Coverage Stock: Borosil Glass Works Ltd. CMP INR 8,803 ... · 1 GWM segment. The company is present...

1 GWM

Edelweiss Investment Research

Borosil Glass Works Ltd (Borosil) is a 50+ year-old brand, a pioneer in specialty glass and a market leader in the microwavable kitchen glassware

segment. The company is present in two segments — consumer products division (CPD) and scientific and industrial products (SIP). Borosil has

acquired two businesses in FY16: (a) Hopewell (CPD segment), and (b) Klasspack (SIP divison). Also, restructuring of Borosil’s businesses will result in

Gujarat Borosil becoming a 58% subsidiary. Borosil has a strong distribution network of over 200 distributors/10,000 retailers in CPD and a healthy

5,000 active customers and 170 distributors in SIP. Borosil focuses on growth via the organic as well as the inorganic route. Its strong balance sheet

and cash surplus affords investment in brand building and acquisitions to supplement organic growth. Further, the recent GST implementation will

support organised players. Increasing market share, a vibrant product portfolio and wide distribution reach should enable Borosil to clock 32%

earnings CAGR, teeing off healthy cash flows and robust return ratios. At CMP of INR 8,803, the stock is currently trading at 32x FY18E EPS of INR 272,

28x FY19E EPS of INR 311 and 24x FY20E EPS of INR 371. We initiate coverage with a ‘BUY’ recommendation.

Strong, steady, SIP business should support growth in CPD business

Borosil’s SIP division has a target market of ~INR 5,000cr and focus on three key segments – laboratory glass, laboratory instruments and

pharmaceutical packaging. The company is a market leader in the domestic lab glass market with 60% -share. With acquisition of Klasspack and

introduction of LabQuest, Borosil is expected to explore the ~INR 700cr market opportunity in the pharma packaging and lab instrument segments.

Borosil’s SIP division is expected to grow at 20% CAGR over FY17-20E with entry into a new market of pharma packaging products via acquisition of

Klasspack as well as organic revenue growth of ~16%. Borosil’s CPD has three major focus product businesses – microwavables, storage and

opalware. Borosil is the market leader in microwavable glass products with 60% share and continues to penetrate the market. The storage product

business has reached meaningful sales in the last three years and is expected to double in the next couple of years owing to the opportunity

market of INR 1,000cr. With acquisition of Hopewell, Borosil has entered the opalware market; and significant improvement in Hopewell’s financials

(sales doubled, margin improved, excluding one-off expense in FY17) post acquisition, is a clear indication of Borosil’s strategic focus. Borosil’s

strong pan-India distribution network, geographic presence and channel loyalty will lead to scale the consumer business and due to this sales and

distribution synergy, we expect higher throughput and significant margin improvement. Borosil’s CPD revenue is expected to clock CAGR of 19%

over FY17-20E driven primarily by the acquisition of Hopewell - improvement in utilization, introduction of new products and investment in brands.

Improvement in product mix and backward integration will boost operating margin

We envisage Borosil’s EBITDA margin to jump to 16% in FY20E from 10.7% in FY17 riding multiple levers:

The change in product mix in favour of consumer-ware is bound to boost margins. Borosil has prudently metamorphosed from B2B to B2C.

SIP division expected to improve margins on account of consolidation of Vyline Glass Works and diversification in products.

Utilisation of acquired entities is expected to improve significantly, resulting in operating leverage.

Outlook and valuation: Consumer and brand focus intact; earnings growth story; initiate with ‘BUY’

Increasing market share, vibrant product portfolio and wide distribution reach amply equip Borosil to clock 32% earnings CAGR over FY17-20E,

which in turn is bound to propel healthy cash flows and robust return ratios. We initiate coverage with a ‘BUY’.

Year to March

Consolidated) FY16 FY17 FY18E FY19E FY20E

Revenues (INR cr) 415 557 674 827 970

Rev growth (%) 27.4 34.2 21.0 22.7 17.3

EBITDA (INR cr) 22 59 93 130 154

PAT (INR cr) 28 133 69 82 97

P/E (x) 69.8 15.0 32.4 28.3 23.7

EV/EBITDA (x) 94.5 34.9 22.4 15.9 13.5

RoACE (%) 0.2 3.1 6.6 9.2 10.0

RoAE (%) 4.5 6.5 8.0 8.5 9.4

Praveen Sahay

Research Analyst

[email protected]

Bloomberg: BRSL:IN

52-week range (INR): 9,666/ 3,880

Share in issue (cr): 0.2

M cap (INR cr): 2,045

Avg. Daily Vol.

BSE/NSE :(‘000): 5,000

Date: 12th July 2017

Promoter, 74.3

Public, 25.7

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Borosil Glass Sensex

Coverage Stock: Borosil Glass Works Ltd.

Performs Beautifully: Market leader and strong brand to drive

CMP INR 8,803 Target INR 11,856

Rating: BUY Upside: 35%

Borosil Glass Works Ltd.

2 GWM

Borosil’s is expected to clock revenue CAGR of 20% over FY17-20E primarily driven by consumer-ware division with the acquisition of Hopewell -

improvement in utilization, introduction of new products and investment in brands. Borosil’s SIP division expected to grow at 20% CAGR over FY17-

20E with the entering to new market of pharma packaging with the acquisition of Klasspack and organic revenue growth of ~16%. We envisage

Borosil’s EBITDA margin to jump to 16% in FY20E from 10.7% in FY17 riding multiple levers to result in a PAT (excluding one off) CAGR of 32% over

FY17-20E.

Borosil SIP division has target market of

~INR 5,000cr and CPD have more than

2,500cr opportunity market excluding

appliance market

Multiple levers for margin expansion

Higher free cash flow generation &

lighter balance sheet to help further

growth

FY17 FY18E FY19E FY20E

Revenue 557 674 827 970

EBITDA 59 93 130 154

EBITDA Margin 10.7 13.8 15.8 15.9

PAT 43 69 82 97

Entry = INR 8,803

PAT CAGR of 32%

over FY17-FY20E to

lead to exit multiple

of 32x FY20E P/E

Total

Return of

35%

FY17 FY18E FY19E FY20E

RoACE (%) 3.1 6.6 9.2 10.0

EV/Sales (x) 3.8 3.1 2.5 2.2

Business (FY20E) Adj EPS (INR)Proj Multiple

PER (x)FY20E

Borosil - CPD 172.0 35x 6,019

Borosil - SIP 150.1 25x 3,754

Guj. Borosil 70.1 20x 1,403

Cash 681.3 681

Value per share (INR) 11,856


3 GWM

Price Target INR 11,856

We have done sum-of-the-parts valuations to value the company, we have arrived at a target price of

INR 11,856 by assigning 35x/25x/20x FY20E earnings to the CPD/SIP/Gujarat Borosil businesses,

respectively, resulting a 32x P/E multiple to Borosil’s consolidated FY20E EPS of INR 371. Borosil’s revenue

is expected to clock CAGR of 20% over FY17-20E driven primarily by the consumer-ware division and

inorganic expansion alongside improvement in utilisation.

