Riddhi Siddhi Gluco Biols

Company Report Agro Processing December 23, 2006 ICICIdirect Code: RIDSID Company Profile Registered Office 701, Sakar-1, Ashram Road, Opp. Gandhigram Railway Station, Ahmedabad, Gujarat - 380 009. Website: www.riddhisiddhi.co.in

Riddhi Siddhi Gluco Biols OUTPERFORMER

Institutional Investors

❑

%

Aggressive capacity expansion to drive volume growth

22.36

❑

Stock Data 195.98 0.956

52-week High (Rs)

239.75

52-week Low (Rs)

105.00

Avg. Volume

26,017

Absolute Return 3 mth (%)

15.24

Absolute Return 12 mth (%)

76.48

Sensex Return 3 mth (%)

12.30

Sensex Return 12 mth (%)

47.07

Domestic starch comsumption at an inflection point India’s GDP has been growing at a rapid rate and we believe that we are at the beginning of a consumption-led boom. Demand for cornstarch and its derivatives, which find application in food, confectionery, pharmaceutical, energy drinks, paper, textiles, adhesives, etc., is expected to grow at 1.5x the GDP growth rate.

1.75 30.78

Performance Chart

❑

45.11

General Public

Shares Outstanding (in crore)

Time Frame 12 mths

Riddhi Siddhi has ramped up its corn crushing capacity by 2.5x over FY0507E to evolve as one of the largest players in the sub-continent. The company will have a capacity of 1,500 tonnes per day (tpd) by the end of FY07. Currently, it is setting up a green-field unit at Uttaranchal at an estimated cost of Rs 110 crore. These expansions will help boost sales on back of the huge demand expected for cornstarch and its derivatives.

Other Investors

Market Cap (Rs crore)

Potential upside 38%

KEY TRIGGERS

Shareholding Pattern as on 31/03/2006 Promoters

Target Price Rs. 282

Riddhi Siddhi Gluco Biols Ltd is India’s largest cornstarch producer. It is well positioned to capitalise on the current consumption-led boom in the economy, which should see a spurt in demand for cornstarch and its derivatives. We rate the stock an OUTPERFORMER.

Chairman: Sampatraj Chowdhary Business Group: Riddhi Siddhi Group

Major Holders

Price (Dec 18) Rs. 205

Strategic alliance with Roquette Freres Roquette Freres of France has picked up a 14.95% stake in the company. Roquette is a leading producer of starch derivatives and the largest producer of polyols (sugar-free sweeteners) in the world. Riddhi Siddhi will benefit from Roquette’s expertise, use its know-how for product and process upgradation, and technology for introducing high-end value added products from its stable of more than 650 products.

VALUATIONS At the current price of Rs 205, the stock trades at a P/E of 10.75x its FY07E EPS of Rs 19.07 and 7.98x its FY08E EPS of Rs 25.68. Sales are expected to grow at a CAGR of 31.22%, while net profits are expected to grow faster at a CAGR of 58.26% over FY06-08E. We initiate coverage on the company with an OUTPERFORMER rating and a price target of Rs 282, an upside potential of 38%, in the next 12 months.

Exhibit 1: Key Financials Year to March 31

FY05

FY06

FY07E

FY08E

Net Profit (Rs crore)

3.71

11.42

20.12

28.61

EPS (Rs)

5.75

13.52

19.07

25.68

155.1%

135.2%

41.0%

34.7%

35.66

15.16

10.75

7.98

Price/Book (x)

2.41

2.21

1.60

1.35

EV/EBIDTA (x)

10.61

9.34

8.82

6.55

% Growth P/E (x) Siddhartha Khemka [email protected]

ICICI Brokerage Services Limited, 2nd Floor, Stanrose House, Appasaheb Marathe Road, Prabhadevi, Mumbai - 400 025.

