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NESCO LIMITED

Result Update (PARENT BASIS): Q2 FY15

BUY

CMP

1703.00

Target Price

1840.00

JANUARY 7th, 2014


ISIN: INE317F01027

SYNOPSIS

Stock Data
Sector
BSE Code
Face Value
52wk. High / Low (Rs.)
Volume (2wk. Avg )
Market Cap ( Rs in mn )

Misc.Commercial Services
505355
10.00
1844.00/742.05
9900
23998.68

NESCO Ltd provides forging hammers and


presses, blow room lines & high production
cards for the textile industry; and sucker rod
pumps for on-shore oil recovery.

During Q2 FY15, net profit jumps to Rs. 265.61


mn against Rs. 190.30 mn in Q2 FY14, an
increase of 39.57%.

Revenue for the quarter rose by 19.41% to Rs.


466.40 mn from Rs. 390.58 mn, when
compared with the prior year period.

EBIDTA is Rs. 399.42 mn as against Rs. 313.25


mn in the corresponding period of the
previous year, grew by 27.51%.

PBT for the quarter was up by 32.36% to Rs.


377.61 mn from Rs. 285.30 mn during the
corresponding period of the previous year.

EPS of the company stood at Rs.18.85 a share


during the quarter, registering 39.57%
increased over previous year period.

Bombay Exhibition Centre and IT Park,


revenue for the quarter was Rs. 438.88 mn
compared to Rs. 348.94 mn in Q2 FY14,
registered a growth of 26%.

Net Sales and PAT of the company are


expected to grow at a CAGR of 12% and 10%
over 2013 to 2016E respectively.

Annual Estimated Results (A*: Actual / E*: Estimated)

Years

FY14A

Net Sales
EBITDA
Net Profit
EPS
P/E

1611.08
1280.31
810.25
57.50
29.62

FY15E
1836.63
1526.88
1003.00
71.17
23.93

FY16E
2038.66
1642.92
1079.91
76.63
22.22

Shareholding Pattern (%)

1 Year Comparative Graph

NESCO LTD

PEER GROUPS
Company Name
NESCO Ltd
Delta Corp Ltd
Nirlon Ltd
Centum Electronics Ltd

S&P BSE SENSEX

CMP
(Rs.)
1703.00
92.40
194.30
680.45

MARKET CAP
Rs. in mn.
23998.68
21311.10
17509.90
8523.30

EPS
(Rs.)
57.50
2.53
4.91
23.06

P/E (X)
Ratio
29.62
36.52
39.57
29.51

P/BV(X)
Ratio
5.55
2.61
1.00
8.17

DIVIDEND
(%)
50.00
25.00
7.50
25.00

Quarterly Highlights (PARENT BASIS)


Results updates- Q2 FY15,
Established in 1939 April as the New Standard

Months

Sep-14

Sep-13

% Change

Net Sales

466.40

390.58

19.41

brought into the country, world class processes and

PAT

265.61

190.30

39.57

designs for the manufacture of a number of

EPS

18.85

13.50

39.57

engineering products, reported its financial results

EBITDA

399.42

313.25

27.51

Engineering Co. Ltd. (NSE), the company is known as


a pioneer in the tool manufacturing segment, as it

for the quarter ended

30th

Sep, 2014.

The companys net profit jumps to Rs. 265.61 million against Rs. 190.30 million in the corresponding quarter
ending of previous year, an increase of 39.57%. Revenue for the quarter rose by 19.41% to Rs. 466.40 million
from Rs. 390.58 million, when compared with the prior year period. Reported earnings per share of the company
stood at Rs.18.85 a share during the quarter, registering 39.57% increased over previous year period. Profit
before interest, depreciation and tax is Rs. 399.42 million as against Rs. 313.25 million in the corresponding
period of the previous year.

