3QFY2019 Result Update | Industrial Machinery
January 31, 2019
GMM Pfaudler Limited
Accumulate
CMP
`1098
Performance Update
Target Price
`1200
Standalone (` cr)
Q3FY19
Q3FY18
% yoy
Q2FY19
% qoq
Investment Period
12 Months
Net sales
105.6
79.2
33%
99.2
6%
EBITDA
Stock Info
16.7
12.3
35%
16.0
5%
EBITDA margin (%)
15.8%
15.5%
16.1%
Sector
Industrial Machinery
Adjusted PAT
10.9
7.4
48%
9.7
7%
Market Cap (` cr)
1,608
For Q3FY2019, GMM Pfaudler (GMM) posted a yoy growth of 33%/48% in
Beta
0.8
52 Week High / Low
1200/663
revenue/ PAT amid ~25 bps margin expansion. The company is seeing good
Avg. Daily Volume
3,343
traction from its user industries like agrochemicals and pharmaceuticals which are
Face Value (`)
2
seeing robust capex owing to slowdown in China.
BSE Sensex
36,257
Healthy order book: Q3’s top-line growth was led by robust execution in Glass
Nifty
10,830
line equipment segment. While pharma sector share has come down from
Reuters Code
GMMP.BO
Bloomberg Code
GMM.IN
historical 50% to 40%, the company is seeing good orders from the new Pharma
City that is being set up in Hyderabad which has further boosted the company’s
Shareholding Pattern (%)
order book. Specialty chemicals and agro chemicals forms
~60% of
Promoters
75.0
M9FY2019’s revenue.
MF / Banks / Indian Fls
1.0
FII / NRIs / OCBs
0.3
Margins were decent: Operating margin were robust at 15.8% due to better
Indian Public / Others
23.7
product mix and cost optimization. GMM is likely to sustain operating margin at
~16-17% level. Its subsidiary is also doing well and likely to maintain robust
revenue run rate and margins for the year.
Outlook and Valuation: We have maintained earnings estimates for robust
Nidhi Agrawal
growth outlook from the user industries. We are expecting a CAGR of ~21%/28%
022-39357800 Ext: 6872
in revenue/ earnings over FY18-20E. The stock has given 54% return since our
[email protected]
initiation in April and is currently trading at 23x its FY2020 earnings which still
looks attractive given its robust earnings growth trajectory. Hence, we recommend
Accumulate with a target price of `1200 (25x FY2020E EPS).
Key Financials
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
Net Sales
292.1
353.0
405.7
502.8
591.6
% chg
-5.1
20.9
14.9
23.9
17.7
Net Profit
19.9
33.3
42.7
58.7
69.0
% chg
6.4
67.0
28.3
37.6
17.5
EBITDA (%)
12.0
13.5
15.3
17.1
17.1
EPS (Rs)*
13.6
22.8
29.2
40.2
47.3
P/E (x)
80.5
48.2
37.6
27.3
23.2
P/BV (x)
9.6
8.2
6.9
5.7
4.7
RoE (%)
11.9
17.1
18.5
21.0
20.4
RoCE (%)
16.1
20.3
22.7
26.9
26.2
EV/EBITDA
44.0
32.0
24.3
17.3
14.3
EV/Sales
5.3
4.3
3.7
3.0
2.5
Source: Company, Angel Research, closing price at the end of 31st January 2019
Please refer to important disclosures at the end of this report
1
GMM Pfaudler |3QFY2019 Result Update
Exhibit 1: Q3 results at a glance
Standalone results - ` cr
Q3FY18
Q2FY19
Q3FY19
YoY %
QoQ % M9FY19 M9FY18
YoY %
Net Sales
79.2
99.2
105.6
33.3%
6.4%
298.0
224.5
32.7%
Raw Material Consumed
37.9
49.7
59.8
57.8%
4.2%
157.3
107.6
46.2%
Stock Adjustment
-6.0
-1.6
-8.6
43.1%
-166.4%
-7.8
-13.5
-41.9%
Employee Expenses
8.7
10.5
10.1
16.5%
6.3%
30.5
26.9
13.3%
Other Expenses
26.4
24.5
27.7
4.8%
36.2%
70.1
71.7
-2.2%
Total Expenditure
66.9
83.2
88.9
32.8%
6.7%
250.1
192.7
29.7%
EBITDA
12.3
16.0
16.7
35.4%
4.8%
47.9
31.8
50.8%
