Gandhimathi Appliances Limited

Result Update: Q1 FY 13

BUY
Stock Data

CMP Target Price

325.00 373.00
Aug 22nd, 2012
ISIN: INE295F01017

SYNOPSIS
Butterfly Gandhimathi Appliances Ltd is Limited is a four decades old company engaged in manufacture of home appliances, kitchen products and cookware of the best quality. Butterfly is a pioneer and trusted name in premium stainless steel home appliances not only in India but also in the United Kingdom, Canada, Australia, Japan, Middle East and East Asian countries Gross Sales for the quarter includes sales to Tamilnadu Civil Supplies Corporation Rs. 355.1 million & Corresponding figures for quarter march12 is Rs.1497.4 millions. The highest export performance of the Company at Rs.703.68 lakhs was achieved during the financial year ended on 31-032012. During the quarter, the robust growth of Net Profit is increased by 42.51% to Rs. 47.67 million. Net Sales and PAT of the company are expected to grow at a CAGR of 59% and 45% over 2011 to 2014E respectively.

Sector Home Appliances BSE Code 517421 Face Value / Div. Per Share 10.00 52wk. High / Low (Rs.) 420.00 / 240.00 Volume (2wk. Avg ) 13286 Market Cap ( Rs in mn ) 5019.95 Annual Estimated Results (A*: Actual / E*: Estimated)

Years
Net Sales EBITDA Net Profit EPS

FY12A
5947.20 634.59 304.09 19.69

FY13E
7731.36 809.55 374.81 24.27 13.39

FY14E
8891.06 975.37 465.96 30.17 10.77

P/E 16.51 Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX

Gandhimathi Appliances Ltd

Source: Company Data, Firstcall Research

Peer Groups Company Name Gandhimathi Appliances Ltd TTK Prestige Ltd Bajaj Electricals Ltd Panasonic Home Appliance India Co Ltd

CMP (Rs.) 325.00 3441.00 179.00 84.00

Market Cap Rs. in mn. 50199.50 39064.00 17850.90 801.60

EPS (Rs.) 19.69 104.85 11.92 0.00

P/E (x) Ratio 16.51 32.91 15.03 0.00

P/BV(x) Ratio 6.36 13.81 2.58 10.32

Dividend (%) 20.00 150.00 140.00 10.00

Investment Highlights Results updates- Q1 FY13, Butterfly Gandhimathi Appliances Ltd is a pioneer in premium stainless steel home appliances in India, reported its financial results for the quarter ended 30 June, 2012. The first quarter witness a healthy increase in overall sales as well as profitability on account, enhanced Showrooms, Service centers Distributor network and robust infrastructural Support system.
Months Net Sales PAT EPS EBITDA JUNE-12 JUNE-11 % Change

1101.26 47.67 2.67 121.70

690.24 33.45 3.47 75.71

59.55 42.51 (23.20) 60.74

The companys net profit jumps to Rs. 47.67 million as against Rs. 33.45 million in the corresponding quarter ending of previous year, an increase of 42.51%. Revenue for the quarter rose 59.55% to Rs.1101.26 million from Rs.690.24 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.2.67 a share during the quarter, registering 23.20% decline over previous year period. Profit before interest, depreciation and tax is Rs.121.70 millions as against Rs.75.71millions in the corresponding period of the previous year.

Expenditure :

During the quarter the persistent inflationary trend in the country could have some effect in the disposable income of the individuals which, in turn, can affect the Companys turnover/margins. Total expenditure in Q1 FY13 was at 986.63 million as against Rs.620.99 million in Q1 FY 12. FY12. Other Expenditure were at Rs. 176.33 million compare 124.39 in Q1 FY12 and The appreciation of dollar against rupee from September 2011 onwards resulted in increase of input cost of imported

production requirements to meet supplies against the Tamilnadu Civil Supplies Corporation (TNCSC) orders, additional production units and labor force had to be added, resulting in steep increase in rental charges, salaries, wages and other benefits to the employees during the quarter

materials/products Consumption of Raw Materials are Rs. 708.47 million in Q1 FY13 are the primarily attributable to growth of expenditure. The mass