Bull

36x Bull Case FY20E EPS

INR 14,440 Assuming higher revenue growth in the SIP and CPD divisions at 24% and 22% respectively, we expect

Borosil to generate an EPS of INR 396 in FY20E. Assigning a multiple of 36x P/E in FY20E.

Base

32x Base Case FY20E EPS

INR 11,856 Assuming lower revenue growth in the SIP and CPD divisions at 20% and 19% respectively, we expect

Borosil to generate an EPS of INR 371 in FY20E. Assigning a multiple of 32x P/E in FY20E.

Bear

26x Bear Case FY20E EPS

INR 9,186 Assuming even lower revenue growth in the SIP and CPD divisions at 15% and 17% respectively, we

expect Borosil to generate an EPS of 349 in FY20E. Assigning a multiple of 26x P/E in FY20E.


4 GWM

Average Daily Turnover (INR cr) Stock Price (CAGR) Relative to Sensex, CAGR (%)

3 months 6 months 1 year 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years

2.4 1.9 1.1 112% 66% 60% 31% 18% 10% 13% 8%

Bu

sin

ess

Va

lue

Driv

ers

Nature of Industry

The automation in pharmaceutical – R&D, education and health segments have led to increasing tests and analysis volumes resulting in

an exponential increase in the requirement for labware glass products. Also, multifactor opportunities are driving the demand for

consumer-ware glass products. We expect this structural advantage to prolong for a few more years.

Opportunity Size

The target market for the entire product basket of Borosil’s CPD division/SIP division is pegged at ~INR 2,220cr/INR 4,870cr, respectively.

Capital Allocation

The company envisages engaging in a two-stage capex for Gujarat Borosil. In the first stage, the INR40-50cr spend for the

manufacturing process will arise from internal accruals; and in second stage, the capacity increase from 1.2GW to 2.3GW will be funded

(capex of INR 250cr) through mix of debt and equity.

Predictability

The growth in consumer-ware segments and transition from plastic/steel to glass table ware and storage segments is difficult to predict.

Also, it is tough to gauge the opportunity size for entry into the export/international lab ware market as well as competition with global

players such as Bormioli, SGD Pharma and Gerresheimer.

Sustainability

The largest player in the domestic lab ware market and expansion in pharmaceutical packaging and lab instruments will continue the

growth in the scientific ware division. Also, the strong brand in microwavable and storage consumer goods along with Larah brand in

tableware will boost growth momentum in the consumer business.

Disproportionate Future

The focus on consumer business on the strong base of inorganic growth, backward integration of scientific ware business and exit from

non-core assets/investments, will likely ensure that the future performance in terms of earnings growth and return ratios will be better

versus the past as asset turnover and margins should improve.

Business Strategy &

Planned Initiatives Current focus is ramp up in utilization of acquired entities, distribution channels and market penetration.

Near Term Visibility

Strong visibility of 32% CAGR bottomline growth (including one-off income) along with 520 bp improvement in operating margin from

FY17-FY20E.

Long Term Visibility

To remain one of the biggest glass consumer-ware and scientific-ware players alongside being a dominant solar glass producer with a

big opportunity in the solar power sector.


5 GWM

Focus Charts – Story in a nutshell

Borosil’s CPD division – Opportunity ahead Hopewell – Opalware to drive growth

(contributions move to ~40% from ~10%) Distributor network – Healthy channel mix

Borosil’s SIP division – Huge opportunity ahead Borosil’s SIP division – Continues to grow Borosil’s SIP division - Strong entry barriers

Source: Company, Edelweiss Investment Research

0%

5%

10%

15%

20%

25%

-50 0 50 100 150

Gro

wth

%

Borosil CPD Revenue (INR cr)

Glass

Microwavables

Tumblers

Melamine

Opalware

Tea/Coffee (incl

ceramicware)

Storage

40 48 55 66 73 103

130 153 181 213

12

87 105 126 151

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18E

FY

19E

FY

20E

Consumerware (BGWL) Hopewell

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Large Formet

Stores

Ecommerce Retailers + others

Borosil - CPD La Opala

0%

2%

4%

6%

8%

10%

12%

14%

(50) - 50 100 150 200

Gro

wth

%

Borosil SIP Revenue (INR cr)

Lab Glass (Domestic)

Lab Glass

(International)

Lab instruments

(Domestic)

Pharma Packaging

(Tubular Glass) -10%

0%

10%

20%

30%

40%

50%

-

50

100

150

200

250

300 FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18E

FY

19E

FY

20E

Scientificware Revenue % growth

SIP Division - Strong Barriers to Entry

Meeting wide product range customer need

Quick & on-time delivery of SKUs range

Products meet International quality benchmarks

Strong customer relationships

Single supplier convenient for laboratory for

multiple critical yet low ticket SKUs

Not easily replicable by competition

Investment in inventory, 6 warehouses & dealer

network

Well managed Inventory more than offsets loss of

sale

Quality control across diverse disciplines –

Pharmaceutical, Food & Soil testing, Microbiology,

Biotechnology etc.

Low propensity of customer to switch


6 GWM

I. Consumer Product Division: Expanding from microwaveable

glass to storage,tableware and appliances

Growth coming from sector drivers

Total opportunity market size – CPD segment

The target market of the entire product bascket of the CPD division is pegged at

~INR 11,220cr.


Note: Value in INR cr

Borosil’s CPD: Initiatives to grow faster vs sector

Revenue growing

Hopewell – Opalware to drive growth (contributions move to ~40% from

~10%)


Lifestyle change towards convenience & improved presentation - Upgrading from steel & unorganized / unbranded market towards premium products

Rise of the middle class aspirational customer base - Focus on hygienic & healthy products, movement from plastic to glass

Innovation possibilities in product categories

Opportunities in multiple distribution channels (E.g.: Modern Retail Outlets, E-commerce etc.)

80

440

9,000

300

300 400

1,000

Glass Microwavables

Tumblers

Appliances

Melamine

Opalware

Tea/Coffee (incl

ceramicware) Storage

New product capabilities

- New product range has received wide market acceptance

– New Products (introduced in last 3 years) share of Total

Sales ~20%

Borosil is the gold standard on quality

Strong channel loyalty

– Proven by quick acceptance of Larah

Investment in brand building

– Few established brands in the category

0%

50%

100%

-

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200

300

400

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Consumerware % growth

40 48 55 66 73 103

130 153 181 213

12

87 105 126 151

FY

11

FY

12

FY

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FY

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FY

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FY

18E

FY

19E

FY

20E

Consumerware (BGWL) Hopewell


7 GWM

Borosil’s CPD division – Opportunity ahead


Storage products: Growth driver

The company has three key focus product businesses – microwavables, storage

and opalware. The storage product business has attained meaningful sales in

the last three years and is expected to double in the next couple of years. We

foresee a huge opportunity for the glass storage business if we consider the steel

and plastic storage market, which is around INR 5,000cr, and of this, around 20%

is the organised market. Thus, even if we consider the opportunity size of merely

the organised segment, i.e. the INR 1,000cr opportunity, this is by itself a huge

one for Borosil. The company is adopting measures such as increasing

distribution channels, creating more health awareness compaigns, focusing on

product development (i.e. using scientific glass for CPD storage products which

is comparatively tougher), increasing presence in the e-commerce space

(currently merely 6% of sales and has a target to reach 20%) and also started

own web store.

