OCL India Ltd - careratings.com€¦ · · 2013-11-25OCL INDIA LIMITED 1 EQUIGRADE Very Good...
Transcript of OCL India Ltd - careratings.com€¦ · · 2013-11-25OCL INDIA LIMITED 1 EQUIGRADE Very Good...
ANALYTICAL CONTACT
Mr. Amod Khanorkar +91-22-6754 3520 [email protected]
BUSINESS DEVELOPMENT CONTACTS
MUMBAI
Mr. Anil Varghese +91-22-6754 3673 [email protected]
KOLKATA
Mr. Sukanta Nag +91-33- 2283 1800 [email protected]
CHENNAI
Mr. V Pradeep Kumar +91-44-2849 7812 [email protected]
AHMEDABAD
Mr. Mehul Pandya +91-79-40265656 [email protected]
NEW DELHI
Ms. Swati Agrawal +91- 11- 2331 8701 [email protected]
BANGALORE
Mr. Dinesh Sharma +91-80-2211 7140 [email protected]
HYDERABAD
Mr. Ashwini Kumar Jani +91-40-40102030 [email protected]
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OCL INDIA LIMITED
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Financial Information Snapshot
(Rs. Crores) FY11 FY12E FY13E FY14E
Total Revenues 1,474 1,602 1,740 2,020
EBITDA 304 303 340 388
PAT 114 79 104 136
Fully Diluted EPS* (Rs.) 20.1 13.9 18.3 23.9
Dividend Per Share (Rs.) 4.0 4.0 4.0 4.0
P/E (x) 4.6 6.6 5.0 3.9
EV/EBITDA (x) 3.2 3.1 3.0 2.6
* Calculated on Current Face Value of Rs.2/- per share
EQUIGRADE – Analytical Power for Investment Decision
OCL INDIA LTD CEMENT AND REFRACTORY
Very Good Fundamentals, Considerable Upside Potential CMP: 92/ CIV: 1241
Sensex: 16,937
CARE Equity Research assigns 4/5 on fundamental grade to OCL
India Limited (OCL)
CARE Equity Research assigns a fundamental grade of 4/5 to OCL.
This indicates ‘Very Good Fundamentals’. OCL is a key player in the
eastern region and the largest cement player in Orissa with a market
share of around 30%. OCL has one of the lowest freight cost in the
industry on account of its plants being located in the proximity of the
key markets in the eastern region. The company is also setting up a
captive power plant (CPP) which will reduce its dependence on grid
power and in-turn aid the margins. CARE Equity Research believes
key catalysts for OCL would be higher cement demand in the eastern
region on the back of infrastructure and economic growth. The eastern
region currently has lowest per capita consumption (an average of 106
kg, compared with all-India average of 171 kg).
Valuation
CARE Equity Research values OCL using sum of the parts (SOTP)
methodology. Given the cyclical nature and corresponding earnings
volatility of the industry, we have valued OCL’s cement business
based on Enterprise Value (EV)/tonne multiple based valuation
methodology. Consequently, we have assumed USD 45 per tonne to
arrive at the EV for OCL’s cement business. The EV for refractory
business is arrived by EV/EBITDA multiple of 3x to one-year forward
refractory EBITDA. The total EV has thus been arrived at using the
SOTP method, resulting in a Current Intrinsic Value (CIV) of Rs. 124
per share. Based on the Current Market Price (CMP) of Rs.92 per
share we assign a valuation grade of 5/5 to OCL, indicating the shares
of OCL have ‘Considerable Upside Potential’
21st
October 2011
OCL INDIA LIMITED
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Mid-sized player; significant in Eastern region
OCL is a mid-sized player in the Indian cement industry and a key player in the eastern region with a capacity of
5.35 MTPA located at Rajgangpur and Kapilas Road in Orissa. The company has a leadership position in Orissa,
with around 30 per cent market share. The state of Orissa in-turn constitutes around 60 per cent of the annual cement
dispatches for the company.
Player-wise capacity in eastern region (FY11)
Source: Company, CARE Equity Research
The company is further expanding its reach in the neighboring states like West Bengal, Bihar and Jharkhand. The
company currently has a distribution network of around 500 dealers and 35 sales offices.
