Dish TV - ICICI Direct

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Oct 28, 2015 ... Dish TV reported its Q2FY16 numbers with revenues at | 752.4 crore, ... Dish TV, the largest DTH operator ended FY15 with 12.9 million net.
Result Update October 28, 2015

Dish TV (DISHTV)

Rating matrix Rating Target Target Period Potential Upside

: : : :

Hold | 115 12 months 7%

Fundamentals continue to improve… •

What’s changed? Target EPS FY16E EPS FY17E Rating

Changed from | 120 to | 115 Changed from | 2 to | 2.2 Changed from | 3.1 to | 3.1 Unchanged

Quarterly performance Revenue EBITDA EBITDA (%) PAT

Q2FY16 752.4 255.0 33.9 86.9

Q2FY15 YoY (%) 672.4 11.9 162.4 57.1 24.1 974 bps (15.1) (677.4)

Q1FY16 QoQ (%) 736.7 2.1 236.8 7.7 32.1 174 bps 54.2 60.4

Key financials | Crore Net Sales EBITDA Net Profit EPS (|)

FY14 2,499 624 (158) (1.5)

FY15 2,773 733 3 0.0

FY16E 3,080 1,024 236 2.2

FY17E 3,527 1,207 332 3.1

FY14 -72.8 (77.7) 20.0 (36.7) 13.2 7.7

FY15 3658.3 3,902.7 17.1 (36.7) -1.0 15.4

FY16E 48.6 51.9 12.3 (149.1) -307.9 35.3

FY17E 34.6 36.9 10.2 45.1 130.3 38.5

Valuation summary P/E Target P/E EV / EBITDA P/BV RoNW RoCE

Stock data Particular Market Capitalization Total Debt (FY15) Cash (FY15) EV 52 week H/L Equity capital Face value

Amount 11,489.3 1,483.9 428.6 12,544.6 121 / 58 106.6 1.0

Price performance Dish TV Hathway Cable

1M -5.4 11.6

3M -8.6 -7.6

| 108

6M 47.7 -17.0

12M 90.2 -28.2

Research Analysts Bhupendra Tiwary [email protected] Sneha Agarwal [email protected]

ICICI Securities Ltd | Retail Equity Research

Dish TV reported its Q2FY16 numbers with revenues at | 752.4 crore, up 11.9% YoY, slightly lower than our expectation of | 761.6 crore. ARPU during the quarter came in at | 171 vs. | 173 in Q1FY16, which led to slightly lower subscription revenues at | 692.6 crore. The ARPU was weighed down by the full quarter impact of the increase of service tax. Excluding this, ARPU would have been | 174. The company added 338,000 net subscribers in the quarter leading to a net subscriber base of 13.7 million at the end of the quarter • EBITDA came in at | 255.0 crore vs. our expectation of | 246.9 crore, up 57.1% YoY. Margins came in at 33.9% aided by stability in the programming costs and lower-than-expected employee expenses • PAT came in at | 86.9 crore vs. expectations of | 53.9 crore primarily aided by lower depreciation charge, which came in at | 133.0 crore vs. build-in charge of | 160.0 crore and higher operating leverage Leads DTH subscriber additions; Zing continues to aid growth Dish TV, the largest DTH operator ended FY15 with 12.9 million net subscribers, up from 11.4 million last year, adding 1.5 million subscribers, double the net adds (0.71 million) in FY14. During Q2FY16, it had net subscriber addition of 338000, higher than its other DTH counterparts. The company remains upbeat on subscriber additions over the next two or three years on the back of Phase III/IV of digitisation and has guided for net subscriber addition of 1.5- 1.7 million in FY16E & 2 million in FY17E. We have built in net subscriber addition of 1.6 million subscribers each in FY16E & FY17E with subscriber base to reach 16.1 million in FY17E. ARPU growth yet to gain momentum... Reported ARPU at | 171 was lower owing to the incidence of increased service tax to 14.0% from 12.36%. Ex-service tax, the ARPU would have been at | 174. We have incorporated the increased tax slab and built in an ARPU of | 174 for FY16E and | 182 for FY17E. The lower traction in HD subscribers in the quarter also led to tepid growth in ARPU despite the hikes taken by Dish TV. The fact that the company has, however, been lagging behind its peers, in terms of ARPU increase, remains a concern. Programming costs under check; margins to expand... Dish TV has been able to keep programming costs under check owing to the revert back of 27.5% price hike taken earlier by broadcasters in several RIO based deals. Content costs were down 4.0% QoQ to | 203.5 crore, which is again lower than that of competitors. Going ahead, we believe the company will be able to maintain such costs under control and, hence, post margins of 33.2% and 34.2% by FY16E and FY17E, respectively. ARPU remains sub-par, recommend HOLD with target price of | 115 With strict control on programming cost and robust subscriber addition, coupled with price hikes, the company’s profitability is set to expand. However, we remain wary of concerns such as disappointment in ARPU, pending concerns of license renewal and acceptance of the new license fee calculation by the government. The stepping down of the CEO (RC Venkateish) post his five years stint and lack of complete clarity on the new CEO also remains a concern. We continue to have a HOLD recommendation on the stock with a target price of | 115 using the DCF methodology.

