sales at a CAGR of 18.2% over FY09-FY14E: MSLBloomberg Code MJS IN management stressed that current capacities of the company will be able to fulfill theReuters Code MNJL.BO expected demand from the clients. Given its end-to-end arrangement with its clients,BSE Code 520043 we expect company’s Net sale to grow at 18.2% CAGR for the period of FY09-FY14E.NSE Code MUNJALSHOWFace Value `2 Lower tax and interest outgo to ensure robust profit growth: MSL’s Haridwar Plant is on tax free regime and therefore EPS accretive. We expect it to bring down effective Shareholding pattern tax rate from 21.9% in FY12 to 11% in FY13. (30th Sep, 2012) Attractive Dividend Paying History: MSL’s stock price gives a healthy dividend yield of 4.74. The company increased its dividend by 20% from `2.5/share to `3/share in Other FY12. Increase in dividend yield also demonstrates that the company is in stable s 33.10 growth conditions. % Munjal Showa VS Gabriel India: After comparing MSL with Gabriel India, We found Prom DII oter MSL trading at steep discount to Gabriel India on the basis of PE and P/S ratio.1.86% 65.02 % Valuations: We initiate coverage with “Buy” recommendation with the DDM based FII 0.02% target price of `85.71, arriving at 4.68x FY13E and 3.71x FY14 earning for the levered firm. Price Performance (%) Key Financials (`Cr)1 Mth 3 Mths 6 Mths 1 Yr-2.1% -3.6% -19.2% -0.2% Particulars FY09 FY10 FY11 FY12 FY13E FY14E Net Sales 829.4 988.0 1,289.3 1,556.9 1,699.6 1,913.6 Stock Price Performance YoY Growth % 16.9% 19.1% 30.5% 20.8% 9.2% 12.6% MSL Sensex Total Expenditure 788.5 934.1 1208.3 1434.2 1582.0 1776.4 145 EBITDA 40.9 53.9 81.0 122.7 117.6 137.2 YoY Growth % 24.1% 31.7% 50.2% 51.5% -4.1% 16.7% 135 EBITDA Margin (%) 4.9% 5.5% 6.3% 7.9% 6.9% 7.2% 125 NPAT 20.7 24.6 34.0 67.1 73.3 92.3 YoY Growth % 3.6% 19.8% 34.1% 102.1% 10.5% 26.0% 115 NPAT Margin (%) 2.5% 2.5% 2.6% 4.3% 4.3% 4.8% 105 ROE (%) 13.0% 14.2% 17.7% 29.2% 26.0% 27.2% 95 EPS (`) 5.2 6.2 8.5 16.8 18.3 23.1 PE(x) 12.2 10.3 7.4 3.8 3.5 2.7 P/BV(x) 1.6 1.5 1.3 1.1 0.9 0.7 E- Keynote Capitals Research EstimatesKeynote Capitals Research 2  
  3. 3.                                                            K E Y N O T E  Abo Compa out any Mun Showa, a Hero group company wa established in 1985 in c njal as d collaboration with Showa Corp poration of JJapan. The Company op perates as a ancillary and manufac an ctures auto components for th two-wheeler and four-w he wheeler indust Its primar products ar front fork, try. ry re shoc absorbers, struts, gas s ck , springs and w window balancers. The company opera ates through plants based in H Haryana and U Uttarakhand. duct-wise rev Prod venue break (FY12) kup Chart 1 Shoc absorbers ck contribuutes more th han 0.67% 90% in the top-line n e 3.24% % 90.52% 5.57% Market leader in two- shock absorb  wheeler s bers Shock A Absorbers Struts Othe ers Window Balan W ncers Mun Showa re njal eported sales growth of 2 s 20.8% in FY1 while its e 12 earnings rose 97.3% on e impr roved margins. A strong eexpansion in PAT margin f from 2.5% to 4.3% demon o nstrates the A stron expansion in ng n impr roved operatio onal environm ment.PAT marg from 2.5% to gin % 4.3% demonstrates t the Munnjal Showa’s client base includes like Maruti S e Suzuki, Hero Motocorp a and Honda improve operation ed nal Moto ently, the group company Hero Motoco contribute the major c orcyles. Curre orp es chunk in the vironment.   