Regional dynamics dominate; demand in eastern region expected to grow at higher rate
The cement industry is characterized by the regional dynamics primarily on account of high freight cost involved
in the movement of cement. While, the overall industry has been reeling under low demand scenario as dispatches
have risen merely by 5 per cent in FY11 as against the earlier expectations of 10 per cent, demand in the eastern
region grew by 9 per cent during the same period. In the past, the eastern region has lagged behind in terms of
economic growth as compared to other regions. The per capita consumption of cement in the eastern region stood
at around 106 kg in FY11, compared with an all-India average of around 171kg, (world average of around 450
kg). However, over the last few years, key states like Bihar, Orissa and Chhattisgarh have witnessed higher
economic growth than the rest of the country. State GDP for Bihar and Orissa have grown at 10 per cent and 9 per
cent respectively over the last three years as compared with an all India GDP growth of around 8 per cent (cement
demand in is closely related to the economic activity, with a multiplier of around 1 to 1.25 times the GDP).
FUNDAMENTAL GRADE Very Good Fundamentals 4/5
OCL INDIA LIMITED
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Demand – Supply in Eastern region
Source: Cement Manufacturers Association (CMA) and CARE Equity Research
Eastern states GDP growth trend (%)
Source: Centre for Monitoring Indian Economy (CMIE) and CARE Equity Research
Going forward, we expect cement demand in the region to grow at 9 per cent to 43 MTPA as compared with an all
-India growth of 7.6 per cent on the back of increased industrialization (rich mineral resource) and infrastructure
spending. The total government expenditure in states of Bihar has increased from Rs.42,796 crore in FY10 to
Rs.57,759 crore in FY11 while in Orissa it has increased from Rs.30,541 crore to Rs.39,389 crore during the same
period. The construction sector’s contribution to the state GDP for Bihar increased from 9.7 per cent in FY08 to 13
per cent in FY11. The demand may get a further push in 2013, on account of Central and State government
elections (in Orissa) in 2014. Cement dispatches in the past have witnessed growth during pre-election years with
the incumbent government speeding up the ongoing/announced projects.
States FY07 FY08 FY09 FY10
Assam 4.7 4.8 6.8 8.1
Bihar 18.1 8.5 13.1 8.6
Chhattisgarh 18.6 8.6 6.8 11.9
Jharkhand 2.4 20.5 4.7 6.6
Meghalaya 7.7 4.0 4.5 7.3
Orissa 13.0 10.9 7.2 10.6
West Bengal 7.4 8.0 5.2 9.0
India 9.6 9.3 6.8 8.0
(mn ton) FY08 FY09 FY10 FY11E FY12E FY13E
Effective Capacity 27 29 34 37 39 43Growth (YoY - %) 6.8 9.7 14.3 9.0 6.8 10.3
Production 24 26 29 30 32 34Capacity utilization (%) 89.5 88.7 86.3 82.2 81.5 80.0
Consumption 25 28 33 36 39 43Growth (YoY - %) 5.7 13.4 17.9 8.8 8.0 10.0
OCL INDIA LIMITED
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Captive power to reduce pressure on margins; location advantage results in lower freight cost
OCL is in the process of setting up 54MW Captive Power Plant (CPP) in Rajgangpur, Orissa with an estimated
capital expenditure of Rs.270 crore. Commissioning of power plants will come about in two phases – the first
phase of 27MW, has already been commissioned in September 2011, while the balance is expected to get
commissioned by December 2011. Coal required for power plants will be procured partly from captive mine and
partly through linkages. Addition of CPP will reduce dependence on grid and would enable to save around Rs.20
crore in FY13E. Also, the company would be in a position to sell excess power from FY13 onwards. We expect
OCL to sell around 4 million units and around 7.4 million units in FY13 and FY14, respectively from the CPP,
resulting in a revenue addition from power sale of around Rs.14.6 crore and Rs.31 crore in FY13 and FY14
respectively.
OCL also has the distinct advantage of plants being located in the proximity of its key markets. Consequently, the
average lead distances for the company are much lower compared with its peers, thereby reducing the outward
freight cost per tonne for OCL as compared with the peers. Freight per tonne for OCL was around Rs.400 as
compared with the industry average of around Rs.579. Freight cost per ton in FY11 had witnessed an increase by
around 15 per cent on account of increase in diesel prices by around 14 per cent. We expect lower impact for OCL
in a rising freight cost scenario on account of this location advantage
High coal prices, flat cement realization to result in continued pressure on margins
OCL sources 60 per cent of its coal requirement through linkages while the rest is procured through open market/
e-auction. Coal India raised domestic coal prices in the later part of Q4FY11 by around 30 per cent, the full impact
of which will be seen from FY12 onwards. We expect power and fuel cost per ton to increase from around Rs.700
in FY11 to Rs.840 in FY12.