Expenditure

Break up of
Expenditure (Rs. in mn)

Q2 FY15

Q2 FY14

%
Change

Cost of Material
Consumed

13.74

17.37

-21%

Employee Benefit
Expenses

19.01

15.90

20%

Depreciation &
Amortization Expense

21.06

27.46

-23%

Other Expenditure

82.49

69.72

18%

Segment Revenue

Company Profile
Established in 1939 April as the New Standard Engineering Co. Ltd. (NSE), the company is known as a pioneer in
the tool manufacturing segment, as it brought into the country, world class processes and designs for the
manufacture of a number of engineering products. Equipment such as forging hammers and presses, blow room
lines and high production cards for the textile industry; and sucker rod pumps for on-shore oil recovery were
some of the main product lines that emerged as market leaders.
In order to reflect on the various new avenues that the company was entering into, the promoters of the New
Standard Engineering Company, decided to change the name to Nesco Limited. The Engineering Group of Nesco
continues to be a leading provider of this equipment to the Indian Railways, numerous Ordnance Factories, and
Forging Plants.
Business Areas

Bombay Convention & Exhibition Centre


Bombay Convention & Exhibition Centre (BCEC) is the largest and permanent exhibition centre, in the private
sector, in India and was set up in 1991. BEC has hosted several prestigious International trade
fairs/exhibitions ever since.

Nesco IT Park & Realty


The IT 3 Building is LEED Platinum rated by Indian Green Building Council, which is the highest standard for
sustainable development.
The Company has successfully launched its 330 seater Nesco Incubation Centre. This state of the art facility is
a unique feature for Nesco IT Park. The Company has also taken steps to set up a day care centre within the
campus for IT Park and has tied up with a leading national brand for this purpose. Company is now actively
pursuing to secure required approvals for starting construction of IT building 4 (built-up area approx.
14,00,000 sq ft) which has been designed by a leading American architects firm.

Indabrator
Indabrator is leading manufacturer, supplier and exporter of surface preparation equipments, providing
services to various Indian industries; mainly Foundries, Forging plants, Automotive industries, Indian
railways, Defense organizations, Heavy engineering industries, Ship building industries, Chemical and
petrochemical industries etc.

Financial Highlight PARENT BASIS

(A*- Actual, E* -Estimations & Rs. In Millions)

Balance sheet as at March 31, 2013A-2016E


FY13A

FY14A

FY15E

FY16E

Share Capital

140.92

140.92

140.92

140.92

Reserves and Surplus

3519.27

4246.85

5185.84

6119.29

1) Net worth

3660.19

4387.77

5326.76

6260.21

Deferred Tax Liabilities [Net]

22.35

21.08

21.92

22.80

Other Long Term Liabilities

232.63

608.28

705.60

790.28

Long Term Provisions

139.70

135.78

142.57

146.85

394.68

765.14

870.10

959.92

Trade Payables

77.49

74.46

58.08

60.40

Other Current Liabilities

279.79

289.96

324.76

350.74

Short Term Provisions

59.06

87.84

38.65

42.51

416.34

452.26

421.48

453.65

4471.21

5605.17

6618.34

7673.78

1584.16

1598.13

1678.04

1778.72

Capital work-in-progress

40.31

47.51

55.59

62.81

a) Sub Total Fixed Assets

1624.47

1645.64

1733.62

1841.53

b) Non Current Investments

0.33

0.33

0.37

0.41

c) Long Term Loans and Advances

13.29

23.18

25.50

27.54

1638.09

1669.15

1759.49

1869.48

2584.02

3683.95

4512.21

5382.17

Inventories

48.39

44.01

69.98

89.57

Trade Receivables

96.56

111.81

100.63

112.70

Cash and Bank Balances

21.36

43.51

57.87

70.02

Short Term Loans and Advances

80.14

47.91

105.40

134.91

Other Current Assets

2.65

4.83

12.76

14.93

2833.12

3936.02

4858.84

5804.30

4471.21

5605.17

6618.34

7673.78

EQUITY AND LIABILITIES:


Shareholders Funds:

Non-Current Liabilities:

2) Long term liabilities


Current Liabilities:

3) Current Liabilities
Total Liabilities (1+2+3)
ASSETS:
Non-Current Assets:
Fixed Assets
Tangible Assets

