3 September 2020
Company Update | Sector: Chemicals
SRF
BSE SENSEX
38,991
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
11,527
SRF IN
59
248.5 / 3.3
4437 / 2492
7/7/52
1092
47.7
CMP: INR4,323
TP: INR5,170 (+20%)
Buy
Investing heavily in Chemicals; Returns to accrue going forward
Technical Textiles/Packaging capex in self-sustaining mode
SRF incurred total capex of INR84b over the last 10 years, of which 57% was
deployed toward the Chemicals segment. Of the total capex, 63% was incurred in
the past 5 years itself.
st
Additionally, on 31 Aug’20, the SRF board approved fund raise of INR7.5b through
QIP and INR2.5b through issuance of listed redeemable secured non-convertible
debentures by way of private placement.
In this report, we analyse SRF’s capex over the past decade and the company’s plans
in the future.
Financials Snapshot (INR b)
Y/E MARCH
FY21E 2022E 2023E
Sales
78.3 98.8 118
EBITDA
17
22 26.5
Adj. PAT
8.58 12.2 15.5
EBITDA Margin (%) 21.7 22.2 22.5
Cons. Adj. EPS (INR) 147 209 265
EPS Gr. (%)
-6.63 42.1
27
BV/Sh. (INR)
982 1,168 1,407
Ratios
Net D:E
0.61 0.45 0.32
RoE (%)
15.9 19.4 20.6
RoCE (%)
10.9 13.8 15.6
Payout (%)
16 11.1 9.85
Valuations
P/E (x)
29.4 20.7 16.3
EV/EBITDA (x)
16.9 12.9 10.5
Div. Yield (%)
0.46 0.46 0.52
FCF Yield (%)
2.98 2.85 3.26
Shareholding pattern (%)
As On
Jun-20 Mar-20 Jun-19
Promoter
52.3
52.3
52.3
DII
11.3
11.3
11.3
FII
17.1
18.3
18.2
Others
19.3
18.1
18.2
FII Includes depository receipts
Stock Performance (1-year)
SRF
4,700
3,900
3,100
2,300
1,500
Sensex - Rebased
Capex accelerates over last 5 years; higher capital invested in Chemicals
Over FY11-20, SRF’s cumulative capex stood at INR84b with the company
delivering revenue of 11% CAGR to INR72b. Of the total capex incurred over
the last 10 years, 57% has been deployed toward Chemicals, resulting in 16%
revenue CAGR to INR29.8b.
Over the last 10 years, incremental revenue/EBITDA stood at
INR47.1b/INR8.4b while the company incurred capex of INR56.4b over FY11-
18 (assuming lag effect of 2 years due to monetization i.e. capex of 8 years is
considered for calculating ratios). Thus, translating into incremental
revenue/EBITDA to capex of 0.83x/0.15x.
Over the last 5 years, SRF has incurred capex of INR53b – constituting 63% of
the capex incurred over the last decade. Thus, capex intensity has increased in
the last 5 years.
Average asset turnover/fixed asset turnover for the last 10 years stood at
0.9x/0.8x, signifying the capital heavy nature of certain business segments.
Average consol. capital employed (CE) to EBITDA for the last 10/5 years stood
at 6.2x/6.4x. For the Chemicals segment, average CE to EBITDA over the last 5
years was reported at 6.2x (v/s average CE of Technical Textiles/Packaging
films of 4.4x/5.4x over the same period).
SRF plans to spend INR12-13b on capex in FY21 across geographies and
segments.
Capex in Technical textiles/Packaging largely self-sustainable
According to our observations in the past – for the Packaging segment –
whenever EBITDA performance improved substantially, it was followed by
higher capex in the following years. For instance, in FY11 when the segment’s
EBITDA increased 6.2x YoY to INR3.8b, SRF incurred capex of INR7b over FY13-
14. The same was witnessed in FY20 – on the back of 47% EBITDA CAGR over
FY18-20 to INR6.4b in FY20 – the company incurred capex of INR11b (in FY20).
Against this backdrop, the segment’s EBITDA less capex for the last 10/5 years
is negative at INR3.4b/1.1b.