Region wise trend in cement price*
Source: CMIE and CARE Equity Research
Note: * Cities represent the major markets in each region
OCL INDIA LIMITED
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While, the cement prices for the industry have so far remained on the higher side on the back of rise in power &
fuel costs and freight charges, going forward the realization may witness a drop on account of reduced utilization
rates. The industry is expected to increase capacities to the tune of 44 MTPA by FY13E resulting in lower capacity
utilization rates. While the eastern region may not witness pricing pressure on the back of comparatively higher
utilization rates (around 80 per cent in FY13E), the movement of cement from the southern region where the
utilization rates are expected to remain low, may pose a threat to the pricing in the region.
Going forward, we expect EBITDA per ton to decline by 8 per cent from around Rs.850 in FY11 to around Rs.785
in FY12E.
West Bengal facility to help expand reach
OCL is process of setting up a 1.35 MTPA grinding facility at Salvoni, West Bengal with an estimated capital
expenditure of around Rs.450 crore. The capex will be funded through a mix of internal accruals and debt funds.
The grinding unit is expected to be commissioned by Q4FY14. The new capacity will enhance OCL’s market
presence in West Bengal, which is a key consumption centre of cement in the Eastern region. This will also protect
the company against any downward pressure in prices in Orissa.
Cement revenue growth to moderate
During FY09, OCL expanded its clinker capacity from 1.2 MTPA to 2.9 MTPA and cement capacity from 2.9
MTPA to 5.35 MTPA. On the back of this capacity expansion, OCL’s dispatches increased from 2 MTPA in FY08
to 3.4 MTPA in FY11, registering 19.5 per cent CAGR. Going forward, we expect dispatches to grow in line with
the industry average at 9 per cent during FY12-14E. However, cement realization growth would stay muted at 3
per cent during FY12-14E on account of lower capacity utilization.
We expect OCL’s cement revenue to register a CAGR of around 12 per cent over FY11-FY14E period, from
Rs.1,181 crore in FY11 to Rs.1,643 crore in FY14E.
OCL INDIA LIMITED
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OCL: Cement Revenue and Growth
Source: Company and CARE Equity Research
Refractory business - no silver lining visible yet
The refractory business is closely linked to the growth in the steel industry as this industry consumes around 70
per cent of the output, with the rest of the demand comes from aluminum and glass industries. Refractory products
are primarily used as heat-resistant material in manufacturing of steel. OCL has a refractory capacity of 106,000
TPA. The segment contributed around 20 per cent to the revenues for the company in FY11. Going forward, we
expect OCL’s refractory business to grow at a CAGR of 5.5 per cent during FY12-14E to Rs.346 crore, thereby
contributing around 17 per cent to the revenues in FY14.
OCL: Refractory Revenue and Growth
Source: Company and CARE Equity Research
OCL INDIA LIMITED
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Margins for the business are expected to stay under pressure on the back of increased competition from China,
leading to higher imports corroborated by an increase in key refractory inputs like fused magnesia, bauxite,
graphite, alumina and excess capacity in the industry. While, prices of the inputs have witnessed an increase by an
average of 20-25 per cent in the last couple of years, the price of refractory products have not been revised to a
large extent due to the excess capacity and better negotiating power of the large steel manufacturers. OCL, despite
being one of the leading players in the industry, finds it difficult to pass on any hike in raw material. As a result,
EBITDA margin in this business declined from around 12 per cent in FY09 to 5 per cent in FY11. Going forward,
we expect EBITDA margin to improve to around 7 per cent and forecast EBITDA CAGR of 12 per cent during
FY11-14E.
Margins trend in refractory business
Source: Company and CARE Equity Research
Revenue growth to slow down to 11 per cent over FY11-14E
Lower cement revenue growth coupled with marginal growth in refractory sales would result in slowdown in the
overall revenue growth for the company from 24 per cent during FY08-11 to 11 per cent in FY11-14E. Cement
revenue growth will be impacted due to lower realization growth. We expect revenues to increase from Rs.1,474
crore in FY11 to Rs.2,020 crore in FY14.