Latest Updates The special Resolution passed at the Extraordinary General Meeting during June quarter i.e. 24,51,000 Equity Shares of Rs 10/- each full paid up have been issued on preferential basis at a premium of Rs 398/- per share and the expenses relating to this issue have been Written- Off to securities premium account. The Company won National Award-2010, First Prize, awarded by Government of India, Ministry of Micro, Small and Medium Enterprises for its LPG Operated Stoves/Appliances. Also, appreciating our Companys performance and growth during the financial year 2011-12, M/s. Indian Oil Corporation Limited (IOCL) has presented a memento for having stood first on All India basis in turnover, with respect to LPG Stoves supplied through the LPG gas Distributors of IOCL.

Company Profile
Butterfly Gandhimathi Appliances Limited is a four decades old company and Butterfly is a pioneer in premium stainless steel home appliances and markets its product with the Brand name Butterfly. Butterfly was the first in India to introduce stainless steel Pressure Cookers and Vacuum Flasks. Gandhimathi Appliances Limited' started business in the year 1986 mainly as a trading concern and the company was initially promoted by Sri V.M. Lakshminarayan and Sri. V.M Kumareason. Subsequently Sri Murugesa Chettiar and his other two sons namely Sri V.M. Seshadri and Sri V.M. Balasubramaniam also joined the company as promoters with equity stake. The Company was originally incorporated as a Private Limited Company on 24th February 1986 and was converted into a Public Limited Company on 25th April, 1990. The name of the Company has been changed from `Gandhimathi Appliances Limited' to `Butterfly Gandhimathi Appliances Limited' with effect form 25th October, 2011.

The operation of the Company relates to only one segment, domestic appliances. Butterfly was the first in India to introduce stainless steel Pressure Cookers and Vacuum Flask and among the first to acquire ISO 9002 certification in the LPG Stove and Mixie divisions. The commercial production of LPG stoves and Geysers started in October 1987. This was followed by commercial production of Mixer/ Grinders from October 1989. Presently the Company is engaged in manufacture of a comprehensive range of home appliances, kitchen products and cookware of the best quality, the highest functionality and the latest styling.

Butterfly is a trusted name not only in India but also in the United Kingdom, Canada, Australia, Japan, Middle East and East Asian countries.

Products

The operation of the Company relates to only one segment, viz., domestic appliances. Kitchen Appliances Desire Glass Top LPG Stoves SS LPG Stoves Mixer Grinders Table-top Wet Grinders Microwave Ovens Electric Rice Cookers Home Appliances Air Coolers Electric Fans Kitchen Products Pressure Cookers Non Stick Cookware SS Cookware & Tableware Vacuum Flasks Eco Water Bottles Kitchen Sinks Water Heaters Emergency Lanterns Power Hobs Electric Kettles Sandwich Makers Toasters Yogurt Makers Chapati Makers

Financial Highlight
Balance sheet as at March31, 2011 (A*- Actual, E* -Estimations & Rs. In Millions) FY-11A FY-12E FY-13E
Rs. In Millions

SOURCES OF FUNDS 1.Shareholder's Funds a) Capital b) Reserves and Surplus Total Net worth 96.35 317.14 413.49 154.46 635.28 789.74 154.46 1010.09 1164.55