Sumant Kumar - Research Analyst
(Sumant.Kumar@motilaloswal.com)
Research Analyst: Darshit Shah
(Darshit.Shah@MotilalOswal.com) |
Yusuf Inamdar
(Yusuf.Inamdar@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
SRF
SRF’s Chemicals segment has not only witnessed higher capex intensity v/s other
segments, but also seen higher spends over the last 5 years. In the past decade,
SRF incurred capex of INR48.3b for the Chemicals segment, of which, 61% was
incurred in the last 5 years itself. Average CE to EBITDA over FY10-13 stood at
2.2x, which deteriorated to 6.2x over FY16-20.
Incremental revenue/EBITDA in the Chemicals business over the last 10 years
stood at INR23.2b/INR4.5b, while SRF incurred capex of INR34.9b over FY11-18
(assuming lag effect of 2 years due to monetization i.e. capex of 8 years is
considered for calculating ratios). Thus, translating into incremental
revenue/EBITDA to capex of 0.66x/0.13x (Refer
Exhibit 9).
The Technical textiles business has been SRF’s cash cow. It incurred an average
annual capex of INR527m over the last 10 years with largely flat revenue over
FY10-20. Over the same period, EBITDA declined at 5% CAGR. However,
excluding FY20 EBITDA (as it was impacted by the auto slowdown), EBITDA has
been more or less flat over the last 10 years. EBITDA less capex for the segment
over the last 10/5 years stood at INR20.5b/INR10.7b, which means the segment
generates enough EBITDA to sustain its capital requirement.
Recently completed major capex provides revenue visibility
In Aug’20, SRF commissioned and capitalized a facility at SRF’s Chemical
Complex in Dahej, Gujarat, at a cost of INR1,570m to produce specialty
chemicals (P-33) for the agro industry. Assuming 10-year average asset turn for
chemicals of 0.64x,it has revenue potential of INR1,005m.
In Oct’19, the company enhanced its HFC capacity from 17,500MT to 34,500MT
at a cost of INR4,770m, which is expected to generate revenue of INR3,053m
assuming an asset turn of 0.64x.
Thus, ramping up of the above key capacities in chemicals provides revenue
visibility of INR4,058m.
Additionally, SRF Europe Kft (a wholly-owned subsidiary) has also completed the
BOPET film line in Hungary. The said project has been capitalized and was
commissioned in Aug’20 at a cost of EUR80m.
In May’20, SRF commissioned a BOPET film line in Thailand (at a cost of
USD51m), which would further strengthen its presence in the South East Asian
region and expand its customer base in new geographies.
Key projects announced by SRF recently
The SRF board has approved the setting up of an additional facility to produce
100kMT of Chloromethanes at Dahej, which is expected to be completed by
end-Jan’22. The projected cost stands at INR3.2b and would be funded through
a mix of debt and internal accruals.
SRF already has 95kMT of Chloromethanes capacity, which is operating at 100%
utilization. The capex would provide significant opportunity for import
substitution in Methylene Chloride (MDC) and Carbon Tetrachloride (CTC) as
India is still a large importer and Chloroform is used for captive requirements.
Additionally, SRF is also setting up dedicated facilities to produce intermediates
catering to the agro-chemicals segment at an aggregate cost of INR2,380m.
3 September 2020
2
 Motilal Oswal Financial Services
SRF
Valuation and view
Over the last five years, SRF has deployed higher capital toward the Chemicals
segment, which requires higher capex for the amount of EBITDA it generates v/s
the Packaging and Technical Textiles segments.
Performance of SRF in the near term should be impacted due to COVID-19 and
the auto slowdown. While sluggishness in autos would dent performance of the
Technical Textiles business, the slowdown in white goods/autos should impact
the Refrigerants business.
Increase in replacement demand (when normalcy is achieved) from the
auto/white goods sector (for refrigerants) should boost performance of
Technical Textiles/Refrigerants.
However, margin expansion witnessed in 1QFY21 in the Packaging Film segment
due to demand-supply mismatch and higher share of value-added products is
unlikely to sustain. However, in May’20/Aug’20, SRF commenced the BOPET film
line in Thailand/Europe, which should aid in driving FY21 volumes.