OCL INDIA LIMITED
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OCL: Revenue and Growth
Source: Company and CARE Equity Research
Return ratios to remain subdued
We believe return ratios for OCL will remain subdued during FY12-14E on account of the ongoing capex and
muted net profit margins. Consequently, we estimate ROE to decline from 14 per cent from FY11 to 11 per cent
in FY13E.
In compliance with the listing agreement 49
The company has eight members in the Board, with two of them being Executive, three Non-Executive and three
Non Executive and Independent Directors. The Board has formed three sub-committees for audit, remuneration
and shareholders/investor’s grievance. As per the annual report, the same is in compliance with the listing
agreement of the stock exchanges.
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CARE Equity Research assigns a valuation grade of 5/5 to OCL
CARE Equity Research has used the sum of the parts (SOTP) methodology to arrive at the valuation for OCL,
since the company has operations in two segments, cement and refractory.
Given the cyclical nature and corresponding earnings volatility we have used the EV/tonne methodology to
value the cement business of OCL. We have assumed an EV/tonne of 45 USD to value OCL’s cement business.
An EV/tonne of 45 USD results in an EV of Rs 1,107 crore for cement business.
For the refractory business, we have used an EV/ EBITDA methodology and a multiple of three times the one-
year forward EBITDA for the refractory business, consequently leading to EV of Rs.61 crore for the refractory
business. Thereby, by the SOTP methodology the company is valued at Rs.1,168 crore and with an outstanding
net debt of Rs.464 crore, the CIV per share for OCL is arrived at Rs.124.
The CIV of Rs.124 results in a valuation grade of 5/5, indicating the shares of OCL has ‘Considerable Upside
Potential’ from the CMP of Rs.92 per share.
OCL: Valuation snapshot
Source: CARE Equity Research
VALUATION GRADE Considerable Potential Upside 5/5
Valuation Multiple
Driver (Average of
FY12 & FY13)
Value
(Rs Crores)
EV of Cement business (A) EV/tonne 45 5.35 1107
EV of Refractory business (B) EV/EBITDA 3 20.20 61
Total EV (A+B) 1168
Less: Net debt 464
Equity value 704
Value per share (Rs.) 124
OCL INDIA LIMITED
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OCL: One-year forward rolling EV/EBITDA OCL: One-year forward rolling EV/ton
Source: CMIE and CARE Equity Research
OCL INDIA LIMITED
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OCL: Peer Comparison
Source: Company and CARE Equity Research
(Rs. Crores) OCL India Ltd JK Cements Sagar Cements
Financial Statements FY10 FY11 FY10 FY11 FY10 FY11
Total Revenues
1,374.2
1,474.4
2,275.2
2,704.7
529.8
553.9
EBITDA
385.1
303.5
464.8
315.1
84.0
78.1
EBIT
270.6
180.8
379.2
202.3
56.3
50.5
PAT
169.7
114.4
224.6
62.6
19.1
17.4
Margins
EBITDA 28.0% 20.6% 20.4% 11.6% 15.9% 14.1%
EBIT 19.7% 12.3% 16.7% 7.5% 10.6% 9.1%
PAT 12.3% 7.8% 9.9% 2.3% 3.6% 3.1%
Per Share Data
EPS 29.8 20.1 32.1 9.0 12.7 11.6
BVPS (Tangible) 140.0 155.4 154.9 162.2 138.0 147.7
Valuations Ratios (Trailing)
P/E
4.6
12.0
12.0
EV/ EBITDA
3.2
5.6
5.9
EV/ TONNE (Rs)
1842
2336
1952
P/BV
0.6
0.7
0.9
Price /Sales
0.36
0.28
0.38
Market Capitalisation
523
751
209
Profitability Ratios
ROCE
7.6%
8.1%
10.4%
ROE
13.6%
5.6%
8.1%
OCL INDIA LIMITED
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OCL India Ltd (OCL), the flagship company of Mr Jai Dayal Dalmia group, was incorporated in October 1949.
The company is into cement and refractory business with facilities located in the eastern part of the country,
primarily in the state of Orissa.