env top line of MSL. T Therefore, MS is benefitin from Hero’s expanding product portfo SL ng olio. Client List Chart 2 Maruti Su uzuki Ltd. Hero Mo otoCorp Ltd. Currenntly, the grou upcompany Hero Motoc y corp contributes the maj jor Hero M Motors Ltd. chunk in the top line of n e Munjal sh howa Ltd. MSL  Honda Mo otorcycles an Scooters I nd India (Pvt) Lt td. Honda-Siel Cars India L Ltd. Majesti Auto Ltd. ic 3 Keynote Ca apitals Resea arch
  4. 4. K E Y N O T E Key Management Personnel Munjal Showa established out of technical and financial collaboration between Hero groupMSL established out of and Showa Corporation of Japan. While Showa Corporation holds 26% stake and Munjaltechnical and financial group holds 39% stake in the company as on Q2FY13. MSL is the sole supplier of shockcollaboration between absorbers to Hero Motocorp Ltd. Following is the list of key management people in theHero group and Showa company. Corporation of Japan.  Management People Chart 3 Mr.Brijmohan Lall Munjal - Chairman/Founder DirectorStrong assistance from promoter group Mr.Mahesh Taneja - Chief Financial Officer Mr.Yogesh Chander Munjal - Managing Director Mr.Tetsuo Terada - Joint Managing Director Mr.Pankaj Gupta - Gen Mgr:F&A/Secretary Performance at glance MSL has come up out of the turbulent years FY08 and FY09 strongly. While its sales grew 2.5% and 16.9% in terms of Net sales during FY08 and FY09 respectively, PAT declined by FY12 was much better 23.1% in FY08 and showed moderate by 3.6% in FY09. The growth was tempered by steepyear as company posted improved performance rise in interest rates and phenomenal increase in raw material inputs especially steel. The owing to recovery in slowdown has resulted in direct impact on the productions and sales of the component domestic market.  manufactures. Whereas, FY12 was much better year as company posted improved performance owing to recovery in domestic market.  The company also reported Net sales and PAT growth at a CAGR of 17.6% and 21.0% for the period of FY07-12. `Cr 5 Yr Particulars FY08 FY09 FY10 FY11 FY12 CAGR (%)MSL reported Net sales Net Sales 709.4 829.4 988.0 1289.3 1556.9 17.6% and PAT growth at a % Change 2.5% 16.9% 19.1% 30.5% 20.8% CAGR of 17.6% and EBITDA 33.0 40.9 53.9 81.0 122.7 24.2%21.0% for the period of EBITDA Margin (%) 4.7% 4.9% 5.5% 6.3% 7.9% FY07-12.  PAT 19.7 20.4 24.5 32.8 66.3 21.0% PAT Margin (%) 2.8% 2.5% 2.5% 2.5% 4.3% % Change -23.1% 3.6% 19.8% 34.1% 102.1% EPS (`) 4.8 5.2 6.2 8.5 16.8 Dividend yield (%) 3.2% 3.2% 3.2% 4.0% 4.7% Installed Capacity Shock Absorbers (No) 21513000 21513000 30542400 30542400 30542400 Struts (No) 1212000 2424000 2424000 2424000 2424000 Window Balancers (No) 1006500 1006500 818100 818100 818100 Keynote Capitals Research 4  
  5. 5.                                                 