Inorganic growth and expansion

Hopewell acquisition (Larah brand)

On January 29, 2016, the company acquired 100% equity share in Hopewell

Tableware Pvt Ltd. (Hopewell), marketing its products under the brand ‘Larah’.

Hopewell Tableware Pvt. Ltd. was established in CY10 as a joint venture

between Mr. Swapan Guha (recipient of the Padma Shree award for his

contribution to the ceramic industry) and Shri Prem Singh Bajor. With Larah, the

company has gained entry into the fast growing opalware market in India

under which it sells microwavable, light, strong, chip resistant opal dinnerware.

The size of the organised opalware market in India, of more than INR

400cr (excluding ~INR 700cr/INR 1,000cr of Bone china/Steel market) , is

dominated by La Opala with revenue of INR 250cr; and the company

foresees an opportunity for a second player to come in and grow this

category by investing and growing Larah into a strong brand, the target

being customers with daily usage needs.

In FY17, Larah recorded revenue of INR 87cr (near double since its

acquisition) and EBITDA was around INR 1cr. The EBITDA was lower due to

INR 11cr expenses towards investments in advertisement and sales

promotion (compared with ~INR 2cr in FY16), INR 5cr towards one-time

claims and write‐offs pertaining to the period prior to acquisition and

~INR 4cr write-down of stock valuation due to increase in production

efficiency. The operating margin has improved to ~18% for FY17

excluding one-off expeneses.

The company’s strong pan-India distribution network, geographic

presence and channel loyalty will lead to scale the consumer business

and due to this sales and distribution synergy, a higher throughput and

significant margin improvement is expected. The company also has

plans to expand capacity with a new furnace and other machinery by

H2FY18 with capex ~ INR 55cr. This measure is expected to enhance sales

by 50% with yield improvement and reduction in wastage. Further, the

company has plans to create additional warehouse space, which will

optimize truck utilization by combining Larah and other Borosil products.

After acquisition, Borosil has reduced the price differential between

Larah and the competitor from a 30% discount to 10%. The long term

objective of the opalware business is to record INR 1,000cr sales

0%

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25%

-20 0 20 40 60 80 100 120

Gro

wth

%

Borosil CPD Revenue (INR cr)

Glass Microwavables

Tumblers

Melamine

Opalware

Tea/Coffee (incl ceramicware)

Storage


8 GWM

Entire process of cooking and serving


CPD – Sales through major modern trade partners

The company conducts sales through all major modern trade channel partners

viz. Big Bazaar, D-Mart, Reliance Retail, Walmart, Metro, Lifestyle, HyperCity etc.

and some institutional customers such as Samsung, LG, Whirlpool etc who

undertake cross promotional sales along with Borosil’s product range. Sales

through this channel account for ~30% of CPD sales.

Borosil also sells its products through various E-commerce platforms like its own

Website, Flipkart, Amazon etc. Sales through E-commerce platforms account for

~ 6% of CPD sales and target to reach 20%.

The consumer division has a distribution network of 200 dealers and 10,000

retailers comparable with 200 distributors and ~12,000 retailers for La Opala.

And is expected to increase its reach to ~12,000 retailers and has plans to

increase large format sales in the forthcoming years.

.

Distributor network – Healthy channel mix


Anti-dumping duty to help gain market share

The Indian government has imposed anti-dumping duty on Chinese

porcelain and other ceramic-ware including bone China. This measure

will help Borosil to increase sales of opal glassware as the price points of

Chinese porcelain and bone China will increase, which will likely move

customer sentiment in favour of opalware.

The anti-dumping duty announced in 2011 for a period of five years was

extended by a year and is now valid until August 2017. The management

is hopeful that this duty will be extended for another four years. This

notwithstanding, Borosil is yet confident of surviving in the absence of

such a duty owing to its robust distributor and retailer network apart from

strong brand recall.

CPD – Key modern trade partners


Cut Chop Grind Mix Cook Bake Serve Store Reheat

Prepare Cook Serve Store

0%

20%

40%

60%

80%

100%

Large Formet Stores Ecommerce Retailers + others

Borosil - CPD La Opala


9 GWM

II. Scientific & industrial products (SIP) division

Opportunity

The target market of entire product basket of SIP division is pegged at ~INR

5,000cr. The domestic business expected to grow at ~12% and the international

lab glass is expected to clock ~2% growth every year. The major revenue

contribution is from pharma companies in Borosil’s SIP division.

Market opportunity – SIP division


Borosil’s SIP division – Huge opportunity ahead


Borosil’s SIP division – continues to grow

Borosil’s SIP division focuses on increasing its product range with

diversification in its segments. Currently, 60% of SIP sales arises from the

sales of lab glass to pharmaceutical sectors. Thus, to reduce its revenue

concentration, the company is diversifing towards different product

offerings e.g. lab instruments, HPLC vials, packaging etc.


Offers Scientific & Laboratory equipment

- Glassware, Instruments, Liquid handling systems

Used in Pharma, Biotechnology, Microbiology, Food & Soil

testing, Educational Institutions etc

Introducing Laboratory tools & equipment under the brand "LABQUEST"

Markets to scientists (end users) as consumers of Lab

products

- Not a typical B2B / institutional business

INR 220cr

INR 4,000cr

INR 150cr INR

500cr Lab Glass (Domestic)

Lab Glass

(International)

Lab instruments

(Domestic)

Pharma Packaging

(Tubular Glass)

0%

2%

4%

6%

8%

10%

12%

14%

(50) - 50 100 150 200

Gro

wth

%

Borosil SIP Revenue (INR cr)

Lab Glass (Domestic)

Lab Glass (International)

Lab instruments (Domestic)

Pharma Packaging (Tubular

Glass)

-10%

0%

10%

20%

30%

40%

50%

-

50

100

150

200

250

300


Scientificware Revenue % growth (RHS)


10 GWM

Inorganic growth – Klasspack acquisition

Borosil has acquied Klasspack Ltd. to enter the pharma packaging (tubular

glass) market which is pegged at ~INR 500cr. Klasspack Ltd has a market share

of ~6% currently and this is expected to increase in the forthcoming year.

The The company acquired 60.3% equity shares in Klasspack Pvt Ltd., a Nasik

based supplier of glass ampoules and tubular glass vials. Hitherto Borosil was

marketing lab glassware to pharmaceutical companies for their research labs

and quality control lab requirements. It complements Borosil’s analytical vials’

range and currently, there being only one strong player viz. Schott Kaisha

operating in this segment, and the product being a raw material for the pharma

Industry, it provides its pharmaceutical customers, a credible second alternative

for their packaging needs. The revenues in FY16 were INR 28cr and for August

16-Mar’17 was INR 20.5cr with EBITDA of INR 2.6cr. The company expects a lead

time of 6-12 months to convert a customer to a purchaser in this segment

because the Customers undertake a lot of testing and certification so that it

adheres to stringent quality benchmarks. The company is dealing with all

leading players in the Pharma Index viz. Cipla, Mylan, Lupin, Ranbaxy etc. for its

product range.