NPM (%)

2.03

4.96

7.45

7.17

RoNW (%)

5.81

9.02

14.23

16.46

RoCE (%)

8.93

9.13

10.92

13.69

Source: ICICIdirect Research

1 For private circulation only

COMPANY BACKGROUND Riddhi Siddhi Gluco Biols Ltd is promoted by the Chowdhary family, who were earlier involved in the trading of corn, cornstarch and its derivatives. It commenced operations in 1993-94 with a corn crushing capacity of 75 tonnes per day (tpd) and is currently the largest wet corn miller in the country with crushing capacity of 850 tpd. The company manufactures starch and its derivatives. Its product range includes native starch, liquid glucose, corn syrup, dextrose syrup and Maltodextrin. Currently the company owns three stateof-the art plants located in Gokak (Karnataka), Viramgam (Gujarat) and Pondicherry. A fourth unit is under construction in Pantnagar, Uttaranchal, and is expected to be commissioned by the first month of next financial year. Recently, Roquette Freres of France, the world’s third largest corn miller, invested Rs 31.73 crore in the company and acquired a 14.95% stake. Riddhi Siddhi has entered into a technical co-operation agreement with Roquette, which provides for transfer of know-how for product and process upgradation and technology for new products to be introduced by the company. The company, in association with Roquette, plans to introduce value-added products to cater to the specific needs of the food, pharmaceutical, textile and paper industries.

Exhibit 2: Operational Process Shelled Maize

Maize cleaners

Steep tanks

Germ separators

Steep water

Germ

Grinding mills

Screens

Centrifugal separators

Fiber

Gluten

Hydroclone starch washing

Germ washing and drying Clean, dry germ Oil expellers and extractors Crude Oil

Refinery

Germ meal Starch products

Starch conversion products

Feed product Maltodextrins

Nutritive sweeteners Syrups

Dextrose

Oil refining Maltodextrins powder

Liquid glucose high Dextrose Syrups Maltosecorn and Dextrose Monohyother type drate Glucose D

Refined oil Product composition flexibility

Source: Company, ICICIdirect Research

2 For private circulation only

INDUSTRY OVERVIEW Promising outlook for domestic cornstarch industy The Indian cornstarch industry, with an estimated size of around Rs 1,500 crore per annum, is regarded as a sunrise industry. The number of cornstarch players in the country is restricted to a handful of companies, each possessing decades of experience. Most of them have small-sized plants scattered around corn producing regions. India is the world’s seventh largest corn producer (about 15 million tonnes). However, yield at 1953 kg/hectare is low as compared to 9285 kg/hectare in the US. Approximately 80-85% of the maize crop is grown during the kharif season (June-October). Of the total production, starch manufacturers consume around 20%. The government allows imports of a fixed quantity (decided annually) of maize at a concession duty rate of 15% and imports over the annual limits attract a hefty 50% duty. The diverse uses of starch make it a very versatile product. Maize or cornstarch is a typical cereal starch with distinctly low protein and ash contents. Its carbohydrate content of high purity makes it useful in several industries. Maize contains about 66% of starch, which can be separated from other ingredients by various processes such as steeping, grinding, purifying and drying. Riddhi Siddhi produces about 35 products comprising starch of all grades including liquid glucose, high maltose corn syrup, dextrose monohydrate, dextrose syrup and malto-dextrin. These products are used in diverse sectors and have specific applications.

Exhibit 3: Sector and product applications Sector

Products offered

Application

Food & Drink

Native starch, Liquid glucose, High

Thickening agent in sauces, gravies, puddings and pies,

Maltose Corn Syrup, Maltodextrin,

preparation of baking powder and salad dressing

Dextrose Syrup, Dextrose Monohydrate Textile & Yarn

Native starch, Modified starch

Sizing, finishing and printing, imparts strength to the yarn and

Paper

Native starch, Modified starch

Gives strength, surface fuzz and stiffness to paper

Pharmaceutical

Native starch, Liquid glucose,

Compressing agent in tablet manufacture, dusting agent in the

Maltodextrin, Dextrose Syrup,

manufacture of surgical gloves

stiffness to fabric

Dextrose Monohydrate, Glucose D Adhesive

Native starch, Modified starch

Used as an adhesive in pigment coating for paperboard

Bakery

Liquid glucose, Dextrose Monohydrate

Provides necessary sweetness, longevity and freshness

Leather

Liquid glucose

Imparts glossiness, fineness and optimum weightage

Industrial application

Native Starch, Modified starch, Liquid

Manufacture of antibiotics, sorbitol and gluconates

Glucose, High Maltose Corn Syrup, Dextrose Monohydrate Ice-creams and frozen dessert Maltodextrin