Additionally, management remains confident of achieving 20-25% revenue
growth in the Specialty Chemicals segment (forms 23% of FY20 sales). It expects
HFC gas demand to improve in 2HFY21 on the back of export opportunities,
which are opening up for the company due to the current geopolitical issues.
Further, company has received approval from its Board to raise INR10b (equity
of INR7.5b and balance through issuance of listed redeemable secured non-
convertible debentures). We believe this is likely to be deployed toward the
Chemicals segment. SRF has recently completed capacity expansion in the
Packaging films segment.
We value SRF on an SOTP basis to arrive at Sep’22E target price of INR5,170.
Maintain
Buy.
Exhibit 1: SOTP Valuation
EV/EBITDA
Technical Textiles
Chemicals & Polymers
Packaging Films
Others
Total EV
Less: Debt
Less: Minority Interest
Add: Cash & Cash Equivalents
Target Mcap (INR m)
Outstanding share (m)
Target Price (INR)
CMP (INR)
Upside (%)
Sept'22 EBITDA (INR m)
2,012
14,335
8,907
403
Multiple (x)
7
17
8
5
EV (INR m)
14,081
2,43,701
71,257
2,016
3,31,054
33,240
-
4,650
3,02,464
58.5
5,170
4,323
20
Source: MOFSL
3 September 2020
3
 Motilal Oswal Financial Services
SRF
Exhibit 2: One year fwd EV/EBITDA (x)
20.0
15.0
10.0
5.0
0.0
EV/EBITDA (x)
Avg (x)
Max (x)
Min (x)
+1SD
-1SD
15.4
12.3
8.7
5.1
2.9
14.7
Source: MOFSL
Exhibit 3: Segment-wise capex trend (INR m)
Technical Textiles
Chemicals & Polymers
Packaging Films
Unallocated
147
199
201
440
4,057
944
FY12
184
3,520
2,852
365
FY13
6,118
266
FY14
3,453
172
871
4,987
386
FY15
157
104
1,327
3,148
702
FY16
3,489
3,418
146
FY17
9,357
527
FY18
8,415
5,033
521
FY19
632
FY20
2,749
137
1,870
10,985
182
113
322
935
781
FY11
Exhibit 4: Segment-wise capex mix trend (%)
Technical Textiles
5
15
43
4
8
3
51
72
41
17
FY12
5
FY13
61
3
FY14
6
FY15
13
FY16
2
34
Chemicals & Polymers
3
14
Packaging Films
Unallocated
1
22
1
17
1
65
73
47
2
FY17
4
FY18
5
FY19
2
25
2
48
78
60
77
30
4
FY20
36
FY11
Exhibit 5: Cumulative capex spend mix (in last 5 years, %)
Unallocated; 1
Technical
Textiles; 5
Technical Textiles
Packaging
Films; 39
Chemicals &
Polymers; 55
Chemicals & Polymers
Packaging Films
Unallocated
Exhibit 6: Cumulative capex spend mix (in last 10 years, %)
Unallocated;
2
Technical
Textiles; 6
Technical Textiles
Chemicals & Polymers
Packaging Films
Unallocated
Packaging
Films; 35
Chemicals &
Polymers;
57
3 September 2020
4
 Motilal Oswal Financial Services
SRF
Exhibit 7: Segment revenue trend
INR m
Technical Textiles
Chemicals & Polymers
Packaging Films
Others
Total
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
17,349
24,454
26,532
2,660
70,996
FY20
13,576
29,750
26,040
2,729
72,094
10 yr
CAGR
-1%
16%
23%
11%
5 yr
CAGR
-8%
19%
16%
10%
15,242 18,615 21,467 21,313 21,857 20,396 19,050 20,102 18,388
6,578 7,467 12,041 10,350 9,563 12,634 16,398 17,214 16,114
3,365 8,713 6,602 6,208 8,830 12,460 13,606 14,092 17,823
(197)
(59)
(101)
(41)
(69)
(91) (3,127) (3,190) 3,566
24,987 34,735 40,010 37,830 40,181 45,398 45,927 48,218 55,890
Exhibit 8: Segment EBITDA trend
INR m
Technical Textiles
Chemicals & Polymers
Packaging Films
Others
Total
FY10
3,193
3,092
