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14 OCT 2014
Ramkrishna Forgings
NOT RATED
INDUSTRY
AUTOS
Rs 232
Target Price
NA
Nifty
7,884
Sensex
26,384
RMKF IN
27
6.4/104.3
Rs 267/56
3M
6M
12M
Absolute (%)
20.9
81.3
236.2
Relative (%)
15.5
64.7
207.7
48.01
15.93
FIIs
22.01
14.05
Source : BSE
Navin Matta
navin.matta@hdfcsec.com
+91-22-6171-7322
(Rs mn)
Net Sales
EBIDTA
APAT
EPS (Rs.)
P/E (x)
EV/EBITDA
RoE (%)
FY13
4,039
616
110
5.2
44.4
12.1
5.0%
FY14
4,295
576
85
3.2
71.6
19.0
2.9%
FY15E
6,484
1,064
302
11.0
21.1
12.7
8.8%
FY16E
10,916
1,993
688
24.0
9.7
7.1
17.2%
FY17E
13,831
2,616
1,060
37.0
6.3
5.3
22.1%
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
Company background
Revenue mix
Forging (tons)
60,000
100%
50,000
80%
40,000
60%
30,000
20,000
10,000
FY09
FY10
FY11
FY12
FY13
FY14
Auto
Railways
Mining
Exports
Others
100%
80%
60%
40%
40%
20%
20%
0%
0%
FY09
FY10
FY11
FY12
FY13
FY14
Page | 2
6300 tons
125,000
3150&
4500 tons
100,000
18k
40%
150k
20%
0%
50,000
25,000
60%
45k
17k
75,000
12500 tons
150,000
70k
-20%
-40%
FY14
July'14
Mar'15
Sept'15
FY16
FY10
FY11
FY12
FY13
FY14
Page | 3
Currency
INR
USD
USD
EUR
INR
Limits
(mn in LC)
1000
14
10
18.3
700
Amount
(Rs mn)
1,000
760
555
1,485
700
4,500
275
494
680
601
2,050
Comments
Cost of debt - 12%
Cost of debt - Libor + 400bps
Cost of debt - Libor + 300bps
Cost of debt - Libor + 125bps
Cost of debt - 12%
Equity shares @ Rs 128/share
Equity shares @ Rs 132.75/share
Equity shares/warrants conversion @ Rs 130/150 share
Page | 4
140,000
90%
120,000
80%
100,000
80,000
70%
60,000
60%
40,000
50%
20,000
-
40%
FY12
FY13
FY14
Financial analysis
FY12
FY13
694
540
532
79
(562)
163
773
(22)
696
(534)
239
928
FY17E
1,654
2,094
(602) (1,625)
(936)
327
29
1,158
(1,117)
(3,416) (2,501)
(150)
(250)
(1,139)
(2,720) (2,174)
(121)
908
Page | 5
OPM % - RHS
15,000
12,000
8,000
18%
6,000
16%
4,000
9,000
6,000
1.5
1.0
14%
3,000
-
12%
FY12
FY13
FY14
2,000
0.5
FY12
FY13
FY14
Inventory days
Debtor days
Creditor days
ROAE %
ROACE %
25%
165
20%
140
15%
115
10%
90
5%
65
40
FY12
FY13
FY14
FY15E
FY16E
FY17E
0%
FY12
FY13
FY14
FY15E
FY16E
FY17E
Page | 6
Key risks
EV/EBITDA (x)
Mean
+1 SD
-1 SD
14.0
12.0
10.0
8.0
6.0
4.0
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
COMPARATIVE VALUATIONS
Company
Mcap
(Rs mn)
2Yr EPS
CAGR
P/E
EV/EBITDA
ROE %
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
18.5%
19.2%
28.3
21.3
14.3
11.5
22%
24%
Bharat Forge
179,256
Amtek Auto*
39,985
42%
20.3%
20.5%
4.2
3.3
5.3
4.6
11%
12%
6,373
172%
16.4%
18.3%
21.1
9.7
12.7
7.1
9%
17%
Ramkrishna Forgings
30%
EBITDA margin
Page | 7
FY13
FY14
FY15E
FY16E
FY17E
Net Sales
4,039
4,295
6,484
10,916
13,831
SOURCES OF FUNDS
Growth (%)
-19%
6%
51%
68%
27%
Material Expenses
2,085
2,277
3,307
5,534
6,985
281
292
417
668
835
1,057
1,151
1,696
2,721
616
576
1,064
1,993
15.2%
13.4%
16.4%
18.3%