Lowers the freezing point, provide a soft, creamy and pleasant mouth-feel, without increasing the sweetness

Source: Company, ICICIdirect Research

3 For private circulation only

INVESTMENT RATIONALE I) Aggressive capacity expansion to drive volume growth Riddhi Siddhi has evolved from a small player with an installed capacity of 100 tpd (corn grinding capacity) in 1994-95 to one of the largest players in the sub-continent with capacity of 1,500 tpd by the end of FY07. It has adopted both the organic as well as inorganic route to grow. The company will have augmented its capacity by 2.5x over FY05-07E. Currently, the company owns three state-of-the art plants located at Gokak (Karnataka), Viramgam (Gujarat) and Pondicherry. Inorganic initiatives Gokak One of the most significant opportunities that Riddhi Siddhi capitalised upon was the acquisition of the Gokak unit in 1995-96 (then a sick unit with an installed capacity of 125 tpd) promoted and set-up by multinational Glaxo. Over the years, the company has regularly expanded capacities at this location and it is now the largest single location plant in the sub continent. Pondicherry Riddhi Siddhi acquired a functional biopolymer unit from Hindustan Lever in 2005-06. The unit has a capacity to process 8,000 tpa of tapioca and corn-based specialty modified starches. The state of-the-art R&D facilities is among the best in India. The acquisition gave the company a significant share of high-end starch derivatives market catering to the domestic paper industry, more than 20 brands and know-how for the manufacture of value-added starch. Organic initiatives Uttaranchal Currently, it is setting up a green-field unit at Uttaranchal at an estimated investment of Rs 110 crore. The unit will enjoy both excise and income tax benefits and will have a capacity of 500 tpd. It is expected to commence operations in April 2007. This unit will enable the company to cater effectively to the many pharmaceutical, food and confectionary units that have been recently set up in Uttaranchal to take advantage of the tax friendly policies. Exhibit 4: Capacity expansion over the years Production capacity (tpd) Viramgam

Gokak

Uttaranchal

Total

1993 – 94

Plant

75

-

-

75

1994 – 95

100

-

-

100

1995 – 96

100

125

-

225

1998 – 99

100

200

-

300

1999 – 00

100

300

-

400

2002 – 03

100

400

-

500

2003 – 04

100

400

-

500

2004 – 05

100

500

-

600

2005 – 06

100

750

-

850

2006 – 07

250

750

500

1,500

Source: Company, ICICIdirect Research

II) Starch consumption in India at an inflection point i) Low per capita consumption Per capita starch consumption in India is less than 1 kg compared to 64 kg in the US and lower than the global average of 6 kg. India’s gross domestic product (GDP) has been growing at a rapid rate and the county is at the beginning of a consumption-led boom. We believe this should result in an explosive growth in the demand for cornstarch and its derivatives, which find applications in food, confectionery, pharmaceutical, energy drinks, paper, textile, adhesive and host of other industries. 4 For private circulation only

Exhibit 5: Outlook of key user industries Sector

Outlook

Pharmaceuticals

Healthcare as a % of GDP to double to 9% by 2010

Textiles

Expected to grow at a CAGR of 8-9% between 2005 and 2010

Paper

Expected to grow at 6% per annum for the next 3 years

Food processing

Expected to grow at 9-12%. Investments of Rs 1.5 lakh crore expected over next decade