605
(703)
6,187
FY11
2,820
3,239
3,755
(805)
9,009
FY12
2,212
6,331
575
(803)
8,314
FY13
2,385
4,063
351
(656)
6,143
FY14
2,541
2,635
488
(611)
5,053
FY15
2,603
4,219
1,109
(756)
7,175
FY16
2,364
5,520
2,443
(599)
9,728
FY17
FY18
FY19
FY20
1,862
7,568
6,419
(1,264)
14,584
10 yr
CAGR
-5%
9%
27%
9%
5 yr
CAGR
-6%
12%
42%
15%
3,088 2,932 2,964
4,950 4,545 6,059
2,544 2,984 4,945
(888) (1,399) (759)
9,694 9,062 13,209
Source: Company, MOFSL
Exhibit 9: Chemicals & Polymers
INR m
Total Capex (INR m)
Incremental Revenue (INR m)
Incremental EBITDA (INR m)
Incremental Sales/Capex (x)
IncrementalEBITDA/Capex (x)
Average Capital Employed (INR m)
Incremental Capital Employed (INR m)
Average EBIT (INR m)
Incremental EBIT (INR m)
ROCE (Average in %)
ROCE (on incremental Capital Employed)
Assuming 2 year lag for monetisation of capex
Total Capex (8 year- FY11-18)
Incremental Sales/Capex (x)
Incremental EBITDA/Capex (x)
Capital Employed (8 Year average)
Capital Employed (on 8 Year incremental-FY11-18)
ROCE (Average in %)
ROCE (on incremental Capital Employed)
10 year
48,319
23,172
4,476
0.48
0.09
25,037
42,089
3,605
2,347
14.4%
5.6%
5 year
29,371
17,116
3,349
0.58
0.11
35,646
24,712
3,772
2,132
10.6%
8.6%
34,872
0.66
0.13
19,786
29,246
18.2%
8.0%
Source: Company, MOFSL
3 September 2020
5
 Motilal Oswal Financial Services
SRF
Exhibit 10: Packaging Films
INR m
Total Capex (INR m)
Incremental Revenue (INR m)
Incremental EBITDA (INR m)
Incremental Sales/Capex (x)
Incremental EBITDA/Capex (x)
Average Capital Employed (INR m)
Incremental Capital Employed (INR m)
Average EBIT (INR m)
Incremental EBIT (INR m)
ROCE (Average in %)
ROCE (on incremental Capital Employed)
Assuming 2 year lag for monetisation of capex
Total Capex (8 year- FY11-18)
Incremental Sales/Capex (x)
Incremental EBITDA/Capex (x)
Capital Employed (8 Year average)
Capital Employed (on 8 Year incremental-FY11-18)
ROCE (Average in %)
ROCE (on incremental Capital Employed)
10 year
29,026
22,675
5,814
0.78
0.20
14,135
25,350
2,028
5,149
14.3%
20.3%
5 year
20,420
13,580
5,310
0.67
0.26
19,805
16,557
3,184
4,920
16.1%
29.7%
16,171
1.40
0.36
11,438
16,540
17.7%
31.1%
Source: Company, MOFSL
Exhibit 11: Capex announcements made by SRF
TIME OF
APPROVAL OF
CAPEX BOD
1QFY21
CAPEX
(INR M)
3,150
SEGMENT
CAPEX SPECIFICATION
Chemicals
Setting up of an additional facility to produce 100,000MT of Chloromethanes at Dahej
3QFY20
3QFY20
2QFY20
2QFY20
655
2,380
400
USD50m
Chemicals
Chemicals
Chemicals
Packaging
Debottleneck the HFC capacity at Dahej
To set up dedicated facilities to produce intermediates catering to the agro-chemicals
segment
Expand the capacity for production of a high volume specialty product finding
application in agro, pharma and other specialty industries
Setting BOPP film line in Thailand by SRF Industries (Thailand) Ltd
Capacity enhancement cum modernization of the Tyre Cord Fabric value chain. This is
an enhancement of the capex of INR810m approved by the Board at its meeting held
on February 4, 2019 to cater to the customer requirements as the Technical Textiles
Business operations of SRF Industries (Thailand) Ltd. at Rayong, Thailand have been
shut down.