Variance analysis Q2FY16 Q2FY16E 752.4 761.6

Revenue

Q2FY15 672.4

Q1FY16 736.7

YoY (%) QoQ (%) 11.9 2.1

Other Income Employee Expenses License Fees Selling and Distribution expenses Administrative Expenses Programing Cost

19.7 29.6 0.0 68.1 37.9 203.5

18.0 35.0 57.5 69.3 38.1 215.4

17.0 25.2 69.9 53.8 29.6 192.9

26.2 34.7 0.0 66.3 34.9 212.0

16.0 17.6 NA 26.6 28.3 5.5

-24.7 -14.7 NA 2.6 8.7 -4.0

Other Operating Cost

155.1

97.4

77.1

150.3

101.1

3.2

0.0

0.0

60.7

0.0

-100.0

NA

Others EBITDA EBITDA Margin (%)

3.2 255.0 33.9

2.0 246.9 32.4

0.9 162.4 24.1

1.6 264.4 98.1 236.8 57.1 7.7 32.1 974 bps 174 bps

Depreciation Interest

133.0 54.8

160.0 48.2

151.9 42.5

159.8 48.0

-12.4 28.8

-16.7 14.2

Total Tax PAT

0.0 86.9

2.8 53.9

0.0 -15.1

0.0 54.2

NA -677.4

NA 60.4

Key Metrics Net Subscriber Additions (Mn)

0.34

0.41

0.38

0.39

-10.6

-13.3

13.70 171.0

13.71 174.4

12.10 172.0

13.30 173.0

13.2 -0.6

3.0 -1.2

Commission

Net Subscribers (Mn) ARPU (in |)

Comments The quarter saw the full impact of the increase in service tax from 12.36% to 14.0% with effect from June 1, 2015, which led to lower-than-expected revenues

The cost item is now clubbed with other operating cost

The company got advantage of recall of the 27.5% hike taken earlier by broadcasters in some of its RIO deals. This helped it contain its programming expenses The cost line now includes license fees, which were at about ~| 50-55 crore lower than its initial run rate owing to the accounting changes undertaken by the company The company will now report subscription net of the commision to save license fees. Hence, any amount on the cost line is missing in the quarter

Lower-than-expected content costs and emjployee expenses led to higherthan-expected margins Certain provisions and a shift towards domectic currency loans led to higher interest costs

Lower depreciation expense and better operating performance led to better PAT Subscriber additions remained tepid across the industry in the quarter. Dish was, however, ahead of the curve The increase in service tax and lower-than-expected traction in HD subscribers resulted in lower ARPU

Source: Company, ICICIdirect.com Research

Change in estimates (| Crore) Revenue

Old 3,095.0

FY16E New % Change 3,080.2 -0.5

Old 3,498.0

FY17E New % Change 3,527.3 0.8

EBITDA EBITDA Margin (%)

1,017.2 32.9

1,023.8 33.2

0.6 37 bps

1,194.6 34.1

1,207.3 34.2

1.1 8 bps

216.9 2.0

236.3 2.2

8.9 8.6

328.6 3.1

331.7 3.1

1.0 0.7

PAT EPS (|)

Comments

The content cost estimates are slightly reduced, in line with the company's ability to contain its costs