Borosil SIP division - Revenue contribution


Exploring growth opportunity

Borosil is working on the opportunity areas shown below to increase

growth


76 75 78 87 102

119 139 161 187 217

28 21 32 45 60

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Scientificware (SIP) Klasspack

• Growth in the customer

industries in India (Pharma)

Growth in End User Industry Market share gain

• New product to same

customers (LabQuest)

Inorganic opportunity Export

Growth

Opportunity

• Import substitution

• Exports to ME/SEA/Africa


11 GWM

SIP division - Strong barriers to entry


Borosil’s SIP division – Key customers

Borosil’s SIP division has around 5,000 active customers and 170 distributors


SIP Division - Strong Barriers to Entry

Meeting wide product range customer need

Quick & on-time delivery of SKUs range

Products meet International quality benchmarks

Strong customer relationships

Single supplier convenient for laboratory for

multiple critical yet low ticket SKUs

Not easily replicable by competition

Investment in inventory, 6 warehouses & dealer

network

Well managed Inventory more than offsets loss of

sale

Quality control across diverse disciplines –

Pharmaceutical, Food & Soil testing, Microbiology,

Biotechnology etc.

Low propensity of customer to switch


12 GWM

III. Strong brand and wide network of channel partners

Borosil enjoys strong brand equity in both the segments and has a wide network

of distributors and retailers/clients which envisages sustained growth momentum

and margins. The consumer division has a dirtribution network of 200 dealers and

10,000 retailers comparable with 200 distributors and ~12,000 retailers for La Opala;

and this number is expected to increase its reach to ~12,000 retailers with plans to

increase large format sales in the forthcoming years. Similarly, SIP division has wide

network of 5,000 active clients and ~170 distributors.

Sales channel mix


IV. GST implementation could support organized players

Implementation of GST will support organized players enabling them to

gain market share. To this end the company has plans to spend INR 20cr to

build a new warehouse in Jaipur to cater to its north India business in CPD.

The warehouse expansion will help optimize logistics and will also aid Borosil

to reduce the amount of stocks which need to be kept in different

locations. Borosil’s products come under the 18% GST category; and

consumers shifting from the unorganised to the organised will benefit

Borosil particularly in the CPD business.

Large Formet

Stores

20%

Ecommerce

7%

Retailers + others

73%


13 GWM

V. Restructuring of business to bring synergies, whilst monetization

of non-core assets should uplift RoCE

In order to restructure the business and reduce cross holdings, the company has

proposed to merge the acquired company – Hopewell, Vyline Glass Works Ltd

(this is a promoter company, that conducts third party manufacturing for Borosil),

and Fennel Investments & Finance Pvt Ltd . The restructuring would reduce related

party transactions, reduce cross holdings, introduce cost synergies and simplify the

structure. Further, the company has started monetizing its non-core assets, that

coupled with the earnings upmove will likely uplift RoCE.

Exit from non-core business

The company has reported a one off gain of ~INR 90.9cr in FY17 from sale of non-

core assets. The Municipal Corporation of Greater Mumbai has acquired land

from Borosil. This was surplus land, which the company had on its books and this

has been a part of Borosil’s strategy to reduce the number of non-core assets in its

books and generate cash, which can then be used for its business activity.

The company has proposed a draft scheme of merger with its related companies

as advised by PwC, the valuation was done by SSPA & Co. and the valuation

report was prepared by Keynote Corporate Services Pvt Ltd.

• Hopewell Tableware: A 100% subsidiary in the consumer products business.

• Vyline Glass Works Ltd, a promoter held company and 3P (Production,

Preparation and Process) manufacturing company producing SIP and CPD

products solely for Borosil. Out of total purchases of INR 130cr for Borosil,

purchases from Vyline amounted to INR 76.2cr.

• Fennel Investments, an associate company with cross holdings.

Rationale for the transaction are:

• Reduction in related party transactions

• Reduction in legal and regulatory compliances

• Reduction in cross holding and simplicity of structure

• Synergies of business under a single entity by reduction in

administration, operational and marketing costs, greater administrative

efficiency and optimum utilization of resources.

• IND AS framework

As per our calculations, shareholders will lose ~3% effective share in Borsosil,

while gaining 25.4% effective share in Vyline Glass Works, ~12.4% effective

share in its associate company, Fennel Investments, and ~3.35% effective

share in its subsidiary, Gujarat Borosil. We expect the merger swap ratios to

be beneficial for the shareholders of Borosil Glass Works.


14 GWM

Shareholding

On Paper Effective

Pre Post Pre Post

Borosil

Promoter 66.80% Promoter 74.60% Promoter 70.91% Promoter 74.60%

Public 27.70% Public 25.40% Public 28.38% Public 25.40%

Fennel 5.37%

Hopewell Borosil 100% Borosil 100% Borosil 100% Borosil 100%

Fennel

Promoter 45.85% Borosil 100% Promoter 86.66% Promoter 74.60%

Borosil 45.85% Public 13.01% Public 25.40%

Vyline 8.30% (Through Borosil)

Vyline Promoter 100% BOROSIL 100% Promoter 100% Promoter 74.60%

Public 25.40%

Gujarat Borosil

Promoter 16.57% Promoter 16.57% Promoter 63.18% Promoter 60.12%

Public 25.05% Borosil 58.38% Public – Borosil 11.48% Public – Borosil 14.83%

Fennel 33.13% Public 25% Public – Guj. Borosil 25.05% Public – Guj. Borosil 25.05%

Borosil 25.25%



15 GWM

Liquidating non-core assets

• The company surrendered a vacant land admeasuring 4,237 sq mt in Andheri

(East), Mumbai upon reservation by MCGM in their development plan for a

recreation ground against compensation of INR 94.44cr out of which it is

required to pay to MCGM INR 3.56cr towards expenses. The company

accounted for an after tax extraordinary gain of INR 87.1cr for this transaction.

• The company is also reducing its non-core non-trade investments.

The company utilized the cash flow generated from this sale to fund its inorganic

expansion by acquiring 100% equity shares in Hopewell Tableware Pvt Ltd. worth

INR 27.13cr and 6% optionally convertible non-cummulative redeemable

preference shares in Hopewell for INR 22cr.

Land sold in FY11; Plans to sell its flat in Samundra Mahal

The company sold its Marol property for a total consideration of INR 830cr.

After paying income tax (MAT) of INR 159cr, meeting all expenses

pertaining to the said deal, repaying loans and payment of interim

dividend of INR 11.55cr with tax thereon, the company is left with a fund of

nearly INR 600cr. The company also has plans to exit from its non-core

investments such as the 1,706 sq ft, three-bedroom duplex apartment in

Samudra Mahal etc.