Revenue mix
Source: Company and CARE Equity Research
Cement Business
OCL has evolved from a once modest 500 TPD capacity of ‘single wet process cement kiln’ imported from FL
Smith, Denmark to its current modern dry process cement capacity of 5.35 MTPA. The current capacity is
situated at two locations, Rajgangpur and Kapilas both in Orissa. OCL is predominantly an eastern player with
close to 60 per cent share of its revenues from Orissa itself, thereby commanding a leadership position in the state
with a share of around 30 per cent in FY11. In FY11, cement business contributed 80 per cent to the total
revenues.
OCL mainly manufactures Portland Blast Furnace Slag Cement (PBFSC) which is sold under the brand name
‘Konark’. OCL’s location helps it in the availability of slag from the nearby steel plants. The company has the
highest blending ratio of around 1.9 compared to an average 1.5-1.7 for other Eastern players due to the higher
use of slag.
COMPANY BACKGROUND
OCL INDIA LIMITED
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Refractory Business
OCL forayed into refractory manufacturing in 1954 and is currently one of the largest refractory manufacturing
companies in the country. OCL produces a wide range of products which are used in the ferrous and non-ferrous
industries. The company has a capacity of 106,000 MTPA. The refractory’s contribution to the total revenues was
20 per cent in FY11.
Different refractory products made by OCL are
Silica Refractories for Coke Ovens, High Temperature Blast Furnace Stoves and Glass Industries.
High Alumina Refractories for Blast Furnace Stoves.
Basic Refractories.
Magnesia Carbon Bricks.
Continuous Casting Refractories.
New-generation high-performance Castable and Precast Blocks for various applications.
Purging Refractories.
Slide Gate Refractories.
OCL: Board of Directors
Source: Company and CARE Equity Research
Name Designation Category of Director
Mr Pradip Kumar Khaitan Chairman Non Executive & Non Independent
Mr Gaurav Dalmia Managing Director Promoter, Executive & Non Independent
Mr D.D. Atal Whole time Director Executive & Non Independent
Mr D. N. Davar Independent Director Non Executive & Independent
Mr Puneet Yadu Dalmia Non-executive Director Promoter, Non Executive & Non Independent
Dr S. R. Jain Independent Director Non Executive & Independent
Dr R. C. Vaish Independent Director Non Executive & Independent
Mr V. P. Sood Non-executive Non Executive & Non Independent
OCL INDIA LIMITED
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Cement Industry Overview
India’s cement demand, is proxy for economic growth and urbanization, remain a long-term story primarily due
to lower per capita consumption. Over the last 15 years cement demand in the India has grown at 1.25x growth
rate of GDP. Cement demand is primarily derived from three segments, viz Housing (55 per cent), Infrastructure
(25 per cent) and Industrial/ Commercial construction (20 per cent).
The Indian Cement industry has been reeling under low demand scenario as dispatches have risen by 5 per cent in
FY11 as against the earlier expectations of 10 per cent. This was primarily due to weak demand on account of
prolonged monsoon, political instability in AP, agitation in states of Rajasthan and Haryana, unavailability of
sand and railway wagons. We believe the overall cement demand for FY12E would remain weak at 6 per cent.
Further, we expect the all-India cement dispatches to grow at 8 per cent in FY13 on account a) increased thrust on
infrastructure sector, b) increase in rural demand housing and c) low base effect.
Cement: All-India demand-supply matrix
Source: CMA and CARE Equity Research
Utilization to remain below 80 per cent level till FY14E
India had an installed capacity base of about 293mt in FY11, and we estimate 60mt will be added over FY11-14.
Since FY96, the average industry-wide utilization levels have been 83-85 per cent. Capacity utilization for FY11
stood at 76 per cent against 87 per cent in FY10 mainly on account of lull demand growth during 2HFY11.
Capacity additions would keep utilization levels subdued at 76 per cent in FY13. Further, we expect recovery in
utilization rates to be achieved in FY14E on the back of increase in demand from housing and infrastructure
spending. However, we do not envisage utilization to grow back to past levels even in FY14.