Integrated PTFE plant along with R22 plant as feedstock
Install additional spinning and textile capacity at the Technical Textiles Plants in Manali
and Gwalior (to be incurred over three years)
Debottlenecking in specialty chemical plants to increase the production capacity at
Dahej
BOPET film line and a Metallizer in Eastern Europe
Construct a dedicated facility to produce P34, Carbon Monoxide (CO) generation and
Ethylene pipeline, all at Dahej
2QFY20
1,250
Technical
Textiles
1QFY20
3QFY19
3QFY19
3QFY18
3QFY18
4,240
800
1,400
Euro 58m
810
Chemicals
Technical
Textiles
Chemicals
Packaging
Chemicals
3 September 2020
6
 Motilal Oswal Financial Services
SRF
TIME OF
APPROVAL OF
CAPEX BOD
3QFY18
2QFY18
2QFY18
Q1FY18
CAPEX
(INR M)
320
3,560
169
850
SEGMENT
Technical
Textiles
Chemicals
Technical
Textiles
Chemicals
CAPEX SPECIFICATION
Installation of a dipping line brought over from SRF’s Overseas erstwhile operations in
Dubai, UAE at its Technical Textiles Business manufacturing plant in Gwalior
Setting up of an integrated facility to produce HFCs and AHF. The overall project
entails acquisition, setting-up and the conversion of capacities of HFC 125, 32, AHF and
134a, with an aim of doubling existing capacities.
Capacity expansion and modernization of Belting Fabric operations at TTB, Viralimalai
site
Setting up of a facility to produce specialty chemicals (P-33) for agro industry at SRF’s
Chemical Complex in Dahej, Gujarat
To create production capability to produce new agrochemical with a peak production
capacity of 250 MT and carry out modifications in the P 11/12 plant with the objective
of improving capacities to meet R 134a production requirements, both at Dahej,
Gujarat
For augmenting new facilities and the production of new products in existing Flexible
Multi-Purpose Plants (FMPs) and the setting up of cGMP (Current Good Manufacturing
Practices) plant to tap upcoming business opportunities in the Pharma sector that
require cGMP compliance at its Dahej, Gujarat facility.
Setting up a ‘BOPP Film Line and a Metallizer’ in the existing Domestic Tariff Area
(DTA) campus at Indore.
Board has approved three separate capex proposals aggregating INR3940m, (i) setting
up a new greenfield packaging film line in the Domestic Tariff Area at a new location
near the company’s Indore plant in SEZ at cost of INR3,560m; (ii) setting up a R-134a
Pharma Grade Manufacturing and Filling facility meeting cGMP requirements at the
existing Chemical Complex at Dahej at cost of INR260m; and (iii) for converting the HFC
134a plant at Bhiwadi into a swing plant at cost of INR120m to produce both HFC 134a
and HFC 32.
Board approved two separate capex proposals, one for setting up a dedicated plant at
Dahej to manufacture existing range of specialty chemicals being produced at its
Bhiwadi plant to cater to the increasing demand from pharma sector and the other for
improving the product development capability in Engineering Plastics
Enhancing the R&D capability of the chemical business for faster turnaround of
customer requests.
Modernization of Technical Textile Plant at Gwalior was also approved.
Proposal for setting up of a new specialty chemical plant at its Chemical Complex at
Dahej in Gujarat
Setting up a second multi-purpose plant to create additional capacity to manufacture
specialty chemicals at Dahej in Gujarat.
Augmenting production facility for specialty chemicals at SRF’s Chemical Complex in
Dahej, Gujarat
Quality of power for Gwalior unit
Set up a new plant under the second Flexible Multi-purpose Plant at the company’s
newly developed chemical complex at Dahej in Gujarat . The new plant will
manufacture speciality chemicals that will essentially cater to the agrochemical
industry
Two separate proposals for setting up two plants with a combined capacity of 2000
tonnes per annum for producing speciality chemicals at SRF’s Chemical Complex in
Dahej, Gujarat
Set up a Fluorinated Speciality Plant at the company’s new Chemical Complex at Dahej
in Gujarat.
