Buy Orient Refractories, engineering sector to benefit from infrastructure projects #BrokerAdvice http://goo.gl/NelzbA

1. CMP 89.10
Target Price 102.00
ISIN: INE743M01012
JULY 20th
2015
ORIENT REFRACTORIES LTD
Result Update (PARENT BASIS): Q4 FY15
BUY
Index Details
Stock Data
Sector Other Industrial Goods
BSE Code 534076
Face Value 1.00
52wk. High / Low (Rs.) 120.00/79.00
Volume (2wk. Avg.) 53000
Market Cap (Rs. in mn.) 10704.47
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 4513.65 5010.15 5486.12
EBITDA 851.64 945.14 1036.27
Net Profit 528.40 585.17 640.28
EPS 4.40 4.87 5.33
P/E 20.26 18.29 16.72
Shareholding Pattern (%)
1 Year Comparative Graph
ORIENT REFRACTORIES LTD S&P BSE SENSEX
SYNOPSIS
Orient Refractories Limited manufactures,
distributes, and sells refractories, monolithics, and
ceramic paper for integrated steel producers and
mini steel plants in India.
During the Q4 FY15, Revenue registered 3.07%
increase and stood at Rs. 1083.92 million from Rs.
1051.68 million over the corresponding quarter
last year.
Net profit for the quarter stood at Rs. 129.01
million from Rs. 131.92 million, when compared
with the prior year period.
In Q4 FY15 Operating profit is Rs. 206.76 million
as against Rs. 207.30 million in the corresponding
period of the previous year.
Earnings per Share for the company were Rs. 1.07
in Q4 FY15 compared to Rs. 1.10 in Q4 FY14.
Revenue rises by 12% to Rs. 4513.65 million for
the end of FY15 from Rs. 4035.04 million for the
end of FY14.
The company has recommended a final dividend
of Rs. 1.40 (140%) per share on fully paid-up
equity share of Re. 1.00 each.
Net Sales and PAT of the company are expected to
grow at a CAGR of 11% and 12% over 2014 to
2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Orient Refractories Ltd 89.10 10704.47 4.40 20.26 6.30 140.00
Ador Welding Ltd 269.90 3670.20 23.80 11.34 1.80 50.00
IFGL Refractories Ltd 110.00 3796.80 7.76 14.14 2.29 20.00
Graphite India Ltd 82.25 16059.90 4.21 19.52 0.88 100.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results Updates- Q4 FY15
The Company revenue for the quarter rose by 3.07% to Rs. 1083.92 million from Rs. 1051.68 million, when
compared with the prior year period. Net profit decreased by 2.21% to Rs. 129.01 million from Rs. 131.92
million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.
1.07 a share during the quarter as against Rs. 1.10 over previous year period. Profit before interest, depreciation
and tax is Rs. 206.76 millions as against Rs. 207.30 million in the corresponding period of the previous year.
Break up of Expenditure
Months Mar-15 Mar-14 % Change
Net Sales 1083.92 1051.68 3.07
PAT 129.01 131.92 (2.21)
EPS 1.07 1.10 (2.21)
EBITDA 206.76 207.30 (0.26)
Break up of Expenditure
(Rs in millions)
Q4 FY15 Q4 FY14
%
CHNG
Material and related cost 442.96 420.26 5%
Purchase of stock in trade 152.07 149.97 1%
Employee Benefit Expenses 98.01 86.43 13%
Dep & Amortization Exp 13.07 7.98 64%
Other Expenses 184.00 200.66 -8%

3. COMPANY PROFILE
Orient Refractories Limited was incorporated in 2010 and is as a subsidiary of Dutch US Holding B.V. The
company manufactures, distributes, and sells refractories, monolithics, and ceramic paper for integrated steel
producers and mini steel plants in India. Its products include isostatically pressed continuous casting
refractories; slide gate plate refractories; inserts for repairing slide gate plates; metering, flying, and fixed
tundish nozzles; bottom purging refractories and top purging lances for steel ladles; precast shapes and blocks;
slag arresting darts for converters; basic spray mass for tundish working lining; blast furnace trough castables
for main trough, metal, and rocking runners; and conventional, low cement, and ultra low cement castables.
An in-house R&D facility supports the division’s product development initiatives. This makes ORL the preferred
choice for quality products. The company also exports its products to Europe, the Middle East, and South East
Asia.
Products
• Isostatically pressed Continuous Casting Refractories
• Slide gate plates
• Nozzles and Well Blocks
• Tundish Nozzles
• Bottom Purging Refractories and Top Purging Lances
• Slag Arresting Darts
• Basic Spray Mass for Tundish working lining
• Castables

4. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
FY14A FY15A FY16E FY17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 120.14 120.14 120.14 120.14
Reserves and Surplus 1256.47 1577.89 1893.47 2234.29
1. Sub Total - Net worth 1376.61 1698.03 2013.61 2354.43
Non Current Liabilities
Deferred Tax Liabilities 2.11 0.00 0.00 0.00
Other Long term Liabilities 8.85 9.33 9.70 9.99
Long term Provisions 17.47 22.29 27.86 33.99
2. Sub Total - Non Current Liabilities 28.43 31.62 37.57 43.99
Current Liabilities
Short term Borrowings 57.17 52.42 49.80 48.31
Trade Payables 508.59 514.51 524.80 540.54
Other Current Liabilities 24.48 32.11 41.10 50.55
Short Term Provisions 180.35 207.87 234.89 260.73
3. Sub Total - Current Liabilities 770.58 806.91 850.59 900.13
Total Liabilities (1+2+3) 2175.62 2536.56 2901.77 3298.55
APPLICATION OF FUNDS
Non-Current Assets
a) Fixed Assets 319.64 371.90 442.56 513.37
b) Non-current investments 0.06 0.06 0.06 0.06
c) Deferred tax Assets 0.00 7.95 8.51 8.85
d) Long Term loans and advances 15.62 17.53 19.28 20.83
e) Other non-current assets 5.03 5.14 5.29 5.51
1. Sub Total - Non Current Assets 340.35 402.58 475.70 548.61
Current Assets
Inventories 633.24 715.59 787.15 861.93
Trade receivables 993.96 1126.95 1252.75 1394.46
Cash and Bank Balances 179.88 261.32 352.78 455.09
Short-terms loans & advances 17.62 20.27 24.12 29.67
Other current assets 10.57 9.85 9.26 8.80
2. Sub Total - Current Assets 1835.27 2133.98 2426.06 2749.94
Total Assets (1+2) 2175.62 2536.56 2901.77 3298.55