SNAPSHOT OF THE INDUSTRY
(mn ton) FY08 FY09 FY10 FY11E FY12E FY13E FY14E
Year end capacity 189 218 259 293 310 336 351
Effective Capacity 176 205 230 274 298 313 330Growth (YoY - %) 6.1 16.6 12.2 19.3 8.8 5.0 5.4
Production 168 181 199 209 221 238 262Capacity utilization (%) 96 89 87 76 74 76 79
Domestic Demand 164 178 197 206 218 236 259Exports (net of imports) 4 3 3 3 3 3 3
Total Demand 168 181 199 209 221 238 262Growth (YoY - %) 8.2 7.9 10.1 4.6 5.9 7.9 9.9
OCL INDIA LIMITED
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Refractory Industry Overview
Refractory products are heat-resistant materials used in almost all processes involving high temperatures and/or
corrosive environment. These are typically used to insulate and protect industrial furnaces and vessels due to their
excellent resistance to heat, chemical attack and mechanical damage. The refractory products influence the safe
operation, energy consumption and product quality; therefore it is critical to obtain refractory product suited to
each application. Any failure of refractory products could result in a great loss of production time, equipment, and
sometimes the product itself. The value of refractory product is judged not merely by the cost of material itself,
but by the nature of the job and/or its performance in a particular situation.
Key refractory products include fire-clay bricks, castables, ceramic fiber and insulating bricks that are made in
varying combinations and shapes for diverse applications. The steel industry is the major consumer of refractory
products hence the fortunes of the refractory industry depend mainly on the growth of the steel industry. Besides
the steel sector, the demand for quality refractory products is also increasing from industries like aluminum,
cement and glass industries.
Outlook
We expect the Indian refractory industry to grow at around 7-8 per cent annually through FY14 on the back of
growth in the steel industry. The steel industry in India on an average consumes 12-13 kg of refractory per tonne
of steel (around 7 kg in developed countries). However, with the focus of refractory manufacturers in improving
the quality of the refractory products, the need to replace the refractory products will decline leading to lower
demand. This downward trend in the unit consumption of refractory products is likely to continue leading to
overcapacities in the refractory market.
While the ability to develop product suiting specific requirement of the client is an area of concern, the Indian
industry is expected to position itself well by virtue of modernisation and strong technical tie-ups. However, the
competition from the unorganized sector players coupled with the influx of import from China might lead to a
further lower increase in realization.
OCL INDIA LIMITED
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Income Statement
(Rs Crores) FY09 FY10 FY11 FY12E FY13E FY14E
Total Revenues 1,119 1,374 1,474 1,602 1,740 2,020
EBITDA 261 385 304 303 340 388
Depreciation and amortisation 57 114 123 142 148 151
EBIT 204 271 181 161 192 236
Interest 38 51 62 86 76 70
PBT 177 255 152 110 145 189
Reported PAT 116 164 114 79 104 136
Recurring PAT 115 170 114 79 104 136
Fully Diluted Earnings Per Share* (Rs.) 20.2 29.8 20.1 13.9 18.3 23.9
Dividend, including tax 17 27 26 26 26 26
* Calculated based on ordinary PAT on Current Face Value of Rs. 2/- per share
Balance Sheet
(Rs Crores) FY09 FY10 FY11 FY12E FY13E FY14E
Tangible Net worth 659 796 884 937 1015 1124
Debt (incl. Preference Shares) 715 826 852 752 702 652
Deferred Liabilities / (Assets) 100 120 114 114 114 114
Capital Employed 1,474 1,742 1,851 1,804 1,831 1,891
Net Fixed Assets, incl. Capital WIP, net of reval
reserve 1218 1309 1292 1321 1442 1491
Investments 6 6 8 8 8 8
Loans and Advances 82 72 77 82 87 92
Inventory 174 203 254 273 295 367
Receivables 116 105 132 125 154 170
Cash and Cash Equivalents 119 354 390 334 193 184
Other current assets 1 1 2 2 2 2
Current Assets, Loans and Advances 490 734 855 815 730 816
Less: Current Liabilities and Provisions 240 307 304 340 349 424
Total Assets 1,474 1,742 1,851 1,804 1,831 1,891
Ratios based on Financials
FY09 FY10 FY11 FY12E FY13E FY14E
Growth in Total Revenues 46.1% 22.8% 7.3% 8.7% 7.7% 15.3%
Growth in EBITDA 30.6% 47.8% -21.2% -0.3% 12.5% 13.9%
Growth in Adj.PAT -1.2% 47.9% -32.6% -31.0% 32.0% 30.3%
Growth in EPS -6.5% 47.9% -32.6% -31.0% 32.0% 30.3%
EBITDA Margin 23.3% 28.0% 20.6% 18.9% 19.6% 19.2%
PAT Margin 10.3% 12.3% 7.8% 4.9% 6.0% 6.7%