Source: Company, MOFSL
4QFY17
2,000
Chemicals
2QFY17
1,280
Chemicals
4QFY16
2,690
Packaging
1QFY16
3,940
Chemicals
4QFY15
540
Chemicals
3QFY15
3QFY15
1QFY15
250
660
1,130
Chemicals
Technical
Textiles
Chemicals
4QFY14
3QFY14
1,400
110
220
Chemicals
Chemicals
Technical
Textiles
Chemicals
1QFY14
500
4QFY13
1QFY13
900
430
Chemicals
Chemicals
3 September 2020
7
 Motilal Oswal Financial Services
SRF
Financials and valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Less: Mionrity Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY16
45,927
1.2
36,199
78.8
9,728
21.2
2,750
6,979
1,305
278
5,952
-103
5,849
1,551
0
26.5
0
4,299
4,402
45.4
9.6
FY17
48,218
5.0
38,524
79.9
9,694
20.1
2,834
6,859
1,018
730
6,572
0
6,572
1,422
0
21.6
0
5,150
5,150
17.0
10.7
FY18
55,890
15.9
46,828
83.8
9,062
16.2
3,158
5,904
1,239
688
5,353
463
5,817
1,200
0
20.6
0
4,617
4,154
-19.3
7.4
FY19
70,996
27.0
57,787
81.4
13,209
18.6
3,582
9,627
1,984
280
7,923
262
8,185
1,769
0
21.6
0
6,416
6,155
48.2
8.7
FY20
72,094
1.5
57,510
79.8
14,584
20.2
3,886
10,698
2,007
491
9,182
997
10,179
265
-277
-0.1
0
10,191
9,194
49.4
12.8
FY21E
78,335
8.7
61,333
78.3
17,002
21.7
4,300
12,702
1,992
491
11,202
-89
11,113
2,617
0
23.5
0
8,496
8,585
-6.6
11.0
FY22E
98,794
26.1
76,813
77.8
21,981
22.2
4,472
17,509
1,993
540
16,056
0
16,056
3,853
0
24.0
0
12,203
12,203
42.1
12.4
(INR M)
FY23E
1,18,108
19.5
91,558
77.5
26,549
22.5
4,822
21,727
1,928
594
20,393
0
20,393
4,894
0
24.0
0
15,499
15,499
27.0
13.1
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Current Investments
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
FY16
584
27,045
27,630
0
3,820
25,153
56,603
71,410
30,334
41,076
49
1,174
1,606
1,649
20,291
6,711
5,145
3,399
5,036
8,934
7,146
1,477
312
11,357
1,297
56,603
FY17
584
31,242
31,827
0
2,866
23,962
58,655
77,169
33,169
44,000
49
2,586
1,708
1,959
21,090
8,381
6,569
961
5,178
11,055
8,089
2,606
359
10,035
26
58,655
FY18
584
35,061
35,645
0
2,914
31,418
69,978
87,502
36,327
51,175
41
5,588
1,217
1,218
25,608
9,582
6,807
967
8,252
13,653
10,442
2,831
380
11,955
0
69,978
FY19
585
40,708
41,293
0
3,420
36,993
81,706
68,322
12,269
56,053
41
7,536
1,005
1,006
34,243
12,247
10,288
1,989
9,719
17,173
13,824
2,908
441
17,070
0
81,706
FY20
585
49,748
50,333
0
1,755
40,240
92,328
76,934
15,540
61,394
41
13,933
1,985
2,027
32,373
12,012
8,911
1,255
10,196
17,440
11,117
5,881
442
14,934
0
92,328
FY21E
585
56,887
57,472
0
1,755
37,740
96,967
85,934
19,840
66,094
41
11,933
0
2,027
36,008
10,677
9,658
2,929
12,745
19,136
12,813
5,881
442
16,873
0
96,967
FY22E
585
67,732
68,317
0
1,755
34,740
1,04,812
92,934
24,313
68,622
41
11,933
0
2,027
44,640
12,767
12,180
3,762
15,931
22,449
16,127
5,881
442
22,190
0
1,04,812
(INR M)
FY23E
585
81,705
82,290
0
1,755
31,740
1,15,784
99,934
29,135
70,799
41
12,433
0
2,027
56,036
16,024
14,561
5,538
19,913
25,552
19,229
5,881
442
30,485
0
1,15,784
3 September 2020
8
 Motilal Oswal Financial Services
SRF
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Debt/Equity
FY16
75.3
122.4
472.8
9.8
15.5
FY17
88.1
136.6
544.6
11.8
15.9
48.9
31.6
7.9
5.7
28.2
0.3
19.0
21.2
9.6
17.0
10.5
18.5
0.6
0.8
105
41
112
0.9
20.1
10.7
17.3