2.Loan Funds
a) Secured Loans b) Unsecured Loans Total Liabilities (1 + 2) APPLICATION OF FUNDS 1.Fixed Asset a) Gross block b) Less: Depreciation c) Net Block d) Capital Work in Progress Total Fixed Assets 2.Investments 3.Current Assets, Loans and Advances a) Inventories b) Sundry Debtor c) Cash and Bank Balances e) Loans and Advances Total Current Assets Less: Current Liabilities and Provisions a) Liabilities and Provisions Net Current Assets Miscellaneous Expenditure a) Deferred Tax Asset Total Assets (1 + 2 + 3) 63.16 1181.34 64.42 1733.74 65.71 2321.39 492.70 815.67 729.20 1168.60 1013.58 1505.05 470.02 420.48 90.40 327.47 1308.37 775.53 592.88 178.99 350.39 1897.79 1124.52 800.38 215.30 378.42 2518.63 427.66 134.53 293.13 9.38 302.51 0.00 634.35 143.95 490.40 10.32 500.72 0.00 894.43 155.46 738.97 11.66 750.63 0.00 502.50 265.35 1181.34 673.35 270.66 1733.75 875.36 281.48 2321.39

Annual Profit & Loss Statement for the period of 2011 to 2014E. Value(Rs.in.mn) Description Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Extraordinary Items Net Profit Equity capital Reserves Face value EPS FY11 12m 2231.76 2.52 2234.28 -2008.21 226.07 -52.62 173.45 -9.55 163.90 -11.98 151.92 -11.24 140.68 96.35 317.15 10.00 14.60 FY12 12m 5947.20 11.39 5958.59 -5324.00 634.59 -175.49 459.10 -16.70 442.40 -138.31 304.09 0.00 304.09 154.46 635.28 10.00 19.69 FY13E 12m 7731.36 17.09 7748.45 -6938.90 809.55 -193.04 616.51 -19.21 597.31 -222.50 374.81 0.00 374.81 154.46 1010.09 10.00 24.27 FY14E 12m 8891.06 21.36 8912.42 -7937.05 975.37 -202.69 772.68 -21.13 751.55 -285.59 465.96 0.00 465.96 154.46 1476.05 10.00 30.17

Quarterly Profit & Loss Statement for the period of 31 Dec, 2011 to 30 Sep, 12E Value(Rs.in.mn) Description Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Equity capital Face value EPS 31-Dec-11 3m 2275.05 2.37 2277.42 -2003.81 273.61 -48.99 224.62 -8.61 216.01 -100.69 115.32 154.29 10.00 7.47 31-Mar-12 3m 2190.11 7.64 2197.75 -2076.62 121.13 -34.27 86.86 1.26 88.12 -35.43 52.69 154.46 10.00 3.41 31-Jun-12 3m 1101.26 7.07 1108.33 -986.63 121.70 -41.64 80.06 -9.50 70.56 -22.89 47.67 178.80 10.00 2.67 31-Sep-12E 3m 1541.76 12.58 1554.35 -1394.68 159.67 -56.21 103.45 -11.40 92.05 -27.98 64.07 178.80 10.00 3.58

Ratio Analysis Particulars EPS (Rs.) EBITDA Margin (%) PBT Margin (%) PAT Margin (%) P/E Ratio (x) ROE (%) ROCE (%) Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV FY11 14.60 10.13% 7.34% 6.81% 22.26 36.74% 20.77% 1.74 13.85 42.92 7.57 FY12 19.69 10.67% 7.44% 5.11% 16.51 38.51% 35.15% 1.35 7.91 51.13 6.36 FY13E 24.27 10.47% 7.73% 4.85% 13.39 32.18% 36.33% 0.96 6.20 75.39 4.31 FY14E 30.17 10.97% 8.45% 5.24% 10.77 28.58% 35.55% 0.72 5.15 105.56 3.08

Charts

Outlook and Conclusion The Companys turnover has increased substantially in the last two years. Efforts are being made to sustain the achieved rate of growth in the coming years by enlarging the consumer base and penetrating to the western and northern Indian markets. However, the general economic scenario in the country looks pessimistic due to uncertainties over the purchasing power of the consumer on account of galloping inflation. At the current market price of Rs.325.00, the stock P/E ratio is at 13.39 x FY13E and 10.77 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.24.27 and Rs.30.17 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 59% and 45% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 6.20 x for FY13E and 5.15 x for FY14E. Price to Book Value of the stock is expected to be at 4.31 x and 3.08 x respectively for FY13E and FY14E. The companys taking into account the steps taken by the Company for establishing PAN INDIA market for its products and in anticipation of repeat orders from the Government of Tamil Nadu for supply of Mixer Grinders and Table Top Wet Grinders, your Company expects to sustain its growth rate.