RoCE 10.2% 11.2% 7.6% 6.3% 7.6% 9.1%
RoE 18.9% 23.3% 13.6% 8.7% 10.7% 12.7%
Net Debt-Equity (x) 0.9 0.6 0.5 0.4 0.5 0.4
Interest Coverage (x) 5.3 5.3 2.9 1.9 2.5 3.4
Current Ratio (x) 2.0 2.4 2.8 2.4 2.1 1.9
Inventory Days 67 69 71 74 74 74
Receivable Days 34 29 29 29 29 29
Price / Earnings (P/E) Ratio 4.6 6.6 5.0 3.9
Price / Book Value(P/BV) Ratio 0.6 0.6 0.5 0.5
Enterprise Value (EV)/EBITDA 3.2 3.1 3.0 2.6
Source: Company and CARE Equity Research
FINANCIAL ANALYSIS
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CARE EquiGrade Grid (CEG)
Through CEG, CARE Equity Research addresses two critical factors considered by an investor while investing
in a particular company’s equity shares:
1. Fundamentals: Whether the company is fundamentally sound with respect to its business, its financial
position, its management and its prospects.
2. Valuation: What is the Current Intrinsic Value (CIV) of the stock and how it compares vis-a-vis its Current
Market Price (CMP).
These factors are answered assigning quantitative grades to both these parameters. CEG is the snapshot of
‘Fundamental Grade’ and ‘Valuation Grade’ assigned by CARE Equity Research.
Fundamental Grade
This grade represents how sound the company is fundamentally, vis-à-vis other listed companies in India. This
grade captures:
1. Business Fundamentals and Prospects
2. Financial Soundness
3. Management Quality
4. Corporate Governance Practices
The grade is assigned on a five-point scale as under:
CARE Fundamental Grade Evaluation
5/5 Strong Fundamentals
4/5 Very Good Fundamentals
3/5 Good Fundamentals
2/5 Modest Fundamentals
1/5 Weak Fundamentals
EXPLANATION OF GRADES
OCL INDIA LIMITED
www.careratings.com 18
EQUIGRADE
Valuation Grade
This grade represents the potential value in the company’s equity share for the investor over a 1-year period. The
Current Intrinsic Value (CIV) or the price arrived by CARE Equity Research on fundamental basis is compared
with the Current Market Price (CMP) of the stock and the grade is assigned based on the gap between CIV and
CMP of the stock.
The grade is assigned on a five-point scale as under:
CARE Valuation Grade Evaluation
5/5 Considerable Upside Potential (>25% upside from CMP)
4/5 Moderate Upside Potential (10-25% upside from CMP)
3/5 Fairly Priced (+/-10% from CMP)
2/5 Moderate Downside Potential (10-25% downside from CMP)
1/5 Considerable Downside Potential (>25% downside from CMP)
Grading determination is a matter of experienced and holistic judgment, based on relevant quantitative and
qualitative factors of the company in relation to other listed companies.
DISCLOSURES
Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of interest that can
bias the grading recommendation of the company.
This report has been sponsored by the company.
DISLCLAIMER
This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research has taken utmost care to
ensure accuracy and objectivity while developing this report based on information available in public domain or from sources considered reliable.
However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of
the ratings division and this report does not contain any confidential information obtained by the ratings division, which it may have obtained in
the regular course of operations. Opinions expressed herein are our current opinions as on the date of this report.
CARE’s valuation of the security is mainly based on company-specific fundamental factors. Equity prices are affected by both fundamental factors
as well as market factors such as – liquidity, sentiment, broad market direction etc. The impact of market factors can distort the price of the
security thereby deviating from the intrinsic value for extended period of time. CARE EquiGrade on a security should not be construed as
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Sion East, Mumbai – 400 022.
CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information
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This report is for the information of the intended recipients only and no part of this report may be published or reproduced in any form or
manner without prior written permission of CARE Research.
OCL INDIA LIMITED
19 www.careratings.com
EQUIGRADE
Credit Analysis & REsearch Ltd. (CARE) is a full-service rating company that offers a wide range of rating and grading
services across sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best
international practices.
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