K E Y N O T E  Investment Rationale Dominant position in shock absorbers MSL commands a Being a technology intensive industry, unorganised sector has no presence in the OEM market share of above segment for shock absorbers. At present only two domestic players, Gabriel India (GIL) and 55% in two-wheeler MSL dominate the industry by contributing 80% of total industry volumes. MSL commands a shock absorbers market share of above 55% in two-wheeler shock absorbers and about 8% in the passenger cars segment. During the year 2010-11 the Market size of shock absorber grew 31% y-o-y to `3644Cr. According to CMIE, According to CMIE, the market will cross `5300Cr in 2013-14 registering a CAGR of 14% Shock absorbers during FY11-14. CMIE expects the industry’s sales to grow by 16.3% in FY13. In terms of market will cross `5300Cr in 2013-14  input costs as well, the industry is better off. Steel prices are expected to rise by a moderate 3.7% during the year. Hence, raw material expenses are likely to rise in line with sales. Particulars Units 2009-10 2010-11 2011-12E 2012-13E 2013-14E Production 000 nos 56358.9 68919.6 74777.8 82106 91794.5 CMIE expects the industry’s sales to Export Tonnes 3748.3 8512.1 9005.8 9951.5 11683grow by 16.3% in FY13.  Import Tonnes 2679.2 5300.7 5692.9 6441 7481.2 Realisation Rs./Numbers 487.1 518.8 534.4 555.7 575.2 Sales Rs crore 2745.4 3575.5 3995.8 4562.6 5279.7 Domestic Rs crore 2782.1 3644 4079.4 4665.3 5397.6 Market value Source CMIE  Under the JV HeroGroup could not export Munjal Showa is not affected due to separation of Hero and Honda to international In December 2010, the Board of Directors of the Hero Honda Group have decided to markets (except Sri terminate the joint venture between Hero Group of India and Honda of Japan. The Hero Lanka) and the Group would buy out the 26% stake of the Honda. Under the joint venture Hero Group could termination would not export to international markets (except Sri Lanka) and the termination would mean thatmean that Hero Group Hero Group can now export. can now export. Munjal Showa to benefit from Hero Motocorp and HMSI’s expansion plans. Hero Motocorp and Munjal showa is sole supplier to Hero Motocorp Ltd.Honda Motorcycle have MSL also provides products to Honda Motorcycle & Scooter India, Private Limited (HMSI). very aggressive HMSI is the wholly owned subsidiary of Honda Motor Company Ltd, Japan. expansion plans Hero Motocorp and Honda Motorcycle have very aggressive expansion plans, which would be beneficial for the Munjal Showa. 5 Keynote Capitals Research
  6. 6. K E Y N O T E Strong growth going forward, sales at a CAGR of 18.2% over FY09-FY14E New product launches Munjal showa is a supplier of shock absorber to leading two wheeler player. The company by two wheeler auto giants will create a has been supplying shock absorbers to HMCL (Hero Motocorp Ltd), HMSI (Honda huge demand for the Motorcycles and Scooters India Pvt Ltd) etc. MSL is a sole supplier of shock absorbers to company’s products. HMCL. Company’s existing clients have targeted to meet predetermined sales targets with around 10% growth, with the support of new models likely to be launched both in 2 Wheeler and 4 Wheeler segment in the coming years. MSL’s manufacturing units in Gurgaon, Manesar and Haridwar with installed capacities of MSL management 30.54Mn Shock absorbers, 2.42Mn Struts and 0.82Mn Window balancer are almost using stressed that current capacities of the their full capacities. During FY12 MSL produced 32.36Mn Shock absorbers, 0.98Mn Strutscompany will be able to and 0.74Mn window balancer which we expect to register a CAGR of 2.8%, 9.2% and 4.5% fulfill the expected respectively over FY12-14E ensuing from the demand from the client on new launches and demand from the better domestic demand. MSL management stressed that