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 4035.04 4513.65 5010.15 5486.12
Other Income 41.02 53.18 55.84 59.19
Total Income 4076.06 4566.83 5065.99 5545.31
Expenditure -3243.20 -3715.19 -4120.85 -4509.04
Operating Profit 832.86 851.64 945.14 1036.27
Interest -0.75 -0.43 -0.37 -0.35
Gross profit 832.11 851.21 944.78 1035.92
Depreciation -36.26 -54.93 -64.82 -74.54
Profit Before Tax 795.85 796.28 879.96 961.38
Tax -267.38 -267.88 -294.79 -321.10
Net Profit 528.47 528.40 585.17 640.28
Equity capital 120.14 120.14 120.14 120.14
Reserves 1256.47 1577.89 1893.47 2234.29
Face value 1.00 1.00 1.00 1.00
EPS 4.40 4.40 4.87 5.33
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th Jun, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 1177.63 1169.32 1083.92 1132.70
Other income 24.74 9.67 6.80 8.98
Total Income 1202.37 1178.99 1090.72 1141.67
Expenditure -981.34 -966.36 -883.96 -932.21
Operating profit 221.03 212.63 206.76 209.46
Interest -0.11 -0.03 -0.27 -0.09
Gross profit 220.92 212.60 206.49 209.37
Depreciation -11.91 -12.25 -13.07 -14.64
Profit Before Tax 209.01 200.35 193.42 194.73
Tax -70.33 -68.77 -64.41 -65.62
Net Profit 138.68 131.58 129.01 129.11
Equity capital 120.14 120.14 120.14 120.14
Face value 1.00 1.00 1.00 1.00
EPS 1.15 1.10 1.07 1.07

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 4.40 4.40 4.87 5.33
EBITDA Margin (%) 20.64 18.87 18.86 18.89
PBT Margin (%) 19.72 17.64 17.56 17.52
PAT Margin (%) 13.10 11.71 11.68 11.67
P/E Ratio (x) 20.26 20.26 18.29 16.72
ROE (%) 38.39 31.12 29.06 27.19
ROCE (%) 60.62 51.79 48.95 46.23
Debt Equity Ratio 0.04 0.03 0.02 0.02
EV/EBITDA (x) 12.71 12.32 11.01 9.94
Book Value (Rs.) 11.46 14.13 16.76 19.60
P/BV 7.78 6.30 5.32 4.55
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs. 89.10, the stock P/E ratio is at 18.29 x FY16E and 16.72 x FY17E
respectively.
Earnings per share (EPS) of the company for the earnings for FY16E and FY17E are seen at Rs. 4.87 and Rs.
5.33 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 12% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 11.01 x for FY16E and 9.94 x for FY17E.
Price to Book Value of the stock is expected to be at 5.32 x and 4.55 x for FY16E and FY17E respectively.
We recommend ‘BUY’ in this particular scrip with a target price of Rs. 102.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased
investments in infrastructure and industrial production. The engineering sector, being closely associated with
the manufacturing and infrastructure sectors of the economy, is of strategic importance to India’s economy.
Growth in the sector is driven by various sub-sectors such as infrastructure, power, steel, automotives, oil and
gas, consumer durables etc.
India on its quest to become a global superpower has made significant strides towards the development of its
engineering sector. The Indian government has appointed the Engineering Export Promotion Council (EEPC) to

8. be the apex body in charge of promotion of engineering goods, products and services from India. India exports
transport equipment, capital goods, other machinery/equipment and light engineering products such as castings,
forgings and fasteners to various countries of the world.
Coupled with favourable regulatory policies and growth in the manufacturing sector, many foreign players have
started to invest in the country. India recently became a permanent member of the Washington Accord (WA) on
June 13, 2014. The country now joins an exclusive group of 17 countries who are permanent signatories of the
WA, an elite international agreement on engineering studies and mobility of engineers.
Driven by strong demand for engineering goods, exports from India registered a double digit growth at 10.22 per
cent to touch US$ 26.4 billion in June 2014 from US$ 24.02 billion in the corresponding month last year. This
growth can be credited to the robust expansion in shipments of aircraft, spacecraft parts and automobiles. The
second best performing sector was non-ferrous metals and metal products.
Outlook
The engineering sector is a growing market. Current spending on engineering services is projected to increase to
US$ 1.1 trillion by 2020. With development in associated sectors such as automotive, industrial goods and
infrastructure, coupled with a well-developed technical human resources pool, engineering exports are expected
to touch US$ 120 billion by 2015.
Also, the Union Budget 2014-15 has allocated funds for several infrastructure projects which are further
expected to provide a boost to the engineering sector. The industry can also look forward to deriving revenues
from newer services and from newer geographies with Big Data, Cloud, M2M and Internet of Things becoming a
reality.
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