Source: Company, ICICIdirect Research

ii)Marquee clients Riddhi Siddhi’s clientele include well-known companies like Nestle, Heinz, Cadburys, Ranbaxy, Pfizer, BILT, ITC, Grasim, Hindalco, and United Breweries among others. It has emerged as a dependable vendor and has been engaged in a stable outsourcing relationship with them for more than five years due to its ability to customise products and grades as per client requirements. The company retains an inventory of diverse products at its end and supplies just-in-time so that clients do not have to block their working capital. In doing so, it has evolved from product to service delivery, which has helped it to gain repeated orders and market share in the institutional segment. Exhibit 6: Key clients Food and confectionery

Pharmaceutical

Paper

Nestle

Ranbaxy

BILT

Grasim

Amul

Heinz

Novartis

ITC

Bombay Dyeing

Hindalco

Cadbury

Nicholas Piramal

J K Paper

Indian Rayon

Emami

HLL

Wockhardt

TNPL

Lakshmi Mills

SAB

Britannia

Lupin

West Coast

Precot Mills

United Breweries

Wrigley’s

Pfizer

Seshasayee

Anglo French

Micro Inks

Biocon

APPM

Paramount

Godrej Agrovet

Perfetti

Textile

Others

Source: Company, ICICIdirect Research

III) Most competitive manufacturer in India Riddhi Siddhi is among the lowest cost manufacturers of quality starch in India. It has strategically taken steps to minimise costs and improve quality. i) Experienced management The promoters have over 30 years of experience, which spans across the entire value chain from trading to manufacturing. They entered the business as intermediaries, providing manufacturers with raw material corn. They also got involved in trading of the final products. This has given them tremendous insight into the intricacies and functioning of the cornstarch business. In 1994, the management leveraged their expertise by setting up a 75 tpd corn processing facility at Viramgam in Gujarat. Over the next decade, the management imbibed global best practices, innovated new product varieties and reinvested earnings. Today, it is the fastest growing company in the industry in India with a capital cost per tonne of installed capacity that is amongst the lowest. It is also the most profitable.

ii) Strategic location of plants The Gokak plant is located in one of the most favourable locations to manufacture starch in India, the heart of the corn-belt in Karnataka. The state accounts for about 17% of the total corn output in India with a yield of 2.8 tonnes per hectare as against the national average of 1.9 tonnes per hectare. Riddhi Siddhi’s consumption accounts for a mere 8% of the state’s entire produce, an adequate scope for sustainable growth over the coming years. The Pondicherry unit is in proximity to the country’s principal tapioca growing regions and sources its entire raw material requirement from Kerala and Tamil Nadu. The unit manufactures value-added starches, the majority of which is used by paper mills located in these regions.

5 For private circulation only

Exhibit 7: Top five maize producing states (2005-06) State

Production

Contribution

Yield

(‘000 tonnes)

(%)

(kg/hectare)

Andhra Pradesh

3,058

20.26

4,034

Karnataka

2,651

17.57

2,851

Bihar

1,424

9.44

2,289

Madhya Pradesh

1,249

8.28

1,449

Maharashtra

1,119

7.42

1,785

Others

5,590

37.04

India

15,091

1,953

Source: Ministry of agriculture

iii) Efficient procurement of raw materials Riddhi Siddhi has initiated measures like direct procurement of corn from farmers and mandis to reduce its raw material costs. The company procures 20-25% of its requirement directly, thus enabling it to reduce procurement cost by 2-5% and eliminate middlemen and corn traders. Riddhi Siddhi is able to procure about 70% of its raw material requirement from within a radius of 100 km of its plants. It has emerged as the single largest corn buyer in Karnataka, enabling it to avail attractive volume-based concessions. Aditionally, Riddhi Siddhi has secured water requirements for its wet milling process from the perennial Ghataprabha river in Gokak. This helps the company to cut costs, as producers in other places need to process the water before using it.

iv) Captive power plant to save costs The company has set up a 6.2 MW captive power plant due to which its power cost per unit is only Rs 2.31 as compared to Rs 4.7 per unit charged by the state electricity board. Since power constitiutes the second major cost component in the cornstarch processing industry, this has helped Riddhi Siddhi in lowering its manufacturing costs considerably. Power cost as a proportion of net sales declined from 12% in 2004-05 to 10% in 2005-06 and is expected to come down further. Exhibit 8: Power cost per tonne of end product