current capacities of the company clients  will be able to fulfill the expected demand from the clients. Given its end-to-end arrangement with its clients, we expect company’s Net sale to grow at 18.2% CAGR for the period of FY09-FY14E. Net Sales to grow 9.2% in FY13E Chart 5 MSL’s installedcapacities of 30.54Mn 2500 35% Shock absorbers, 1913.6 30% 2.42Mn Struts and 2000 1699.6 1556.9 25% 0.82Mn Window ` Cr 1500 1289.3 20% balancer  988.0 1000 829.4 15% 709.4 10% 500 5% 0 0% FY08 FY09 FY10 FY11 FY12 FY13E FY14E Net Sales % Growth (RHS) Lower tax and interest outgo to ensure robust profit growth Lower tax is game MSL’s Haridwar Plant is on tax free regime and therefore EPS accretive. We expect it to changer for the bring down effective tax rate from 21.9% in FY12 to 11% in FY13. company FY12 FY13 Particulars Q1 Q2 Q3 Q4 Q1 Q2 Total Tax (` Cr) 3.9 3.81 2.85 8.21 1.66 0.72 % Change Q-o-Q -16.3% -2.3% -25.2% 188.1% -79.8% -56.6% % Change Y-o-Y 8.0% 56.8% -12.0% 76.2% -57.4% -81.1% % Effective tax rate 19.8% 21.3% 17.8% 25.4% 10.9% 7.6% Keynote Capitals Research 6  
  7. 7.                                                 K E Y N O T E  Tax Rate to go down Chart 7 25.00 40.0% 37.1% 23.09 MSL posted strong 35.1% 36.4% 35.0%EPS growth of 97.18% 20.00in FY12 as compared 29.0% 18.32 30.0% 16.78 to FY11 15.00 25.0% 21.9% 20.0% 10.00 15.0% 8.51 11.5% 5.17 6.15 10.0% 10.0% 5.00 4.83 5.0% 0.00 0.0% FY08 FY09 FY10 FY11 FY12 FY13E FY14E EPS (`) Effective Tax Rate (%) (RHS) Interest cost to go down due to repayment of loan Apart from tax benefits, the company is also reducing pressure of debt from its balance sheet. As on FY12 the company has total debt of `73.16Cr, which includes secured loan of Apart from tax `63.16cr and unsecured loan of `10Cr. Total debt of the company declined by 15% asbenefits, the company compared to FY11. MSL reported interest coverage ratio of 10.99x in FY12 as compared to is also reducing 8.86x in the previous year. This indicates that earnings can easily cover interest payment.pressure of debt from its balance sheet.  The Debt to Equity ratio is expected to decline to 0.13x by FY14E from 0.29x (FY12) on account of a reduction in debt. The interest coverage ratio is expected to improve to 27.58x in FY14E from 10.99x (FY12) owing to decline in the interest outgo. Improvement in Debt to Equity Ratio Chart 8 0.80 30.00 0.68 0.70 0.61 25.00 0.60 The Debt to Equity 20.00 0.50 ratio is expected to 0.42 decline to 0.13x by 0.40 15.00 FY14E from 0.29x 0.29 0.30 0.23(FY12) on account of 10.00 0.19 a reduction in debt. 0.20 0.13 5.00 0.10 0.00 0.00 FY08 FY09 FY10 FY11 FY12 FY13E FY14E Total Debt to Equity (x) Interest coverage ratio (x) (RHS) 7 Keynote Capitals Research
  8. 8. K E Y N O T E The tax and interest benefit will ensure steady cash flows and intact earnings growth for the company in the current scenario of increasing raw material costs and wage hike. Margins impressive going forward Chart 6 2500 9%Lower tax and interest 7.9% 8% outgo to ensure 2000 6.9% 7.2% 7% robust profit growth 6.3% 6% 1500 5.5% 4.7% 4.9% 4.8% 5% ` Cr 4.3% 4.3% 4% 1000 2.8% 3% 2.5% 2.5% 2.5% 500 2% 1% 0 0% FY08 FY09 FY10 FY11 FY12 FY13E FY14E Net Sales EBITDA Margin (RHS) PAT Margin (RHS) Attractive Dividend Paying History MSL’s stock price gives a healthy dividend yield of 4.74. The company increased its dividend by 20% from `2.5/share to `3/share in FY12. Increase in dividend yield also demonstrates Increase in dividend that the company is in stable growth conditions. yield also Dividend Historydemonstrates that the Year End 200803 200903 201003 201103 201203company is in stable growth conditions. Dividend amount (`Cr) 8 8 8 10 12 Dividend % 100 100 100 125 150 Dividend Yield (%)* 3.16% 3.16% 3.16% 3.95% 4.74% *Stock price considered = `63.25 per share  We expect MSL to maintain a payout ratio in the range of 15% to 17.7% in FY13E and FY14E. We have built in an estimate for dividend per share at `3.25 and `3.5 for FY13E and The company FY14E respectively.increased its dividend Dividend Yield Chart 9 by 20% from`2.5/share to `3/share 6% 5.53% 5.14% in FY12 4.74% 5% 3.95% 4% 3.16% 3.16% 3.16% 3% 2% 1% 0% FY08 FY09 FY10 FY11 FY12 FY13E FY14E Dividend Yield (%) Keynote Capitals Research 8  
  9. 9.                                                 K E Y N O T E  Peer comparisonMSL trading at steep We have compared MSL with its immediate competitor Gabriel India. Gabriel India is a discount to Gabriel manufacturer and supplier of Shock absorbers, Struts, Front forks and Engine bearings. ItIndia on the basis of also has a wide range of Ride control products. It has well-known clients like Bajaj Auto, PE and P/S ratio. Ashok Leyland and Tata Motors etc. After comparing MSL with Gabriel India, We found MSL trading at steep discount to Gabriel India on the basis of PE and P/S ratio. Munjal Showa VS Gabriel India `Cr Munjal Showa Ltd Gabriel India Ltd Particulars FY12 FY12 Net Sales 1556.88 1128.24 Dividend yield of munjal showa is PAT 66.33 47.47 higher than the Gabriel India. PAT Margin (%) 4.3% 4.2% EPS (`) 16.78 3.61 PE (x) 3.77 7.83 Stock Price (`) 63.25 28.25 Mkt cap (`) 257 405.67 P/Sale (x) 0.17 0.36 Dividend Yield (%) 4.74% 2.31% Valuations At current market price of `63.25 stock is trading at 3.45x FY13E and 2.74x FY14E earnings, Which is low as compared to Gabriel India. Considering improved demand from clients and At current market decline in the interest outgo as well as lower effective tax rate is likely to boost the bottom-price of `63.25 stock line of the company. We initiate coverage with “Buy” recommendation with the DDM based is trading at 3.45x FY13E and 2.74x target price of `85.71, arriving at 4.68x FY13E and 3.71x FY14 earning for the levered firm. FY14E earnings, Dividend Discount Model Which is low ascompared to Gabriel Gordon Growth Model India. Single stage DDM model FY12 Dividend Per Share 3.00 9 Keynote Capitals Research
  10. 10. K E Y N O T E Assumptions CoE (r) Rfr 8.00% Rm 15.00% Beta 0.54 CoE 11.78% Gn 8% Target Price (`) 85.71 Upside 33.93% Valuations Table ROE to be in therange of 25% to 28% Particulars FY09 FY10 FY11 FY12 FY13E FY14E EPS (`) 5.17 6.15 8.51 16.78 18.32 23.09 RoE (%) 13% 14% 18% 29% 26% 27% P/E (x) 12.23 10.28 7.44 3.77 3.45 2.74 Price/BV (x) 1.58 1.46 1.32 1.10 0.90 0.75 Risk and concern The key concerns are volatility in raw material prices such as steel, iron etc The concentration of business with few customers, may adversely affect the profitability of the Company. The profitability of the Company may further be affected by changes in Government Policies regarding excise duty and import duty. Keynote Capitals Research 10  