Fund details (INR cr) – Received from land sale (FY11)

Received 830

Tax (159)

Interim dividend (12)

Borrowings & other liabilities (59)

Net received 600

Uses of Fund

Buyback (in FY13 & FY16) (331)

Flat in Samudra Mahal (21)

Inorganic expansion (54)

Other investment (113)

Property bought (45)

Dividend (36)

Total (600)

Particulars (INR Cr) FY15 FY16

Equity shares- Hindustan Composites Ltd. 25.6 0

Preference Shares- Ravindranath GE Medical

Associates 10 0

Quoted and unquoted debentures 26.2 7.6

Tax free bonds 60.5 15.3

Property 5.0 5.1

Others 48.0 45.0

Total 175.3 72.9


16 GWM

VIII. Gujarat Borosil Ltd (GBL) – Solar energy play

GBL is engaged in low iron solar glass production for application in the solar power

sector. Solar Photovoltaic market has faced tough times internationally in view of

the extraordinary capacity increase in China since 2011, resulting in an

international market crash. In India, the present Central Government has given

enormous momentum for the use of solar power. The objective of achieving 100

GW of solar energy is now proposed to be realized by 2022.

Gujarat Borosil will become a 58% subsidiary after the scheme of amalgamation.

Gujarat Borosil has also posted healthy results in the previous year with an EBITDA

margin of ~22% on net sales of INR 183cr. We foresee big momentum for solar

energy in India and the Union Budget has reduced customs duty on solar glass,

but has increased the countervailing duty (CVD), As a consequence, Gujarat

Borosil benefits as it will get input tax credits. Previously, Gujarat Borosil had an

inverted tax structure, which restricted the company from getting the credit of

input taxes. Now, since Gujarat Borosil is able to get tax credits, the profitability of

the company per year will improve by about INR 3.5cr.

GBL is the only producer of solar glass in the country and it is constantly evaluating

growth in this sector in the domestic market to remain a dominant player. Its

natural advantage of offering a shorter lead time is helping it to secure business.

With patterned glass in exclusive designs being an attractive product, it is adding

newer applications in the architectural glass segment and expects to continue to

grow in niche segments.

In solar glass production,there are two parts to the manufacturing process – first, to

melt the raw material and make flat glass; and second, to make the glass tough

i.e. to strengthen it by heating and coating it with an anti-reflective coating. GBL’s

toughening capacity was not commensurate with its manufacturing capacity. So,

GBL is allocating INR 60cr as the initial capex to H1FY18 to increase the

downstream toughening capacity to cater to the entire production. This is

expected to improve yields and add ~15% to 17% to revenue in FY18. The other

initiative is to reduce the average thickness of solar glass to 2mm from the current

3.2mm without sacrificing product quality or efficiency. So, this is expected to

increase business volume and enhance profitability. The total capex will be ~INR

225cr.

Competitive advantages (format)

• Market leadership in Indian solar glass market

− Cost competitive with China’s supplies

• Preferred brand of high quality solar glass

− Lowest iron content, world’s only antimony-free glass

− Anti-reflective coating

− Superior light transmission and highest glass efficiency

− High resistance to potentially induced degradation

• State-of-the-art manufacturing with strong testing and R&D

infrastructure

− High degree of product innovation to drive down total cost of

ownership for end customers

− Implementing a facility for tempering thinner glass that has growing

domestic and international demand

• Filed for anti-dumping duty; the investigation is currently ongoing.

Key customers – Domestic



17 GWM

Key customers – International

Revenue growth driven from efficiency and capacity increase


EBITDA & EBITDA margin

PAT & PAT margin


0%

5%

10%

15%

20%

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30%

35%

40%

45%

0

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150

200

250

300

350

FY13 FY14 FY15 FY16 FY17 FY18E FY19E

Net Sales Sales growth (%)

0

5

10

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30

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20

30

40

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60

70

80

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EBITDA (INR cr) EBITDA margin (%)

-10%

-5%

0%

5%

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15%

-20

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PAT (INR cr) PAT margin (%)

(RHS)

(RHS)

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18 GWM

Valuation and peer comparisions

We expect healthy growth in operating cash flows with improvement in margins across businesses. We expect 20% CAGR in revenue over FY17-20E and 520bps

improvement in margin to result in 32% earnings CAGR over FY17-20E. We believe that the current level is attractive for the medium to long term investment

horizon with the prospect of sales growth and RoCE improvement. At CMP of INR 8,802, the stock is currently trading at 32x FY18E EPS of INR 272, 28x FY19E EPS of

INR 311 and 24x FY20E EPS of INR 371. We have done sum-of-the-parts valuations to value the company, we have arrived at a target price of INR 11,856 by

assigning 35x/25x/20x FY20E earnings to the CPD/SIP/Gujarat Borosil businesses, respectively, resulting a 32x P/E multiple to Borosil’s consolidated FY20E EPS of INR

371. We have valued Borosil’s SIP business at 25x FY20E earnings, versus global peers that are trading at an average of 20x to 25x forward earnings. Given the

huge opportunity in the Indian pharmacetical labware, glass instrument and primary packaging segments and Borosil’s positioning as one of the largest players;

with the improvement in return rations on account of lower requirement of capital employed and further improvement in margins (owing to expansion in product

mix) we believe assigning 25x the forward multiple will be a fair multiple. Similarly, we have valued Borosil’s CPD business at 35x FY20E earnings, versus its domestic

peers that are trading at an average of 33x to 35x forward earnings.

Peers Comparision – Valuation SOTP valuation

Company CY16 CY17 CY18 CY19

SHANDONG HUAPENG GLASS CO 67.9x 56.0x 42.0x 35.6x

SHENZHEN BEAUTY STAR CO 134.9x 72.5x 46.7x 101.1x

SHENGXING GROUP CO LTD 55.5x 49.5x 41.3x 32.6x

LA OPALA RG LTD* 48.3x 51.8x 37.1x 28.9x

PIRAMAL GLASS CEYLON PLC 11.3x 9.8x 7.2x 4.5x

BOROSIL GLASS WORKS LTD* 69.8x 15.0x 32.4x 28.3x

XINYI GLASS HOLDINGS LTD 10.1x 8.9x 8.1x 8.1x

CSG HOLDING CO LTD 12.7x 9.2x 8.0x

ASAHI GLASS CO LTD 23.6x 16.1x 15.6x 14.7x

COMPAGNIE DE SAINT GOBAIN 18.6x 16.0x 13.9x 12.3x

Average 45.3x 30.5x 25.2x 29.6x

Median 36.0x 16.1x 24.0x 28.3x Note: * FY

Huge opportunity market and improvement in profitability justify higher valuation

CMP MCap Sales (INR cr) EBITDA margin (%) PAT (INR cr) RoCE (%) PER (x)

(INR cr) (INR) (INR cr) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

La Opala 512 2,844 263 315 380 33.2 37.5 38.2 55 77 98 21.7% 25.3% 26.5% 52 37 29

BOROSIL 8,803 2,033 557 674 827 10.7 13.8 15.8 43 69 82 3.1% 6.6% 9.2% 15 32 28

Source: Bloomberg, Edelweiss Investment Research

:

Business (FY20E)Adj EPS

(INR)

Projected

Multiple PER (x)FY20E

Borosil - CPD 172 35x 6,019

Borosil - SIP 150.1 25x 3,754

Guj. Borosil 70.1 20x 1,403

Cash 681.3 681

Value per share (INR) 11,856


19 GWM

Key Management

Name Designation Profile

Mr. B. L. Kheruka Executive

Chairman

Mr. B. L. Kheruka has 53 years of experience in various functional areas of business and industry. He has been an Executive Chairman at

Borosil Glass Works Limited since December-2010 and has served as its Chairman. Previously, he served as the Managing Director of Gujarat

Borosil Limited from August 1, 2007 to March 17, 2011. He serves as non Executive Chairman at Gujarat Borosil Limited. He has been a Non

Executive Director at Gujarat Borosil Ltd since December-1988. He serves as a Director of Window Glass Ltd., Gujarat Fusion Glass Ltd.,

General Magnets Ltd. and Croton Trading Limited. He served as Executive Chairman of Gujarat Borosil Limited from August 1, 2005. Mr.