Source: Company, ICICIdirect Research

6 For private circulation only

IV)Strategic alliance with Roquette Freres Riddhi Siddhi is set to benefit from a recent tie-up with Roquette, France which is one of the worlds leading cornstarch manufacturers. Roquette has picked up a 14.95% stake in the company at Rs 200/share. Roquette will provide transfer of know-how for product and process up-gradation as well as technology for introducing new value added products from its stable of more than 650 products. The partnership is the first ever tie-up by Roquette with any company. The fact that it selected Riddhi Siddhi is a validation of the latter’s excellent manufacturing facilities and products of global standards. One of the products Riddhi Siddhi hopes to develop using Roquette’s expertise is a sugar-free product. With India having the largest population of diabetics in the world, the potential for this product is immense. Further, with India’s young population becoming health conscious, sugar-free products are likely to see huge demand in the near future. Riddhi Siddhi will serve as a low-cost Research & Development base for Roquette to carry out work in the area of application innovation, which will facilitate an intellectual cost arbitrage in a global competitive business making it more profitable. It will also give Roquette an opportunity to serve the other growing markets like the Middle East and South East Asia and benefit from savings in logistics costs. [Note: About Roquette Roquette is a private family owned business, specializing in starch and starch derivatives. Started in 1933, today its consolidated turnover is close to 2 billion euros with production facilities in Europe, US and Asia. Its products are sold in more than 100 countries, backed up by its global network of subsidiaries and agents. Roquette is one of Europe’s most significant suppliers of starches, glucose syrups, maltodextrins and dextrose. It is also the world ‘s leading producer of Polyols in particular sorbitol, mannitol, xylitol and a group of special products which together form the foundation of Roquette’s expanding family of sugarless sweeteners.]

V) Focus on value-added products to boost contributions Riddhi Siddhi is now turning its focus towards value-added products to cater to the specific needs of the food, pharmaceutical, textile and paper industry. It has outlined a strategy to increase the contribution from valueadded derivatives in the next two to three years. It will expand its capacity in modified starches to extend its success in high value paper grade starch products. The company also expects to introduce import substitute products like the Pyrogen-free dextrose used in the manufacture of IV fluids and denim grade starch that enhances fabric smoothness permitting Indian textile manufacturers to produce world-class cotton fabric. In addition the company’s international alliance with Roquette will facilitate its entry into products for the nutrition, health, construction, biotech and fermentation categories. Exhibit 9: Average realisation per tonne

Source: Company, ICICIdirect Research

7 For private circulation only

KEY CONCERNS Increase in raw material prices The major input is corn and its prices have been rising continuously since last couple of months both in the local and global markets. There is a demand-supply mismatch as the current estimated production in India is around 12 million tonnes against the annual consumption of approximately 14 million tonnes. A significant rise in corn prices can affect the company’s profitability. However, the company is confident that it will be able to pass on price increases to customers due to lack of viable substitutes.

FINANCIALS Net sales, PAT to register strong growth Riddhi Siddhi is expected to reap the full benefits of its expansion in FY08, as the Uttaranchal unit would be operational by then. We expect net sales to grow from Rs 229.86 crore in FY06 to Rs 268.05 crore in FY07E and surge to Rs 395.82 crore in FY08E at a CAGR of 31.22%. The company is also likely to benefit from an increased focus on value-added products that would reflect in its bottom line as PAT is expected to grow at a CAGR of 58.26% from Rs 11.42 crore in FY06 to Rs 28.61 crore in FY08E. Exhibit 10: Aggressive ramp up in sales

Source: Company, ICICIdirect Research

Profitability, return ratios to expand The benefits from the increased scale of operations will be visible from the current year onwards. NPM is likely to expand from 4.96% in FY06 to 7.17% in FY08E. RoNW at 9.02% in FY06 is likely to expand to 16.46% in FY08E. Exhibit 11: Margins/Return ratios on the uptick