  11. 11.                                                 K E Y N O T E  Financial Statement Profit and Loss A/C `Cr Net sale to grow at 12.6% in FY14 on Y/E, 31st March FY09 FY10 FY11 FY12 FY13E FY14E account of new Net Sales 829.4 988.0 1,289.3 1,556.9 1,699.6 1,913.6 launches and better % change 16.9% 19.1% 30.5% 20.8% 9.2% 12.6% domestic demand EBITDA 40.9 53.9 81.0 122.7 117.6 137.2 EBITDA margin (%) 4.9% 5.5% 6.3% 7.9% 6.9% 7.2% Other income 14.3 20.0 2.3 1.6 1.1 0.9 We expect effective Interest exp/ (inc) 5.5 12.1 9.1 11.2 7.0 5.0 tax rate to go down PBTD 49.8 61.8 74.2 113.1 111.7 133.1from 21.9% in FY12 to Depreciation 16.9 23.1 26.3 27.2 28.9 30.5 11% in FY13. PBT 32.9 38.7 47.9 85.9 82.8 102.6 Taxes 12.2 14.1 13.9 18.8 9.5 10.3 PAT (Reported) 20.7 24.6 34.0 67.1 73.3 92.3 PAT margin to be in  Less: Extraordinary Income /Others 0.3 0.1 1.2 0.8 0.0 0.0the range of 4% ‐ 4.8%  Adj PAT 20.4 24.5 32.8 66.3 73.3 92.3 in FY13E & FY14E   Adj PAT margin (%) 2.5% 2.5% 2.5% 4.3% 4.3% 4.8% Source: E- Keynote capitals Research Balance Sheet Statement `Cr Y/E, 31st March FY09 FY10 FY11 FY12 FY13E FY14E Liabilities Equity share capital 8.0 8.0 8.0 8.0 8.0 8.0 Total Res. & Surplus 157.3 172.6 195.0 248.2 300.5 361.9Total loan fund was Total Shareholders’ funds 165.3 180.6 203.0 256.2 308.5 369.9declined by 14.6% in Secured Loan 101.3 88.8 80.7 63.2 50.5 44.7 FY12 Unsecured Loan 0.0 34.9 5.0 10.0 8.0 5.0 Total loans 101.3 123.7 85.7 73.2 58.5 49.7 Deferred tax lia. 13.6 17.3 16.7 15.7 16.6 17.6 Other liability 0.0 0.0 0.6 0.7 0.7 0.7 Total liabilities 280.2 321.5 306.0 345.6 384.3 437.9 Assets Net fixed assets 199.8 254.2 254.5 245.0 262.7 282.3 Cash and Cash Capital WIP 40.6 8.5 8.6 11.2 10.9 11.6equivalents increased Total non-current assets 240.3 262.8 263.1 256.2 273.6 293.9 by 51.6% in FY12 Inv - non current 10.0 5.0 0.0 3.0 3.0 3.0 Current assets Inventories 28.8 30.4 36.7 49.1 52.5 61.2 Sundry debtors 91.5 128.2 143.0 176.0 189.5 200.3 Cash & cash equivalents 5.3 2.4 3.1 4.7 5.6 6.1 Loans and Advances 29.4 37.3 45.0 45.7 49.3 55.3 Total current assets 154.9 198.3 227.7 275.5 296.9 322.9 Total current liabilities 116.1 131.8 176.8 178.2 177.5 168.3 Total provisions 13.1 16.3 14.8 15.9 17.4 19.4 Net current assets 25.8 50.2 36.2 81.4 102.0 135.1 Other Asset 4.1 3.5 6.8 5.0 5.6 5.8 Total assets 280.2 321.5 306.0 345.6 384.3 437.9 Source: E- Keynote capitals Research 11 Keynote Capitals Research
  12. 12. K E Y N O T E Cash Flow Statement `Cr Y/E, 31st March FY09 FY10 FY11 FY12 FY13E FY14E Cash flow from operations PBT 32.9 38.7 47.9 85.9 82.8 102.6 Tax paid 12.2 14.1 13.9 18.8 9.5 10.3 Dep & amortization 16.9 23.1 26.3 27.2 28.9 30.5 Working capital changes 0.7 27.3 (14.7) 43.6 19.8 32.6 Others (0.3) (8.1) 2.1 (4.9) (21.6) (25.2) A-Net cash from operations 36.6 12.3 77.0 45.9 60.8 65.1 B-Net cash from investments 90.7 31.9 26.9 16.7 25.4 25.8 C-Net cash from financing 57.3 16.7 (49.5) (27.5) (34.6) (38.8) Net change in cash (A-B+C) 3.1 (2.9) 0.7 1.6 0.8 0.5 Cash at the end of the period 5.3 2.4 3.1 4.7 5.6 6.1 Source: E- Keynote capitals Research Key Ratios Y/E, 31st March FY09 FY10 FY11 FY12 FY13E FY14E Growth Net sales (%) 16.9% 19.1% 30.5% 20.8% 9.2% 12.6% EBITDA (%) 24.1% 31.7% 50.2% 51.5% -4.1% 16.7% PAT adjusted (%) 3.6% 19.8% 34.1% 102.1% 10.5% 26.0%MSL is trading at 3.8x ValuationsFY12 earnings, whichis low as compared to EPS (`) 5.2 6.2 8.5 16.8 18.3 23.1 its