4) Non-Current Assets
Current Assets:
Current Investments

5) Current Assets
Total Assets (4+5)

Annual Profit & Loss Statement for the period of 2013 to 2016E
Value(Rs.in.mn)

FY13A

FY14A

FY15E

FY16E

Description
Net Sales

12m
1434.61

12m
1611.08

12m
1836.63

12m
2038.66

Other Income

192.83

203.14

217.36

226.05

Total Income

1627.44

1814.22

2053.99

2264.71

Expenditure

-425.25

-533.91

-527.11

-621.79

Operating Profit

1202.19

1280.31

1526.88

1642.92

-7.17

-1.07

-1.71

-1.40

Gross profit

1195.02

1279.24

1525.17

1641.52

Depreciation

-58.28

-110.26

-88.21

-98.79

Profit Before Tax

1136.74

1168.98

1436.96

1542.73

Tax

-319.88

-358.73

-433.96

-462.82

Net Profit

816.86

810.25

1003.00

1079.91

Equity capital

140.92

140.92

140.92

140.92

Reserves

3455.03

4182.84

5185.84

6119.29

Face value

10.00

10.00

10.00

10.00

EPS

57.97

57.50

71.17

76.63

Interest

Quarterly Profit & Loss Statement for the period of 31st Mar, 2014 to 31st Dec, 2014E
Value(Rs.in.mn)

31-Mar-14

30-Jun-14

30-Sep-14

31-Dec-14E

Description

3m

3m

3m

3m

Net sales

516.27

373.59

466.40

527.03

Other Income

80.34

72.74

45.67

48.41

Total Income

596.61

446.33

512.07

575.44

Expenditure

-202.46

-85.16

-112.65

-151.26

Operating profit

394.15

361.17

399.42

424.18

-0.15

-0.07

-0.75

-0.65

Gross profit

394.00

361.10

398.67

423.54

Depreciation

-28.98

-15.54

-21.06

-22.11

Profit Before Tax

365.02

345.56

377.61

401.43

Tax

-119.73

-95.50

-112.00

-122.84

Net Profit

245.29

250.06

265.61

278.59

Equity capital

140.92

140.92

140.92

140.92

Face value

10.00

10.00

10.00

10.00

EPS

17.41

17.74

18.85

19.77

Interest

Ratio Analysis
Particulars

FY13A

FY14A

FY15E

FY16E

57.97

57.50

71.17

76.63

EBITDA Margin (%)

83.80%

79.47%

83.13%

80.59%

PBT Margin (%)

79.24%

72.56%

78.24%

75.67%

PAT Margin (%)

56.94%

50.29%

54.61%

52.97%

29.38

29.62

23.93

22.22

ROE (%)

22.72%

18.74%

18.83%

17.25%

ROCE (%)

35.05%

32.16%

30.32%

27.82%

EV/EBITDA (x)

17.80

15.83

12.72

11.29

Book Value (Rs.)

255.18

306.82

378.00

444.24

6.67

5.55

4.51

3.83

EPS (Rs.)

P/E Ratio (x)

P/BV
Charts

Outlook and Conclusion




At the current market price of Rs.1703.00, the stock P/E ratio is at 23.93 x FY15E and 22.22 x FY16E
respectively.

Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.71.17 and
Rs.76.63 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 10% over 2013 to 2016E
respectively.

On the basis of EV/EBITDA, the stock trades at 12.72 x for FY15E and 11.29 x for FY16E.

Price to Book Value of the stock is expected to be at 4.51 x and 3.83 x respectively for FY15E and FY16E.

We recommend BUY in this particular scrip with a target price of Rs.1840.00 for Medium to Long term
investment.

Disclaimer:
This document is prepared by our research analysts and it 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 we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research 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. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients investment decision based on this document.

Firstcall India Equity Research: Email info@firstobjectindia.com

C.V.S.L.Kameswari
U. Janaki Rao
B. Anil Kumar
M. Vinayak Rao
C. Bhagya Lakshmi
G. Amarender

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