Source: Company, ICICIdirect.com Research

Assumptions zzzzzzzzzzzzzzzzzzzzzzzz

Net Subscriber Additions (Mn) Net Subscribers (Mn) ARPU (in |)

FY14 0.71 11.4 170.0

Monthly Churn Rate 0.6% Source: Company, ICICIdirect.com Research

FY15 1.50 12.9 175.4 0.6%

Current FY16E FY17E 1.61 1.58 14.5 16.1 173.6 181.9 0.7%

ICICI Securities Ltd | Retail Equity Research

0.6%

Earlier FY16E FY17E 1.61 1.58 14.5 16.1 174.7 180.2 0.7%

Comments

The ARPU numbers have been revised in line with the service tax imapact , which would have an impact

0.6%

Page 2

Company Analysis Zing/HD drives subscriber addition… The company’s innovative offering in the regional market, Zing, led to higher subscriber addition in Phase III and IV markets, with almost 22% of incremental subscribers being added to this platform. This has also enabled Dish TV to garner higher share of net adds. By offering regional packages on the relatively cheap Zing platform, it is able to effectively nullify the regional customisation advantage of digital cable over DTH. Furthermore, HD subscription has also been a key driver of subscriber net addition. Dish TV ended FY15 with 12.9 million net subscribers, up from 11.4 million last year, adding 1.5 million subscribers, double the net adds (0.71 million) in FY14. During Q2FY16, it had net subscriber addition of 338,000. The company remains upbeat on subscriber additions over the next two to three years on the back of Phase III/IV of digitisation and has guided for net subscriber addition of 1.5-1.7 million in FY16E and 2 million in FY17E. We have built in net subscriber addition of 1.6 million subscribers each in FY16E and FY17E with the subscriber base reaching 16.1 million in FY17E. Exhibit 1: Subscriber details trends 18.0

182

16.0 14.0

175

12.0

170

170 165

8.0

160

158

6.0

155

4.0 0.0

180 175

174

10.0

2.0

185

10.7

11.4

12.9

14.5

16.1

FY13

FY14

FY15E

FY16E

FY17E

Net Subscribers (million) - LHS

150 145

ARPU (|)

FY13 ARPU not comparable due to change in accounting policy Source: Company, ICICIdirect.com Research

Reported ARPU lower owing to incidence of increased service tax Reported ARPU at | 171 was lower due to the increase in service tax from12.36% to 14.0% with effect from June 1, 2015. Had it not been for such an impact from service tax, the ARPU would have been | 174. In line with the same, we have re-aligned our ARPU estimates to 3.6% CAGR over FY15-17E to | 181.9 from | 174.0 in FY15. Restructuring, accounting changes to lead to lower license fee outgo Dish TV had effected two accounting/restructuring changes, which boosted it margins. It transferred non-core activities and associated revenues to Dish Infra, its fully-owned subsidiary leading to saving of license fees (10% of revenues) on non-core revenues. It also began reporting subscription revenues net of trade channel commissions (about 4% on recharge packs), which would drive further saving on license fee to the tune of ~| 12-15 crore on an annual basis. Such an accounting change continues to reflect in the fundamentals. We factor in the same in our estimates and, consequently, build in higher EBITDA margin of 33.2% and 34.2% in FY16E and FY17E, respectively.

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 2: EBITDA trend 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 (5.0) (10.0)

33.2 26.7

26.4

25.0

7.7

FY14

9.4

0.1

(1.6) FY13

34.2

FY15E

FY16E

FY17E

(5.8) EBITDA Margins %

NPM %

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 4

Valuation With strict control on programming cost and robust subscriber addition, coupled with price hikes, the company’s profitability is set to expand. However, we remain wary of concerns such as disappointment in ARPU, pending concerns of license renewal and acceptance of the new license fee calculation by the government. The stepping down of the CEO (RC Venkateish) post his five years stint and lack of complete clarity on the new CEO also remains a concern. We continue to have a HOLD recommendation on the stock with a target price of | 115 using the DCF methodology. Exhibit 3: DCF assumptions Particulars WACC Revenue CAGR over FY16E - FY22E PV of Cash Flow Till Terminal Year Terminal Growth Present Value of terminal cash flow PV of firm Less: Net Debt Total present value of the Equity (excluding current cash) Number of Equity Shares outstanding DCF - Target price (|)