18.9%
Employee Expenses
Other Operating Expenses
EBIDTA
EBIDTA (%)
EBIDTA Growth (%)
Share Capital
261
275
287
287
3,385
4,075
4,949
2,541
3,232
3,659
4,362
5,236
3,395
1,583
3,893
5,643
5,643
5,243
2,616
1,015
1,148
1,648
2,048
2,048
Total Debt
2,598
5,041
7,291
7,691
7,291
318
309
357
491
696
5,458
8,582
11,308
12,544
13,223
2,422
2,337
7,950
7,590
7,522
998
4,249
750
750
500
134
233
242
251
261
1,492
1,571
2,185
3,678
4,661
803
1,150
1,741
2,931
3,714
Deferred Taxes
31%
Other Income
13
24
128
13
15
Depreciation
226
249
387
511
568
APPLICATION OF FUNDS
Interest
217
223
368
468
481
Net Block
PBT
186
128
437
1,027
1,582
CWIP
Goodwill
Tax
76
43
136
339
522
PAT
110
85
302
688
1,060
110
85
302
688
1,060
Inventories
-54.6%
-23.3%
257.0%
128.1%
54.0%
Debtors
5.2
3.2
11.0
24.0
37.0
-61%
-38.0%
239.2%
118.5%
FY17E
2,971
87%
FY16E
211
85%
EPS
FY15E
2,330
-6%
FY14
Reserves
-24%
APAT
FY13
54.0%
30
143
153
125
186
385
442
416
520
569
2,844
3,539
4,737
7,506
9,391
Creditors
535
1,022
1,510
2,542
3,221
271
521
619
759
969
806
1,543
2,129
3,301
4,189
2,038
1,996
2,607
4,204
5,201
5,458
8,582
11,308
12,544
13,223
Page | 8
FY14
FY15E
FY16E
FY17E
Reported PAT
110
85
302
688
1,060
(13)
(24)
(128)
(13)
(15)
97
61
174
675
1,045
217
223
368
468
481
226
249
387
511
568
(562)
163
(602)
(1,625)
(936)
FY13
FY14
FY15E
FY16E
FY17E
GPM
48.4%
47.0%
49.0%
49.3%
49.5%
EBITDA Margin
15.2%
13.4%
16.4%
18.3%
18.9%
APAT Margin
2.7%
2.0%
4.7%
6.3%
7.7%
RoE
5.0%
2.9%
8.8%
17.2%
22.1%
4.3%
2.6%
4.2%
8.0%
10.5%
5.1%
3.3%
5.6%
8.4%
10.7%
40.7%
33.9%
31.0%
33.0%
33.0%
PROFITABILITY (%)
(22)
696
327
29
1,158
RoCE
Capex
(1,117)
(3,416)
(2,501)
(150)
(250)
EFFICIENCY
(1,139)
(2,720)
(2,174)
(121)
908
Investments
INVESTING CASH FLOW ( b )
Debt Issuance
Interest expenses
Share capital Issuance
Dividend
(59)
(8)
0.7
0.5
0.6
0.9
1.0
(1,176)
(3,424)
(2,501)
(150)
(250)
Inventory (days)
135
134
123
123
123
817
2,443
2,250
400
(400)
Debtors (days)
73
98
98
98
98
(217)
(223)
(368)
(468)
(481)
Payables (days)
48
87
85
85
85
377
661
178
180
159
144
136
136
136
4.2x
8.8x
6.9x
3.9x
2.8x
1.0
1.5
1.9
1.7
1.3
1.9x
1.6x
2.2x
3.2x
4.3x
EPS (Rs/sh)
5.2
3.2
11.0
24.0
37.0
CEPS (Rs/sh)
15.9
12.8
25.1
41.8
56.8
DPS (Rs/sh)
1.2
1.0
1.6
3.6
5.5
BV (Rs/sh)
120
124
133
152
183
44.4
71.6
21.1
9.7
6.3
(29)
(31)
(53)
(121)
(186)
Debt/EBITDA (x)
1,211
2,817
2,056
80
(862)
Net D/E
14
89
(118)
(41)
46
Interest Coverage
13
24
128
13
15
30
143
153
125
186
VALUATION
P/E
P/BV
EV/EBITDA
1.9
1.9
1.7
1.5
1.3
12.1
19.0
12.7
7.1
5.3
OCF/EV (%)
(0.3)
6.4
2.4
0.2
8.4
FCF/EV (%)
(15.3)
(24.8)
(16.1)
(0.8)
6.6
0.5%
0.4%
0.7%
1.6%
2.4%
Page | 9
Rating Definitions
BUY
Where the stock is expected to deliver more than 10% returns over the next 12 month period
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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Page | 10