Professional Documents
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Voltamp Transformers LTD
Voltamp Transformers LTD
1
Diwali Picks
1 Crompton Greaves Consumer Electricals Ltd 184 11,520 39.6 31.8 23.7 19.2 94.7 75.5
3 Indian Terrain Fashions Ltd 150 560 17.0 14.3 9.2 7.7 18.7 18.4
4 JMC Projects (INDIA) Ltd 259 869 11.9 8.6 6.3 5.3 15.9 18.2
6 Tourism Finance Corporation of India Ltd 65 525 0.9* 0.9* NA NA 11.4 12.3
7 Voltamp Transformers Ltd 811 821 15.7 11.6 15.8 10.8 10.3 12.7
•For ICICI Bank & Tourism Finance Corporation of India Ltd numbers are in Price/BV
•CMP updated as on 21st October 2016
2
Crompton Greaves Consumer Electricals Ltd. (CMP: INR 184; Mkt Cap: INR 11,520 crs)
Investment Hypothesis
1. Premiumisation, innovative offerings driving spurt; sharpening appliance market focus
Share Holding Pattern (%)
new growth avenue: Innovative products, deepening distribution reach, operational
efficiencies and strengthening of critical capabilities have anchored CGCEL’s faster-
than-industry growth pace over the years. Moreover, the company’s unwavering focus
on product diversification to innovate and introduce premium products with better
Promoter 34.3
aesthetics and new features across product categories. Sharpening focus on
penetrating the appliance business and decorative fan market to cash in on its robust
distribution reach offers humungous untapped growth opportunity. Public 65.6
2. Strong experienced management team at helm: Post CGCEL’s demerger from CG, a
new management with wide experience in FMCG and consumer electrical space is at Others
the helm at the new entity with a mandate to focus on premiumisation and growth.
Moreover, new promoter (Advent) boasts of a long and credible investment history in
consumption – since inception, its entire portfolio, including realized and unrealized
investments, has generated gross IRR of 33% and gross 2.9x invested capital.
3. Bolstering already wide distribution reach to enhance market share of nascent
appliances business: CGCEL has a robust distribution network in the consumer
electrical space of 3,000 plus distributors and 100,000 plus touch points. Additionally, on
the anvil are plans to further deepen its reach to enhance market share. 140
Risks
130
1. Cheap imports from China have been queering the competitive landscape of LED and
fan markets. 120
2. High competitive market and less scope from unorganized pie as organized players has
higher market-share in each segment. 110
Jun-16
May-16
Jul-16
Sep-16
Aug-16
P/E (x) – – 55.0 39.6 31.8
P/B (x) – – 0.8 0.5 0.3
ROCE (%) – – 42 47 48 Crompton Sensex
ROE (%) – – 91 95 76
Index 3
ICICI Bank Ltd. (CMP: INR 277; Mkt Cap: INR 1,61,422 cr)
Investment Hypothesis
1. ICICI is India’s second largest bank and largest private bank and will be the biggest Share Holding Pattern (%)
beneficiary of buoyant economic outlook, pick up in corporate credit, continued retail
credit growth, given its extensive reach and client relationships.
Promoter –
2. Around 44% of its deposits comprise low-cost current account and savings account
(CASA) deposits, which collectively enable the bank to contain its deposit costs and
generate best in class NIMS of 3.3%. Public 100
3. The bank has best in class operating efficiency with cost-to-income ratio at 37%.
4. Its subsidiaries have near market leadership in their respective segments (mortgages, Others –
auto loans, commercial vehicle loans, life insurance, general insurance, and asset
management)
5. In spite of stress, we are comfortable given: a) >35% of current price reflects stable
value of subsidiaries (recent deals lend comfort on realisability); b) stable RoA and RoE
(1.7%/13%, despite higher credit cost); and c) other operating parameters - CASA, and
retail assets - are consistently improving.
Risks 120
1. Execution risk
110
2. Higher than expected delinquencies
100
3. Slowdown in Economy
90
80
Year to March FY14 FY15 FY16 FY17E FY18E
70
Net Interest Income (INR Cr) 16,475 19,039 21,224 22,219 25,924
Net Profit (INR Cr) 9,810 11,175 9,726 11,008 13,939 60
Adjusted BV per share 101 110 115 104 129 50
EPS (INR Cr) 17 19 17 19 24
40
Gross NPA ratio (%) 3 4 6 10 9
May-15
May-16
Mar-15
Jul-15
Mar-16
Jul-16
Jan-15
Sep-15
Jan-16
Sep-16
Nov-15
Net NPA ratio (%) 0.9 2 3 7 5
Price/Adj. Book Value(x) 2.1 1.9 1.8 1.7 1.5
ICICI Sensex
Price/Earnings (x) 16.3 14.3 16.5 14.6 11.5
Index 4
Indian Terrain Fashions Ltd. (CMP: INR 150; Mkt Cap: INR 560 cr)
Investment Hypothesis
1. Indian Terrain has positioned itself as a contemporary Smart Casual brand in the Share Holding Pattern (%)
men’s wear segment targeting the working population in the age group of 25-44
years, which is highly brand and fashion conscious.