Amount 11.9% 13.6% 4,088.9 3.5% 9,123.1 13,212.0 955.3 12,256.7 106.6 115.0

Source: Company, ICICIdirect.com Research

Exhibit 4: Valuations

FY14 FY15 FY16E FY17E

Sales (| cr) 2,499.0 2,773.2 3,080.2 3,527.3

Growth (%) 15.3 11.0 11.1 14.5

EPS (|) (1.5) 0.0 2.2 3.1

Growth (%) NA NA 7,424.5 40.4

PE (x) NA NA 48.6 34.6

EV/EBITDA (x) 20.0 17.1 12.3 10.2

RoNW (%) 13.2 (1.0) (307.9) 130.3

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

RoCE (%) 7.7 15.4 35.3 38.5

Company snapshot 140 120

Target Price | 115.0

100 80 60 40 20

Oct-16

Jul-16

Apr-16

Jan-16

Oct-15

Jul-15

Apr-15

Jan-15

Oct-14

Jul-14

Apr-14

Jan-14

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

0

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date Mar-11

Event Registers a very high churn of 1.94 million subscribers and records a churn rate of 2.3%

Jun-12

Sunset date for Phase I of digitisation. Dish TV able to add only 1.1 million net susbcribers

Mar-13

Sunset date for Phase II of digitisation. Dish TV able to add only 1.1 million net susbcribers

Jan-14

Dish TV starts offering all the Indiacast UTV (except ETV) channels on an a la carte basis

Mar-14

Dish TV issues disconnection notice to 10 channels distributed by IndiaCast UTV, including CNBC-TV18 and IBN7 and some ETV regional channels, claiming low popularity In a bid to provide customised local television channels to regional viewers of the state, Dish TV India rolls out a new brand Zing. The new brand will offer regional channels as the base while other segments can be added as per the needs of customers

Mar-14 Jul-14 Jan-15

Trai recommends license period extension to 20 years from 10 years, renewable for 10 years at once and license fees calulation as 8% of adjusted gross revenues vs. 10% of gross revenues paid currently Launches Zing in Tamil Nadu

Source: Company, ICICIdirect.com Research

Top 10 Shareholders 1 2 3 4 5 6 7 8 9 10

Name Essel Group Apollo Capital Management, L.P. Baron Capital Management, Inc. Citigroup Inc Columbia Threadneedle Investments (US) Reliance Capital Asset Management Ltd. Hasham Investment & Trading Company Pvt. Ltd. Jay Properties Pvt. Ltd. Dimensional Fund Advisors, L.P. The Boston Company Asset Management, LLC

Shareholding Pattern Latest Filing Date % O/S Position (m)n Change (m) 30-Jun-15 63.09 672.4 0.0 30-Jun-15 3.58 38.1 6.1 30-Jun-15 1.80 19.2 1.6 30-Jun-15 1.57 16.8 3.2 30-Sep-15 1.37 14.6 5.1 30-Sep-15 1.36 14.5 -2.8 30-Jun-15 1.00 10.7 10.7 30-Jun-15 0.95 10.1 0.0 31-Jul-15 0.67 7.2 0.0 31-Aug-15 0.55 5.9 1.5

(in %) Promoter FII DII Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 64.5 64.5 64.5 64.5 64.5 11.9 13.1 12.8 18.6 19.8 3.1 3.5 3.7 4.0 4.0 20.5 18.9 19.0 12.9 11.8

Source: Reuters, ICICIdirect.com Research

Recent Activity Buys Investor name Hasham Investment & Trading Company Pvt. Ltd. Apollo Capital Management, L.P. William Blair & Company, L.L.C. Columbia Threadneedle Investments (US) Citigroup Inc

Value 17.87m 10.24m 9.36m 8.24m 5.37m

Shares 10.68m 6.12m 5.60m 5.07m 3.21m

Sells Investor name FIL Investment Management (Hong Kong) Limited Lloyd George Investment Management (Hong Kong) Ltd. Reliance Capital Asset Management Ltd. DSP BlackRock Investment Managers Pvt. Ltd. L&T Investment Management Limited