Source: Company, ICICIdirect Research

8 For private circulation only

VALUATIONS Exhibit 12: P/E and P/B Band

Source: ICICIdirect Research

At the current price of Rs 205, the stock is available at an EV/EBIDTA of 8.82x FY07E earnings and 6.55x FY08E earnings. The stock trades at a P/E of 10.75x FY07E EPS of 13.52 and 7.98x FY08E EPS of Rs 25.68, which is well below the BSE Small Cap P/E of 11.7x. Riddhi Siddhi is the market leader and well placed to capitalise on the boom in the Indian cornstarch industry. Its selection by Roquette as its partner for its Indian foray is a validation of its superior business model. Its sales are expected to grow at a CAGR of 31.22% while net profits are expected to grow faster at a CAGR of 58.26% over FY06-08E. Considering these factors we believe that the stock is undervalued. We rate the stock an OUTPERFORMER with a price target of Rs 288 at P/E of 11x its FY08E earnings.

9 For private circulation only

FINANCIAL SUMMARY Profit and Loss Account Sales to grow at a CAGR of 31% over FY06-FY08E

Net profit to grow at a CAGR of 58% over FY06-FY08E

FY08E

(Rs crore) FY07E

FY06

FY05

Sales 395.82 268.05 229.86 183.87 ................................................................................................................................................. % Growth 47.7% 16.6% 25.0% 27.5% ................................................................................................................................................. Operating Profit 65.88 45.97 33.10 25.32 ................................................................................................................................................. % Growth 43.3% 38.9% 30.7% 12.4% ................................................................................................................................................. Other Income 0.00 0.00 0.29 0.18 ................................................................................................................................................. EBIT 52.88 37.42 24.88 17.56 ................................................................................................................................................. % Growth 41.3% 50.4% 41.7% 15.3% ................................................................................................................................................. Interest 17.06 14.19 11.90 12.19 ................................................................................................................................................. PBT 35.81 23.22 12.98 5.37 ................................................................................................................................................. % Growth 54.2% 78.9% 141.8% 88.0% ................................................................................................................................................. Taxation 7.21 3.10 1.56 1.66 ................................................................................................................................................. PAT 28.61 20.12 11.42 3.71 ................................................................................................................................................. % Change YoY 42.1% 76.2% 208.2% 145.5%

Balance Sheet

(Rs crore) FY08E

FY07E

FY06

FY05

Sources of funds ................................................................................................................................................. Share Capital (including Preference) 16.14 15.55 13.45 15.45 ................................................................................................................................................. App. money of Shares & Warrants 0.00 1.17 43.29 0.00 ................................................................................................................................................. Reserves & Surplus 157.61 124.69 69.84 48.37 ................................................................................................................................................. Secured Loans 200.73 191.48 127.56 114.01 ................................................................................................................................................. Unsecured Loans 11.80 9.80 18.30 18.88 ................................................................................................................................................. Deferred Tax Liability 10.67 6.67 5.67 5.27 ................................................................................................................................................. Current Liabilities & Provisions 37.19 22.96 17.51 14.01 ................................................................................................................................................. Increase in net block on account of ongoing expansion

Total Liability 434.13 372.31 295.61 215.98 ................................................................................................................................................. Application of Funds ................................................................................................................................................. Net Block 236.59 226.22 161.40 139.06 ................................................................................................................................................. Capital WIP 0.00 15.00 5.90 1.99 ................................................................................................................................................. Investments 0.09 0.09 0.09 0.09 ................................................................................................................................................. Cash 20.03 18.82 15.55 2.00 ................................................................................................................................................. Trade Receivables 79.16 53.61 50.38 36.19 ................................................................................................................................................. Loans & Advances 7.92 5.36 4.63 2.72 ................................................................................................................................................. Inventory 90.34 53.20 57.64 33.93 ................................................................................................................................................. Total Asset 434.13 372.31 295.61 215.98