Better business control and ensure financial discipline, the Company has started implementation of the SAP system, which is expected to come in full swing during financial year2013-14. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.373.00 for Medium to Long term investment. Industry Overview The term appliances can imply many different pieces of equipment. The most recognizable are items like refrigerators, freezers, cooking ranges, and clothes washers and dryers. Other items like coffee makers, microwaves, and air purifiers are also home appliances. Kitchen appliances are the most commonly recognized appliances. Food processors, bread makers, juicers, and other such items are also considered appliances for the kitchen. All of these items are designed to make daily kitchen duties much easier and convenient.

Many home appliances are found outside of the kitchen. The washer and dryer are probably the two most common non-kitchen oriented appliances. Other items include air purifiers, dehumidifiers, air conditioners, and space heaters. Small appliances are becoming increasingly popular in the modern home. Many of these items didnt exist 20 years ago. Electric shavers and toothbrushes are among the most popular small home appliances. Manufacturing home appliances has become a big industry over the past few decades. The variety of appliances, and the multitude of designs for each item, has grown much more numerous. The technology that is used in the operation of this equipment has dramatically advanced in recent years. The General Electric (GE) appliance line covers nearly every home appliance need. This company has existed for decades and is one of the industry leaders in appliance manufacturing. Many of their products are considered some of the most advanced and efficient on the market. In todays world, energy efficient appliances are an important way to help conserve our natural resources. An ecologically friendly appliance can have a significant impact on annual energy costs. These items sometimes cost a little more at the point of purchase, but the long term energy savings easily makes up for the difference in price. The refrigerator is often the centerpiece of a kitchens design. However, these items are usually the largest consumer of electricity in the house. It is therefore recommended that one purchase the most energy efficient model that one can afford. Dishwashers are as common as refrigerators and cooking ranges in todays kitchens. Modern versions are much more efficient in their water usage and in their energy consumption than they have been in the past. They can also be found in designs to match nearly any kitchen dcor. Appliances are omnipresent in the average American home. Many common appliances like refrigerators, freezers, stoves, cooking ranges, and dishwashers have been seen in homes for decades. As technology has advanced, so have the capabilities and efficiency of these appliances. Most of todays appliances are designed to be much more efficient and ecologically friendly. Modern washers use much less water than those of the past. Todays refrigerators also use much less electricity than earlier models. Appliances like air conditioners and space heaters are becoming more common in todays homes. These items can help make a home much more comfortable during inclement weather. Small items like these are often the least expensive appliances as well.

Kitchen appliances make up the vast majority of household appliances. Refrigerators, cooking ranges, and microwaves are found in nearly every home. Smaller items like coffee makers, food processors, and blenders are also quite common. The refrigerator is generally the most used kitchen appliance in the average home. Energy efficiency is an important aspect of a refrigerator, as they are always running and are therefore responsible for the bulk of a kitchens energy consumption. Modern refrigerators use considerably less energy than those of just a decade ago. Cooking ranges and microwave ovens are also common kitchen appliances. Cooking ranges come in both electric and natural gas varieties. Electric ranges today use much less electricity than those of the past. CRISIL Research expects household appliance industry to register a growth of 17 per cent CAGR to reach Rs.736 billion in 2015-16.Rising household incomes and low penetration levels will drive the industry volume growth.

Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods A.Nagaraju Cement, Reality & Infra, Oil & Gas Ashish.Kushwaha IT, Consumer Durable & Banking K. Jagadhishwari Devi Diversified Abdul Khabeer Diversified Anil Kumar Diversified A.Ravi Diversified Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com