Value -8.28m -4.58m -2.54m -1.75m -1.66m

Shares -8.34m -3.26m -2.82m -1.87m -1.76m

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

Financial summary Profit and loss statement (Year-end March) Total operating Income Growth (%) Employee Expenses Administrative Expenses Programing Cost License Fees Commission Other Expenses Total Operating Expenditure EBITDA Growth (%) Depreciation Interest Other Income PBT Exceptional Items Prior Period Items Total Tax PAT Growth (%) EPS (|)

| Crore

Cash flow statement

| Crore

FY14 2509.0 15.8 89.2 127.9 778.4 261.4 183.7 444.4 1885.0

FY15 2781.6 10.9 101.8 118.0 800.8 288.8 248.9 490.3 2048.5

FY16E 3085.5 10.9 128.1 154.5 854.3 230.5 694.5 2061.8

FY17E 3528.9 14.4 147.0 172.8 966.5 266.3 769.0 2321.6

(Year-end March) Profit after Tax Add: Depreciation Add: Interest Paid (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions Others CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets

FY14 -157.6 597.4 132.8 -18.2 54.5 608.9 78.2 -289.5

FY15 3.1 613.8 175.4 -136.9 396.0 1,051.5 0.0 -785.2

FY16E 236.3 622.2 205.6 -43.1 -96.7 924.3 -150.0 -771.5

FY17E 331.7 680.8 183.2 -73.0 61.6 1,184.4 0.0 -740.0

624.0 NM 597.4 132.8 64.9 -41.2 0.0 0.0 0.1 -41.3 NM -1.5

733.1 17.5 613.8 175.4 63.5 7.4 0.0 0.0 4.2 3.1 NM 0.0

1023.8 39.6 622.2 205.6 76.0 271.9 0.0 0.0 34.5 237.4 7461.0 2.2

1207.3 17.9 680.8 183.2 64.0 407.3 0.0 0.0 75.6 331.7 39.7 3.1

Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Interest Paid Others CF from financing activities Net Cash flow Opening Cash Closing Cash

-63.7 -275.1 0.0 -223.5 0.0 132.8 -264.9 -355.6 -21.8 364.5 342.6

-75.4 -860.6 0.1 74.4 0.0 175.4 -354.8 -105.0 86.0 342.6 428.6

27.4 -894.1 0.0 -100.0 0.0 205.6 -411.1 -305.6 -275.4 428.6 153.2

0.0 -740.0 0.0 -150.0 0.0 183.2 -366.5 -333.2 111.2 153.2 264.4

FY14

FY15

FY16E

FY17E

106.5 -419.1 -312.6 1,409.5 91.8 1,188.7

106.6 -419.9 -313.4 1,483.9 18.3 1,188.8

106.6 -183.6 -77.1 1,383.9 45.7 1,352.5

106.6 148.1 254.7 1,233.9 45.7 1,534.2

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet (Year-end March) Liabilities Equity Capital Reserve and Surplus Total Shareholders funds Total Debt Other Non Current Liabilities Total Liabilities

| Crore

Assets Gross Block Less: Acc Depreciation Net Block Capital WIP Total Fixed Assets Net Intangible Assets Investments Inventory Debtors Loans and Advances Other Current Assets Cash Total Current Assets Creditors Provisions Total Current Liabilities Net Current Assets Other Non Current Assets Profit & Loss (Negative) Application of Funds

4,098.9 2,741.8 1,357.1 422.6 1,779.7 200.0 7.5 41.5 379.0 5.0 342.6 775.6 731.2 850.3 1,581.5 -805.8 14.9 0.0 1,188.7

4,816.0 3,362.1 1,453.9 497.2 1,951.0 200.0 9.9 63.7 474.8 21.6 428.6 998.5 903.8 1,073.7 1,977.5 -979.0 16.7 0.0 1,188.8

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

5,587.5 3,984.3 1,603.2 497.2 2,100.4 350.0 11.0 76.0 513.8 12.3 153.2 766.2 838.2 1,042.5 1,880.8 -1,114.6 16.7 0.0 1,352.5

6,327.5 4,665.1 1,662.4 497.2 2,159.6 350.0 11.1 81.0 579.8 14.1 264.4 950.3 876.5 1,065.9 1,942.4 -992.1 16.7 0.0 1,534.2

Key ratios (Year-end March) Per share data (|) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Total Operating income