Other Income
0.9
1.9
2.1
140.8%
42.1%
5.3
5.0
5.7%
Interest
0.2
0.3
0.3
53.3%
100.0%
0.8
0.8
4.8%
Depreciation
2.1
2.6
2.8
32.9%
3.4%
7.9
6.1
30.7%
PBT
10.9
14.9
15.7
43.8%
7.4%
44.4
29.9
48.5%
Tax
3.5
5.2
5.3
50.5%
8.7%
15.3
10.0
53.1%
Reported PAT
7.4
9.7
10.9
47.7%
6.7%
29.7
20.0
48.8%
Ratios
EBITDA margin %
15.5%
16.1%
15.8%
16.1%
14.2%
PAT margin %
9.3%
9.8%
10.3%
10.0%
8.9%
Tax rate %
32.4%
34.8%
33.9%
34.4%
33.3%
Exhibit 2: Segmental performance
` cr
Q3FY18
Q2FY19
Q3FY19
YoY %
QoQ %
M9FY19
M9FY18
YoY %
Revenue from Operations
79.2
99.2
106.6
34.5%
6.4%
299.0
229.8
30.1%
Glass Lined Equipments
48.1
67.1
76.7
59.5%
1.7%
209.7
154.6
35.7%
Heavy Engineering
8.5
13.7
9.9
15.5%
31.4%
33.9
27.2
24.9%
Proprietary Products
22.6
18.4
20.0
-11.5%
9.3%
55.3
48.0
15.1%
Non GL segment
31.1
32.1
29.9
-4.1%
17.7%
89.2
75.2
18.7%
As a % of revenue
Glass Lined Equipments
61%
68%
72%
70%
67%
Heavy Engineering
11%
14%
9%
11%
12%
Proprietary Products
29%
19%
19%
18%
21%
Non GL segment
39%
32%
28%
30%
33%
PBIT
12.4
16.6
17.6
26.2%
-0.2%
50.7
34.9
45.1%
Glass Lined Equipments
9.5
12.0
13.9
3.8%
-8.3%
39.1
29.2
33.8%
Heavy Engineering
0.8
2.3
1.4
154.6%
0.9%
6.0
2.5
137.4%
Proprietary Products
2.0
2.2
2.3
261.3%
89.3%
5.6
3.2
75.9%
Non-GL segment
2.8
4.5
3.6
197.4%
30.6%
11.6
5.7
103.0%
PBIT margin %
15.6%
16.7%
16.5%
17.0%
15.2%
Glass-Lined segment
19.8%
17.9%
18.2%
18.6%
18.9%
Heavy Engineering
9.7%
16.9%
13.7%
17.6%
9.3%
Proprietary Products
8.8%
12.0%
11.3%
10.2%
6.6%
Non-GL segment
9.1%
14.1%
12.1%
13.0%
7.6%
Source: Company
January 31, 2019
2
GMM Pfaudler |3QFY2019 Result Update
Risks to our estimates
GMM’s primary raw material is steel; any abrupt fluctuation in pricing will
adversely impact its profitability.
Business may get impacted owing to the inability to get break through with
new clients or slowdown in capex by its clients.
GMM has market exposure to foreign exchange rates mainly on account
of exports, imports and investments in foreign subsidiary, and therefore, it
is subjected to the exchange fluctuation risk.
January 31, 2019
3
GMM Pfaudler |3QFY2019 Result Update
Profit & Loss Statement
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E
FY2020E
Total operating income
292.1
353.0
405.7
502.8
591.6
% chg
-5.1
20.9
14.9
23.9
17.7
Total Expenditure
257.1
305.3
336.7
416.6
490.2
COGS
173.4
209.6
240.9
298.5
351.3
Selling and Administration Expenses
19.2
22.1
23.7
29.3
34.5
Personnel
56.2
66.1
63.5
78.7
92.6
Others Expenses
8.4
7.6
8.7
10.1
11.8
EBITDA
34.9
47.7
69.0
86.2
101.4
% chg
-2.8
36.6
44.5
24.9
17.7
(% of Net Sales)
12.0
13.5
17.0
17.1
17.1
Depreciation& Amortisation
8.1
8.2
9.8
10.8
12.7
EBIT
26.8
39.5
59.2
75.4
88.7
% chg
2.7
47.3
49.8
27.4
17.7
(% of Net Sales)
9.2
11.2
14.6
15.0
15.0
Interest & other Charges
0.7
0.9
1.0
1.0
1.0
Other Income
3.6
8.3
9.4
10.8
12.4
(% of Sales)
1.2
2.3
2.3
2.1
2.1
Extraordinary Items
-
-
-
-
-
Share in profit of Associates
-
-
-
-
-
Recurring PBT
29.8
46.9
67.5
85.1
100.1
% chg
5.6
57.4
44.1
26.1
17.5
Tax
9.7
13.6
18.0
26.4
31.0
PAT (reported)
19.9
33.3
42.7
58.7
69.0
% chg
6.4
67.0
28.3
37.6
17.5
(% of Net Sales)
6.8
9.4
10.5
11.7
11.7
Basic & Fully Diluted EPS (Rs)
13.6
22.8
29.2
40.2
47.3
% chg
6.4
67.0
28.3
37.6
17.5
January 31, 2019
4
GMM Pfaudler |3QFY2019 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY2016