Kheruka is a B. Com Graduate.

Mr. Shreevar

Kheruka

Managing

Director &

CEO

Mr. Shreevar Kheruka, grandson of Mr B. L. Kheruka, has been the Managing Director and Chief Executive Officer of Borosil Glass Works

since August-2012. He has been working in the company from June-2006, first as Vice President and then as Chief Financial Officer. He has

obtained dual degrees in Bachelor of Science and Economics with specialisation in Entrepreneurship & Finance and Bachelor of Arts in

International Relations from Wharton School and the College of Arts & Sciences of the University of Pennsylvania, United States of America

(USA).


Key Risks

• Failure of acquisition – Not able to exploit the “Borosil” brand, distribution reach and innovation.

• Unfavorable government policies could affect sectoral growth: India imposed an anti-dumping duty on the import from China and UAE for five years,

effective from August 2011. Any reversal or non-continuation of the same by the Government of India may negatively impact the profitability of the

company.

• Rising competition from organised players e.g. CELLO and unorganised players. The tableware industry is dominated by small unorganised players. Though,

Indian consumers are gravitating towards the organised segment that offers branded products, any increase in the competitive intensity from the

unorganised segment may be detrimental for the company.


20 GWM

Business Overview Company Brief

Borosil Glass Works Ltd. (BOROSIL) is the market leader for laboratory glassware and microwavable kitchenware in India. The company operates through two segments. The

company operates primarily in 3 business segments (post restructuring of subsidiary, Gujarat Borosil): Scientific and industrial products division (~28% of revenue), Consumer products

division (~37% of revenue) and Gujarat Borosil (~35% of revenue).

Business Model

The company has 4 segments.

1) Lab ware

2) Consumer ware

3) Pharma packaging

4) Solar glass

Strategic Positioning

The company is the leader in laboratory glassware and microwavable kitchenware segments in India and is also a key player in the glass

tableware market and the domestic pharmaceutical packaging segment. Borosil has also entered into the international lab ware market,

recently.

Competitive Edge

Brand with a 50+ year legacy

Consumer product division: Entire product range from microwaveable glass to storage, tableware and appliances

Diversified product portfolio

Financial Structure The company is focusing on the high-margin consumer-ware Opalware market which it entered, with the Hopewell acquisition; it is also exiting

from non-core assets. The operating margin is expected to improve

Key Competitors La Opala, Year, Ocean Glass

Industry Revenue Drivers Opportunities across the domestic market (Consumer and scientific glass market) as well as in the international pharmaceutical segment

Shareholder Value

Proposition The company will likely record an EPS of INR 371 in FY20E. A 32x valuation should give a price target of INR 11,856 which offers an upside of 33%.


21 GWM

Borosil Glass Works - SWOT Analysis

• Strong Distribution Channel & Brand Name

• Expansion through inorganic way and new

product lunches

• Market leader in lab glassware &

microwavable kitchenware

Strengths Weakness

• Pick up in consumption may create a virtuous cycle

of higher demand-improved capacity utilization –

higher manufacturing investment – higher job and

income growth – higher consumption

• Pay revision by the Central Government

• Demographic shift

Opportunities Threats

Growth

Opportunity

• Demand can be adversely impacted by a shift

in customer and consumer preferences

• Low entry barriers, there could be an increase

in the number of competing brands

• Counter campaigning and aggressive pricing

by competitors- May lead to Disruption to its

market share

• Competition from organised sector in trading of

scientific and microwave glassware.

• Use of Plastic as a substitute

• Substantial erosion of global demand

• Uncertainties in Government policies


22 GWM

Scientific and industrial products (SIP) division

Borosil’s entire range of scientific and laboratory glass products includes laboratory glassware, instruments, disposable plastics, liquid handling systems and

explosion proof lighting glassware. The company’s products have acceptability in over 2,000 different products and app lications, in areas as diverse as

microbiology, biotechnology, photo printing, process systems and lighting. Borosil has a strong distribution network of 170 dealers country-wide. The range of

laboratory glassware includes nearly all the items items required for general laboratory usage. The company’s expertise in melting and forming low expansion,

chemically inert borosilicate glass for over 50 years has made its products preferrable globally.

Due to BOROSIL brand acceptability and reputation, leading pharmaceutical companies, R&D labs scientific, health and educational institutions have been

loyal customers for the last 50 years. As a testament of its quality, to get ISO 9001 certification, it is recommended that a laboratory use BOROSIL certified A-class

glassware. Its apparatus for measurement of volumes rank amongst the most accurate in the world.

The company has a 60% market share in the laboratory glassware market in India. In FY17, the company acquired 60.3% stake in Klasspack Ltd, which is a leading

manufacturer of glass ampoules and tubular glass vials for pharmaceutical packaging. It complements Borosil’s analytical vials product range and provides a

viable second alternative to its pharmaceutical customers for their packaging needs. The company has a 10% market share in HPLC vials market in India. Under

its LabQuest brand, the company has recently introduced a range of laboratory tools and equipment.

Product range – Laboratory glassware, volumetric flasks, laboratory bottles, pipettes Key customers



23 GWM

Consumer products division (CPD)

The consumer products division has a wide array of products in the microwavable, flameproof kitchenware range as well as in glass tumblers supported by a

strong distribution network of over 10,000 retail outlets. Borosil’s consumer products fulfill all cooking, serving and dining needs. To cater to changing lifestyle

needs, the company also offers a range of small appliances which include mixer grinders, juicers, salad cutters, oven toaster grillers, pop up toasters and

induction rice cookers. Major product categories offered by the company include glass microwavables, tumblers, appliances, opalware, tea/coffee crockery

and storage products.

In FY16, the company acquired Hopewell Tableware Pvt Ltd. which manufactures a range of fine opal glass dinnerware under the brand name ‘Larah’. The

Larah range is known for its immaculately designed products with an impeccable finish. Borosil’s expertise in glassware has made the products stronger and chip

resistant. The company has a market share of 60% in the glass microwavable market.

The glassware products market has been one of the rapidly growing markets in the Indian kitchenware industry.

The glassware products market has been one of the rapidly growing markets in the Indian kitchenware industry.