11.0
17.8
0.6
0.8
126
50
122
0.8
FY18
71.1
125.1
609.9
16.0
23.5
60.7
34.5
7.1
5.0
31.1
0.4
-110.5
16.2
7.4
12.3
8.5
13.8
0.6
0.8
115
44
126
0.9
FY19
105.2
166.4
705.9
20.0
21.2
41.0
25.9
6.1
4.0
21.7
0.5
428.1
18.6
8.7
16.0
10.7
18.1
1.0
0.9
113
53
127
0.9
FY20
157.2
223.6
860.4
14.0
9.6
27.4
19.3
5.0
4.0
19.8
0.3
-50.7
20.2
12.8
20.1
13.3
15.3
0.9
0.8
119
45
110
0.8
FY21E
146.7
220.3
982.4
20.0
16.0
29.4
19.6
4.4
3.7
16.9
0.5
128.6
21.7
11.0
15.9
10.9
21.0
0.9
0.8
100
45
120
0.7
FY22E
208.6
285.0
1,167.8
20.0
11.1
20.7
15.1
3.7
2.9
12.9
0.5
122.8
22.2
12.4
19.4
13.8
26.8
1.1
0.9
95
45
120
0.5
FY23E
264.9
347.4
1,406.7
22.5
9.9
16.3
12.4
3.1
2.4
10.5
0.5
140.7
22.5
13.1
20.6
15.6
30.3
1.2
1.0
100
45
120
0.4
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY16
5,952
2,750
1,305
-1,551
703
9,159
-947
8,212
-4,771
3,441
0
-707
-5,477
0
1,053
-1,305
-664
507
-409
2,326
1,073
3,399
FY17
6,572
2,834
1,018
-1,422
-2,464
6,538
1,742
8,280
-7,170
1,110
0
-310
-7,479
0
-1,523
-1,018
-821
123
-3,238
-2,438
3,399
961
FY18
5,817
3,158
1,239
-1,200
-2,138
6,876
0
6,876
-13,335
-6,460
0
741
-12,595
0
7,806
-1,239
-1,085
243
5,726
6
961
968
FY19
8,185
3,582
1,984
-1,769
-4,171
7,811
0
7,811
17,232
25,043
212
0
17,444
1
5,575
-1,984
-1,357
-26,469
-24,234
1,021
968
1,989
FY20
10,179
3,886
2,007
-265
-3,762
12,044
0
12,044
-15,009
-2,965
-1,021
4,841
-11,189
0
3,246
-2,007
-983
-1,846
-1,590
-734
1,989
1,255
FY21E
11,113
4,300
1,992
-2,617
-265
14,523
0
14,523
-7,000
7,523
0
0
-7,000
0
-2,500
-1,992
-1,357
0
-5,849
1,674
1,255
2,929
FY22E
16,056
4,472
1,993
-3,853
-4,484
14,184
0
14,184
-7,000
7,184
0
0
-7,000
0
-3,000
-1,993
-1,357
0
-6,350
833
2,929
3,762
(INR M)
FY23E
20,393
4,822
1,928
-4,894
-6,519
15,730
0
15,730
-7,500
8,230
0
0
-7,500
0
-3,000
-1,928
-1,527
0
-6,455
1,776
3,762
5,538
3 September 2020
9
 Motilal Oswal Financial Services
SRF
NOTES
3 September 2020
10
 Motilal Oswal Financial Services
SRF
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details
of
associate
entities
of
Motilal
Oswal
Financial
Services
Limited
are
available
on
the
website
at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be
such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
3 September 2020
11
 Motilal Oswal Financial Services
SRF
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential 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 MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
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. This report and information herein is solely for informational purpose and may 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. 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. Each recipient of this document should make such investigations as it deems necessary to arrive at
an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures,
options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. 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 MOFSL 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. Neither the Firm, not its directors, employees, agents or representatives shall be
liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
3 September 2020
12