FY2017
FY2018
FY2019E FY2020E
SOURCES OF FUNDS
Equity Share Capital
2.9
2.9
2.9
2.9
2.9
Reserves& Surplus
163.9
191.9
227.9
277.5
335.7
Shareholders Funds
166.8
194.8
230.8
280.4
338.6
Minority Interest
-
-
-
-
-
Total Loans
-
-
-
-
-
Other Liab & Prov
4.4
11.1
11.6
12.1
12.8
Total Liabilities
171.3
205.9
242.4
292.5
351.4
APPLICATION OF FUNDS
Net Block
53.4
61.2
66.4
70.6
72.9
Capital Work-in-Progress
4.3
2.0
2.0
2.0
2.0
Investments
13.7
44.6
64.6
84.6
94.6
Current Assets
178.6
207.9
233.2
281.7
354.3
Inventories
70.9
82.3
94.5
117.1
137.8
Sundry Debtors
48.7
69.9
80.3
99.5
117.1
Cash
53.6
31.7
30.6
30.7
58.9
Loans & Advances
5.5
24.1
27.7
34.3
40.4
Other Assets
-
-
-
-
-
Current liabilities
84.4
113.2
127.9
151.5
178.3
Net Current Assets
94.2
94.7
105.3
130.2
176.0
Other Non Current Asset
5.6
3.4
4.1
5.0
5.9
Total Assets
171.3
205.9
242.4
292.5
351.4
January 31, 2019
5
GMM Pfaudler |3QFY2019 Result Update
Consolidated Cash flow Statement
Y/E March (` cr)
FY2016
FY2017
FY2018E FY2019E FY2020E
Profit before tax
29.8
46.9
60.7
85.1
100.1
Depreciation
8.1
8.2
9.8
10.8
12.7
Change in Working Capital
(2.0)
(12.8)
(9.7)
(24.8)
(17.6)
Interest / Dividend (Net)
-
-
-
-
-
Direct taxes paid
(9.6)
(14.0)
(18.0)
(26.4)
(31.0)
Others
1.8
5.3
-
-
-
Cash Flow from Operations
24.7
23.0
42.8
44.7
64.2
(Inc.)/ Dec. in Fixed Assets
(13.9)
(14.4)
(15.0)
(15.0)
(15.0)
(Inc.)/ Dec. in Investments
0.3
0.1
-
-
-
Cash Flow from Investing
(17.0)
(22.0)
(36.9)
(35.4)
(25.5)
Issue of Equity
-
-
-
-
-
Inc./(Dec.) in loans
-
-
-
-
-
Others
6.0
6.3
6.7
9.2
10.8
Cash Flow from Financing
(6.0)
(6.3)
(6.7)
(9.2)
(10.8)
Inc./(Dec.) in Cash
1.7
(5.3)
(0.8)
0.1
27.9
Opening Cash balances
34.7
36.4
31.1
30.3
30.4
Closing Cash balances
36.4
31.1
30.3
30.4
58.3
Free cash Flow
10.8
8.6
27.8
29.7
49.2
January 31, 2019
6
GMM Pfaudler |3QFY2019 Result Update
Key Ratios
Y/E March
FY16
FY17
FY18
FY19E
FY20E
Valuation Ratio (x)
P/E (on FDEPS)
80.5
48.2
37.6
27.3
23.2
P/CEPS
43.1
28.2
22.2
16.6
14.1
P/BV
9.6
8.2
6.9
5.7
4.7
Dividend yield (%)
0.3
0.4
0.4
0.5
0.6
EV/Sales
5.3
4.3
3.7
3.0
2.5
EV/EBITDA
44.0
32.0
24.3
17.3
14.3
EV / Total Assets
9.0
7.4
6.2
5.1
4.1
Per Share Data (`)
EPS (Basic)
13.6
22.8
29.2
40.2
47.3
EPS (fully diluted)
13.6
22.8
29.2
40.2
47.3
Cash EPS
25.5
38.9
49.4
66.1
77.8
DPS
3.0
4.0
4.0
5.2
6.1
Book Value
114.3
133.4
158.1
192.0
231.9
Returns (%)
ROCE
16.1
20.3
22.7
26.9
26.2
Angel ROIC (Pre-tax)
25.8
30.5
35.5
42.5
44.8
ROE
11.9
17.1
18.5
21.0
20.4
Turnover ratios (x)
Asset Turnover (Gross Block)
2.6
3.1
3.2
3.6
3.8
Inventory / Sales (days)
89
85
85
85
85
Receivables (days)
61
72
72
72
72
Payables (days)
101
115
115
110
110
WC cycle (ex-cash) (days)
48
42
42
47
47
Source: Company, Angel Research
January 31, 2019
7
GMM Pfaudler |3QFY2019 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER:
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies 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.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Disclosure of Interest Statement
GMM Pfaudler
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or
No
relatives
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on Expected Returns:
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period)
Reduce (-5% to -15%)
Sell (< -15%)
January 31, 2019
8