10 For private circulation only

Cash Flow Statement FY08E

(Rs crore) FY07E

FY06

FY05

Opening Cash Balance 18.82 15.55 2.00 1.92 ................................................................................................................................................. Profit after Tax 28.61 20.12 11.34 3.95 ................................................................................................................................................. Dividend Paid -5.17 -3.67 -2.75 -2.02 ................................................................................................................................................. Depreciation 13.00 8.56 8.22 7.72 ................................................................................................................................................. Provision for deferred tax 4.00 1.00 0.40 1.11 ................................................................................................................................................. Cash Flow before WC Changes 40.44 26.01 17.22 10.81 ................................................................................................................................................. Net Increase in Current Liabilities 14.23 5.45 3.50 1.15 ................................................................................................................................................. Net Increase in Current Assets 65.24 -0.49 39.82 5.12 ................................................................................................................................................. Cash Flow after WC Changes -10.57 31.94 -19.11 6.84 ................................................................................................................................................. Purchase of Fixed Assets -10.00 -84.10 -36.10 -14.01 ................................................................................................................................................. (Increase) / Decrease in Investment 0.00 0.00 0.00 -0.05 ................................................................................................................................................. Inc. / (Decrease) in Loan Funds 11.25 55.42 12.97 7.56 ................................................................................................................................................. Inc. / (Decrease) in Preference Cap. 0.00 0.00 -4.00 0.00 ................................................................................................................................................. Inc. / (Decrease) in Equity Capital 10.53 0.00 59.79 -0.25 ................................................................................................................................................. Net Change in Cash 1.21 3.27 13.55 0.09 ................................................................................................................................................. Closing Cash Balance 20.03 18.82 15.55 2.00

Ratios FY08E

FY07E

FY06

FY05

EPS (Rs.) 25.68 19.07 13.52 5.75 ................................................................................................................................................. Book Value (Rs. Crore) 151.51 128.15 92.69 85.03 ................................................................................................................................................. Enterprise Value (Rs. Crore) 431.49 405.46 309.13 268.30 ................................................................................................................................................. EV/Sales (x) 1.09 1.51 1.34 1.46 ................................................................................................................................................. EV/EBIDTA (x) 6.55 8.82 9.34 10.61 ................................................................................................................................................. Market Cap to sales (x) 0.58 0.81 0.75 0.72 ................................................................................................................................................. Improvement in net profit margin on account of higher realisations Strong improvement in return on capital employed on account of efficient utilisation of incremental capital employed

Price to Book Value (x) 1.35 1.60 2.21 2.41 ................................................................................................................................................. Operating Margin (%) 16.64 17.15 14.40 13.77 ................................................................................................................................................. 7.17 7.45 4.96 2.03 Net Profit Margin (%) ................................................................................................................................................. RONW (%) 16.46 14.23 9.02 5.81 ................................................................................................................................................. ROCE (%) 13.69 10.92 9.13 8.93 ................................................................................................................................................. Debt/ Equity (x) 1.28 1.47 1.20 2.16 ................................................................................................................................................. Current Ratio 1.46 1.44 1.81 1.29 ................................................................................................................................................. Debtors Turnover Ratio 5.00 5.00 4.56 5.08 ................................................................................................................................................. Inventory Turnover Ratio 4.38 5.04 3.99 5.42 ................................................................................................................................................. Fixed Assets Turnover Ratio 1.67 1.11 1.37 1.30

11 For private circulation only

RATING RATIONALE ICICIdirect endeavours to provide objective opinions and recommendations. ICICIdirect assigns ratings to its stocks according to their notional target price vs current market price and then categorises them as Outperformer, Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and the notional target price is defined as the analysts’ valuation for a stock. Outperformer: 20% or more; Performer: Between 10% and 20%; Hold: +10% return; Underperformer: -10% or more.

Research Team Harendra Kumar

Head - Research and Content

[email protected]

ICICIdirect Research Desk ICICI Brokerage Services Limited, 2nd Floor, Stanrose House, Appasaheb Marathe Road, Prabhadevi, Mumbai - 400 025 [email protected]

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PH/19/12/06

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