FY14

FY15

FY16E

FY17E

-1.5 4.1 -2.9 0.0 3.2

0.0 5.8 -2.9 0.0 4.0

2.2 8.1 -0.7 0.0 1.4

3.1 9.5 2.4 0.0 2.5

25.0 1.1

26.4 4.3

33.2 13.0

34.2 14.9

PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio

-1.6 1.1 6.1 19.8

0.1 1.3 8.4 16.7

7.7 1.3 9.0 15.5

9.4 1.1 8.4 14.4

13.2 7.7 7.4

-1.0 15.4 48.4

-307.9 35.3 75.0

130.3 38.5 86.9

NM 20.0 5.0 0.0 0.0

NM 17.1 4.5 0.0 0.0

48.6 12.3 4.1 0.0 0.0

34.6 10.2 3.5 0.0 0.0

2.3 -4.5 0.3 0.3

2.0 -4.7 0.3 0.3

1.4 -18.0 0.3 0.3

1.0 4.8 0.4 0.3

Source: Company, ICICIdirect.com Research

.

Page 7

ICICIdirect.com coverage universe (Media) Sector / Company DB Corp (DBCORP) DISH TV (DISHTV) ENIL (ENTNET) Eros (EROINT) Hathway Cables (HATCAB) HT Media (HTMED) Inox Leisure (INOX) Jagran Prakashan (JAGPRA) PVR (PVRLIM) Sun TV (SUNTV) TV Today (TVTNET) ZEE Ent. (ZEETEL)

CMP (|) TP(|) Rating 321 305 Hold 108 115 Hold 684 660 Hold 370 612 Buy 44 42 Sell 91 84 Hold 243 275 Buy 143 160 Buy 833 1,050 Buy 385 UR UR 248 270 Buy 425 410 Hold

M Cap (| Cr) 5,897 11,463 3,259 3,418 3,613 2,143 2,230 4,650 3,459 15,186 1,479 40,786

EPS (|) P/E (x) EV/EBITDA (x) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E 17.2 19.5 23.3 18.7 16.5 13.8 10.3 10.7 9.7 0.0 2.2 3.1 NA 48.5 34.6 17.1 12.3 10.2 22.2 22.6 22.5 30.8 30.2 30.4 19.5 21.0 16.5 26.7 32.4 38.2 13.8 11.4 9.7 10.5 8.8 7.7 -2.2 -2.1 -1.1 NM NM NM 19.1 14.7 11.5 7.7 6.3 8.1 11.8 14.5 11.2 7.8 8.8 6.2 2.2 7.0 10.2 111.3 34.9 23.8 19.8 12.1 9.1 9.7 12.6 9.9 14.7 11.3 14.4 10.1 8.0 6.5 3.1 30.6 33.6 271.0 27.2 24.8 20.0 11.9 11.1 19.8 23.8 28.0 19.4 16.2 13.8 8.4 7.4 6.2 13.6 16.0 19.5 18.3 15.5 12.7 8.5 6.6 5.0 10.2 11.0 13.7 41.7 38.6 31.1 31.3 27.2 21.3

RoCE (%) RoE (%) FY15 FY16E FY17E FY15 FY16E FY17E 34.2 31.7 31.7 24.6 22.8 22.9 15.4 35.3 38.49 NM NM 130.3 21.4 17.2 15.4 15.7 13.8 12.1 16.7 17.5 17.1 16.7 17.1 16.8 NM 0.4 3.1 NM NM NM 13.5 10.8 12.5 10.0 7.2 8.6 6.0 12.3 15.1 3.1 8.6 11.2 21.1 23.4 22.55 21.9 22.0 18.6 8.3 17.8 17.2 3.6 24.7 21.2 33.0 36.6 38.5 22.7 25.4 26.8 27.5 27.3 28.2 18.0 18.0 18.5 25.3 25.0 26.2 17.6 16.9 17.5

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey

Head – Research

[email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

ICICI Securities Ltd | Retail Equity Research

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ANALYST CERTIFICATION We /I, Bhupendra Tiwary MBA, Sneha Agarwal, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Bhupendra Tiwary MBA, Sneha Agarwal, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Bhupendra Tiwary MBA, MBA Sneha Agarwal, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

ICICI Securities Ltd | Retail Equity Research

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