historical PE P/E (x) 12.2 10.3 7.4 3.8 3.5 2.7 Price/BV (x) 1.6 1.5 1.3 1.1 0.9 0.7 EV/EBITDA (x) 8.5 6.9 4.1 2.6 2.6 2.2 P/Sales (x) 0.31 0.26 0.20 0.16 0.15 0.13 Profitability EBITDA margin (%) 4.9% 5.5% 6.3% 7.9% 6.9% 7.2% Adj PAT margin (%) 2.5% 2.5% 2.6% 4.3% 4.3% 4.8%Debt to equity to be in RoE (%) 13.0% 14.2% 17.7% 29.2% 26.0% 27.2% comfort zone RoCE (%) 9.5% 11.3% 20.3% 32.5% 27.8% 28.3% B/S ratios Inventory days 10.6 10.2 8.8 9.3 10.1 10.1 Creditor days 33.7 32.5 34.5 35.2 31.7 27.4 Debtors days 33.0 37.8 35.6 34.8 36.5 34.8 Debt/equity 0.61 0.68 0.42 0.29 0.19 0.13 Source: E- Keynote capitals Research Keynote Capitals Research 12  
  13. 13.                                                 K E Y N O T E  KEYNOTE CAPITALS LTD. Member Stock Exchange, Mumbai (INB 010930556) National Stock Exchange of India Ltd. (INB 230930539) Over the Counter Exchange of India Ltd. (INB 200930535) Central Depository Services Ltd. (IN-DP-CDSL-152-2001) The Ruby, 9th Floor Senapati Bapat Marg Dadar (W), Mumbai – 400 028. T: +91-22-30266000, F: +91-22-30266088 www.keynotecapitals.comDISCLAIMER• This report has been prepared and issued by Keynote Capitals Limited, based solely on public information and sources believed to bereliable.• Neither the information nor any opinion expressed herein, constitutes an offer, or an invitation to make an offer, to buy or sell any securitiesor any options, futures or other derivatives related to such securities and also for the purpose of trading activities.• Keynote Capitals Limited makes no guarantee, representation or warranty, express or implied and accepts no responsibility or liability as tothe accuracy or completeness or correctness of the information in this report.• Keynote Capitals and its affiliates and their respective officers, directors and employees may hold positions in any securities mentioned inthis Report (or in any related investment) and may from time to time add to or dispose of any securities or investments.• Keynote Capitals may also have proprietary trading positions in securities covered in this report or in related instruments.• An affiliate of Keynote Capitals Limited may also perform or seek to perform broking, investment banking and other banking services for thecompany under coverage.• If ‘Buy’, ‘Sell’, or ‘Hold’ recommendation is made in this Report, such recommendation or view or opinion expressed on investments in thisReport is not intended to constitute investment advice and should not be intended or treated as a substitute for necessary review orvalidation or any professional advice. The views expressed in this Report are those of the analyst which are subject to change and do notrepresent to be an authority on the subject. Keynote Capitals may or may not subscribe to any and/ or all the views expressed herein.• The opinions presented herein are liable to change without any notice.• Though due care has been taken in the preparation of this report, Keynote Capitals limited or any of its directors, officers or employees shallbe in any way be responsible for any loss arising from the use thereof.• Investors are advised to apply their judgment before acting on the contents of this report.• This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Keynote Capitals Limited. 13 Keynote Capitals Research

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