Some of the leading glassware manufacturers operating in this market are:

• Borosil Glass

• Yera

• Ocean Glass

• La Opala

Category Market Size (INR cr) Market Growth (%)

Glass Microwavables 80 10%

Tumblers 440 10%

Appliances 9000 10%

Opalware ~400 20%

Tea / coffee 400 (incl. ceramicware) 15%

Storage 1,000 15-20%

Melamine 300 15%


24 GWM

Major brands in Opalware

LARAH BY BOROSIL

Larah dinnerware sets are available in two series - Opalglass and Oriole.

• Larah Opalglass — Opalglass is a specially treated glass with impurities making

it look white in colour due to the diffusion of light. Dinnerware sets made from

Opalglass come with attractive designs and finish. They are dishwasher safe,

made from 100% food grade material, chip resistant and microwave safe.

• Larah Oriole — Dinnerware sets in this series are made from melamine, a

thermostat plastic that can be moulded into any desirable shape and form.

The material is lightweight and durable. Oriole dinnerware sets comprise

saucers, plates, dishes and trays. They come in eye-catching designs and

shapes, and make use of colour and designs to give a fancy finish.

LA OPALA RG LIMITED

La Opala RG (LORL), the largest organised crockery player in India, is engaged in

the manufacture of opalware and crystalware products. La Opala basically sells

via three brands- 1)La Opala; 2) Diva further divided into: a) Ivory and b)

Classique collections; and c) Solitaire. The company’s products are spread across

the value chain where Diva and Crystal - its high-end brands - have a distributor

network of around 200-strong, covering all major towns of India. The company

also channelises its products through modern retail stores. There are ~12,000 retail

touch-points through which the products of LORL are sold.

Acquisition details

Hopewell Tableware Private Ltd under Borosil CPD

The company invested approximately INR 50 crore towards acquisition of

Hopewell Tableware Private Ltd. Hopewell Tableware Private Ltd (HTPL)

was established in 2010 and was promoted by Mr. Swapan Guha (a

technocrat and Padma Shri awardee) along with Mr. Premsingh

Shekhawat (founder and chairman of Bajore group of companies) and

others. The company initially started with manufacture of melamine in

2011-12. Later it entered into the opalware business and decided to set up

an opal glass manufacturing facility due to greater opportunities.

Melamine production was suspended and only opal glass was being

manufactured from 2013-14. In January 2016, the earlier promoters exited

the company and entire stake was acquired by Borosil Glass Works Ltd

(BOROSIL). HTPL’s manufacturing unit is located in Rajasthan and is

equipped with a furnace capacity of 40 metric tonnes per day (MTPD),

two spinning lines and a pressing line.

Acquisition

of Hopewell

(Larah)

Brand Larah• Lifestyle Opal dinnerware• Microwave, Light, Strong, Chip-

resistant for daily use

Targets mass market customers for daily use

Market dominated by a single player• Opportunity to invest & grow

Larah into a strong brand

Sales and distributor channel synergy – higher throuhput

Brand revenue INR 48 crores in FY16

Revenue FY17: INR 87 crores(net of excise duty)


25 GWM

Klasspack Pvt Ltd under Borosil’s SIP division

Klasspack, one of India’s leading manufacturers of primary packaging materials –

glass ampoules and tubular glass vials of USP type I – for pharmaceutical

companies for their life saving drugs. Borosil Glass Works has acquired a 60.3%

stake in Nashik-based Klasspack Pvt Ltd, marking its foray into the primary

pharmaceutical glass packaging business.

Scientific and Industrial Products

Borosil Glass Works Ltd: Proposed Scheme of Amalgamation

Resultant Holding Structure


Effective promoter and promoter group holding of BGWL to increase from

74.28% to 76.28% Scheme to all statutory approvals.

Swap ratio:

4 shares of BGWL against 65 equity shares of Vyline

10 shares of BGWL for 207 equity shares of Fennel

Acquired

60.3% in July 2016

Glass Ampoules & Tubular Glass Vials

for packaging pharmaproducts

• Complements Borosil’s analytical vilas range (used in the lab)

Revenue for Aug to Mar’17: INR 20.5 Crores

Revenue in FY16 INR 28 Crores

Long lead times to pass stringent quality benchmarks, a

significant barrier to more entrants

Provide Borosil’s pharmacustomers credible 2nd

alternative for their packaging needs

Promoters Public

BGWL

GBLKlasspack

60.3%

76.28% 23.72%

25.05%

58.38%

16.57%


26 GWM

Current Holding Structure


Borosil Glass Works Limited (BGWL) and Gujarat Borosil Limited (GBL), listed on BSE.

Hopewell Tableware Private Ltd (HTPL) is a wholly owned subsidiary of BGWL

Vyline Glass Works Ltd (VGWL) is hel by Promoter of BGWL

Fennel Investment & Finance Pvt Ltd (FIFPL) is held by BGWL and Promoter of BGWL and is registered with RBI as NBFC and itself a promoter of BGWL

It is now proposed to merge/consolidate HTPL, VGWL and FIFPL with BGWL

Promoters Public

BGWL

VGWL FIFPL HTPL Klasspack GBL

68.91% 25.72%

100% 45.86% 5.37%

8.29% 31.13%

16.57%

45.85% 60.3%100%

25.05%

25.25% (Equity) +

100% (Pref share)


27 GWM

Financial Analysis

Healthy revenue growth driven from consumer business

Borosil’s revenue is expected to clock CAGR of 20% over FY17-20E driven primarily

by the consumer-ware division with the acquisition of Hopewell (Larah) -

improvement in utilization, introduction of new products and investment in brands.

Also, the scientific and industrial products division is expected to grow at 20%

CAGR over FY17-20E with entry into the new market of pharma packaging post

acquisition of Klasspack as well as organic revenue growth of ~16%. This division

continues to favour the educational sector by reaching more and more schools in

India for product promotions and has set an ambitious target of approaching

1,500 schools in the near future.


Improvement in product mix & backward integration will boost operating margin

Borosil’s operating margin is estimated to improve to 15.9% in FY20E from 10.7% in

FY17 on account of a change in product mix towards consumer-ware and

consolidation of Vyline Glass Works to backward integrate its SIP division.


PAT and PAT margin to improve substantially

The capex requirement in forthcoming years would be lower; greater

emphasis would be placed on capacity utilization, product mix and

market penetration while depreciation costs are expected to remain

range-bound, and debt is likely to remain at a lower level; consequently,

this scenario should result in finance costs being constant ahead. It is

envisaged that this will likely result in PAT (excluding one off) CAGR of 32%

over FY17-20E.


326 415

557 674

827 970

-

50.0

100.0

150.0

-

500

1,000

1,500

FY15 FY16 FY17 FY18E FY19E FY20E

Revenue (INR cr) (LHS) Revenue growth (%) (RHS)

4.7 5.4

10.7

13.8 15.8 15.9

-

5.0

10.0

15.0

20.0

-

50

100

150

200


EBITDA (INR cr) (LHS) EBITDA margin (%) (RHS)

50

28

43

69 82

97

-

2.0

4.0

6.0

8.0

10.0

12.0

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20

40

60

80

100

120


Net Profit (INR cr) (LHS) Net Profit margin (%) (RHS)


28 GWM

Maintain lower debt to equity

Borosil’s debt to equity stood at ~.07x as the company completed acquisitions

with internal accruals from sale of non-core assets. Ergo, we envisage significant

free cash flow generation, which will be available for growing the business further

and also without major borrowings. This should result in a debt to equity of merely

0.05x in FY20E.


Return ratios to improve

With margin improvement, parameters such as profitability along with asset

turnover on account of efficient capital allocation, should aid RoE and RoCE

improvement.


Healthy cash flow from operations

Borosil is estimated to generate healthy cash flow from operations in the

coming years led by robust operational performance.


0.05

0.13

0.07 0.06 0.06

0.05

0.04

0.06

0.08

0.10

0.12

0.14

-

20

40

60

80

100


Debt (INR cr) (LHS) Debt to Equity (x) (RHS)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

FY16 FY17 FY18E FY19E FY20E

ROAE (%) ROACE (%)

-150

-100

-50

-

50

100

FY16 FY17 FY18E FY19E FY20E

Operating cash flow (INR cr) Free cash flow (INR cr)


29 GWM

Financials

Income statement (Standalone) (INR cr) Balance sheet (Standalone) Ratios

Year to March FY16 FY17 FY18E FY19E FY20E As on 31st March FY16 FY17 FY18E FY19E FY20E Year to March FY16 FY17 FY18E FY19E FY20E

Income from operations 415 557 674 827 970 Equity share capital 2 2 2 2 2 ROAE (%) 4.5 6.5 8.0 8.5 9.4

Direct costs 180 206 237 291 345 Reserves & surplus 615 763 816 874 943 ROACE (%) 0.2 3.1 6.6 9.2 10.0

Employee costs 47 72 88 99 112 Shareholders funds 617 765 816 874 943 Debtors (days) 68 61 58 56 54

Other expenses 213 292 344 405 470 Secured loans 78 51 51 51 51 Current ratio 6.5 5.4 4.3 4.1 3.9

Total operating expenses 393 498 581 696 816 Borrowings 78 51 51 51 51 Debt/Equity 0.1 0.1 0.1 0.1 0.1

EBITDA 22 59 93 130 154 Minority interest 35 56 56 56 56 Inventory (days) 74 62 62 62 62

Depreciation and amortisation 21 32 28 34 41 Sources of funds 730 872 923 981 1,050 Payable (days) 25 24 30 30 30

EBIT 1 27 64 96 113 Gross block 460 452 497 652 717 Cash conversion cycle (days) 117 100 90 88 86

Interest expenses 4 8 6 6 6 Depreciation 128 160 188 223 264 Debt/EBITDA 3.5 0.9 0.5 0.4 0.3

Other income 36 43 45 32 38 Net block 332 292 308 429 453 Adjusted debt/Equity 0.1 0.1 0.1 0.0 0.0

Profit before tax 34 62 103 122 145 Capital work in progress 7 42 42 42 42

Provision for tax 6 19 34 40 48 Total fixed assets 348 351 368 488 512 Valuation parameters

Core profit 28 43 69 82 97 Investments 219 264 264 149 149 Year to March FY16 FY17 FY18E FY19E FY20E

Extraordinary items 0 91 0 0 0 Inventories 84 95 115 141 165 Diluted EPS (INR) 126.2 588.2 272.0 310.9 370.9

Profit after tax 28 133 69 82 97 Sundry debtors 78 94 107 127 144 Y-o-Y growth (%) 10.4 366.1 (53.8) 14.3 19.3

Minority Interest 2 2 -6 -10 -12 Cash and equivalents 9 11 8 8 9 CEPS (INR) 216.7 335.3 395.1 460.0 548.6

Adjusted net profit 29 136 63 72 86 Loans and advances 39 36 43 43 40 Diluted P/E (x) 69.8 15.0 32.4 28.3 23.7

Equity shares outstanding (cr) 0.2 0.2 0.2 0.2 0.2 Total current assets 210 235 273 319 358 Price/BV(x) 3.3 2.7 2.5 2.3 2.2

EPS (INR) basic 126 588 272 311 371 Sundry creditors and others 28 37 55 68 80 EV/Sales (x) 5.1 3.7 3.1 2.5 2.1

Diluted shares (Cr) 0.2 0.2 0.2 0.2 0.2 Prov isions 4 7 8 10 12 EV/EBITDA (x) 94.5 34.9 22.4 15.9 13.5

EPS (INR) fully diluted 126.2 588.2 272.0 310.9 370.9 Total CL & provisions 32 43 63 78 91 Diluted shares O/S 0.2 0.2 0.2 0.2 0.2

Div idend per share 25.0 30.1 52.2 59.7 71.2 Net current assets 178 192 210 241 266 Basic EPS 126.2 588.2 272.0 310.9 370.9

Div idend payout (%) 19.8 15.5 19.2 19.2 19.2 Net Deferred tax -70 -74 -87 -104 -120 Basic PE (x) 69.8 15.0 32.4 28.3 23.7

Misc expenditure 54 139 168 207 242 Div idend yield (%) 0.2 0.3 0.5 0.6 0.7

Common size metrics- as % of net revenues (INR cr) Uses of funds 730 872 923 981 1,050

Year to March FY16 FY17 FY18E FY19E FY20E Book value per share (INR) 2,662 3,304 3,533 3,785 4,084

Operating expenses 94.6 89.3 86.2 84.2 84.1

Depreciation 5.0 5.8 4.2 4.2 4.2 Cash flow statement

Interest expenditure 0.9 1.4 0.9 0.7 0.6 Year to March FY16 FY17 FY18E FY19E FY20E

EBITDA margins 5.4 10.7 13.8 15.8 15.9 Net profit 28 133 69 82 97

Net profit margins 7.0 8.1 9.3 8.7 8.8 Add: Depreciation 21 32 28 34 41

Add: Misc expenses written off -1 -85 -29 -38 -36

Growth metrics (%) Add: Deferred tax 66 4 13 17 16

Year to March FY16 FY17 FY18E FY19E FY20E Add: Others 2 2 -6 -10 -12

Revenues 27.4 34.2 21.0 22.7 17.3 Gross cash flow 114 88 75 85 107

EBITDA 45.8 166.8 56.5 40.5 18.2 Less: Changes in W. C. 82 13 20 31 25

PBT (47.9) 81.8 66.5 18.3 19.4 Operating cash flow 32 75 55 54 82

Net profit (45.1) 54.3 62.0 18.3 19.4 Less: Capex 97 35 45 155 65

EPS 10.4 366.1 (53.8) 14.3 19.3 Free cash flow -64 40 10 -101 17


30 GWM

Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)

Board: (91-22) 4272 2200

Vinay Khattar

Head Research

[email protected]

Rating Expected to

Buy appreciate more than 15% over a 12-month period

Hold appreciate between 5-15% over a 12-month period

Reduce Return below 5% over a 12-month period

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Borosil 5 years price chart

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31 GWM

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32 GWM

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Coverage Stock: Borosil Glass Works Ltd. CMP INR 8,803 ... · 1 GWM segment. The company is present...

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Transcript of Coverage Stock: Borosil Glass Works Ltd. CMP INR 8,803 ... · 1 GWM segment. The company is present...