Promoter 29.7
2. The brand portrays ‘masculine’ sensibility, yet conforms to the popular ‘Friday
Dressing’ concept. Currently, the company offers a wide product range comprising
shirts, trousers, knits, jackets and sweaters. Public 70.2
3. It has a pan India distribution network spread across 200 cities and ~1000 touch
points through varied distribution channels such as EBOs, MBOs as well as LFOs Others –
along with focus on expanding in uncluttered Tier 2 and 3 cities. Entry into white
spaces such as boys wear and footwear has undeniably reinforced its long-term
growth prospects. We expect revenues to grow at 20% CAGR over FY17E-18E
4. A light asset model due to outsourced manufacturing has lead to high RoCE of
+20%
Risks
170
1. Increasing competition
2. Semi-Urban slowdown 150
Mar-15
Jul-15
Mar-16
Jul-16
Jan-15
Jan-16
Sep-15
Sep-16
Nov-15
May-15
May-16
P/E (x) 43.4 30.0 16.9 17.0 14.3
P/B (x) 11.8 4.3 3.5 2.9 2.4
ROCE (%) 23 23 20 20 21
Indian Terrain Sensex
ROE (%) 32 22 23 19 18
Index 5
JMC Projects (INDIA) Ltd. (CMP: INR 259; Mkt Cap: INR 869 crs)
Investment Hypothesis
1. Robust INR 5,800 cr order backlog imparts JMC excellent revenue visibility of 3 years. In B&F Share Holding Pattern (%)
segment, the company has established strong brand name especially in South, comprises
77% of overall orderbacklog.
2. The Kalpataru Group taking majority (67.19%) control and infusing professional management
Promoter 67.1
has further burnished the company’s already well established credentials.
3. The continued focus on international market in order to leverage parent’ (Kalpataru Group) Public 32.8
presence, successfully received road projects INR 465 crore (EBITDA 10%) in Africa.
4. Government projects contribute 40% of overall orderbacklog and is expected to augment
growth based on spending in Smart Cities, Housing for All, AIIMS and IITs. Others –
5. JMC’s BOT portfolio, comprising 4 road projects, is operating on full length and full toll basis,
the company already has invested INR 600 crore equity in BOT. Its 4 BOT road projects are
expected to generate adequate cashflow in next 2 years to meet expenses.
6. We expect standalone RoCE will be improved by 110 bps & 225 bps in FY17E and FY18E
respectively based on 1.) reduction in debt (QIP issued INR 150 crore), 2.) stable debt as
incremental equity required (BOT) will be funded via internal accrual.
Risks 180
1. High business concentration risk with a large exposure to the B&F segment
160
2. Its BOTs have limited toll collection history; valuations are highly sensitive to traffic estimates
3. Limited floating stock and liquidity may impact value discovery 140
May-15
May-16
Mar-15
Jul-15
Mar-16
Jul-16
Jan-15
Sep-15
Jan-16
Sep-16
Nov-15
P/E (x) 27.1 20.8 21.1 11.9 8.6
P/B (x) 1.4 1.3 1.3 1.2 1.1
ROCE (%) 12 12 15 16 18 JMC Sensex
ROE (%) 5 6 6 10 12
Index 6
Tata Communications Ltd (CMP: INR 680; Mkt Cap: INR 19,381 cr)
Investment Hypothesis
Share Holding Pattern (%)
1. Data business, the major growth driver of telecom industry, is growing at rapid
pace both in domestic and international market as modern life is increasingly
depending on internet and related services. Promoter 74.9
2. The data business of Tata communication (highest contribution among Indian
telecom players) is expected grow at 18% CAGR over FY16-18E and Data Public 25.0
margin will reach to 24% as new growth services entails significantly higher
margin than traditional services.
Others –
3. The company will use the major chunk of its data centre and Neotel sales
proceed to repay debt and that will significantly deleverage its balance sheet.
4. Higher EBITDA margin and lighter balance sheet will result in doubling the RoCE
over the period of next two years.
Risks
1. Sustained pressure on data yield may reduce growth and margin performance 133
2. Delay in deals of Neotel may put pressure on Balance Sheet
124
115
May-15
May-16
Mar-15
Jul-15
Mar-16
Jul-16
Jan-15
Sep-15
Jan-16
Sep-16
Nov-15
P/E (x) 76.5 176.4 390.7 169.2 94.2
P/B (x) NA NA NA NA NA
ROCE (%) 5 9 8 9 12
Tata Comm Sensex
ROE (%) 9 0 NA NA NA
Index 7
Tourism Finance Corporation of India Ltd (CMP: INR 65; Mkt Cap: INR 525 cr)
Investment Hypothesis
1. Hotel sector is at the inflection point and Tourism Finance (TFCI) is predominantly Share Holding Pattern (%)
engaged in the hotel and tourism asset financing. We expect loan book to register 25%
CAGR over FY16-18E to INR 2,005 cr from INR 1,292 cr. Renovation/modernization,
refinancing and fresh capex will drive the growth in loan book. Promoter 48.0
2. In previous high (FY08-12) and low (FY12-16) cycle, Hotel & tourism industry reported 27%
and 3% CAGR while TFCI outpaced the growth by 200-300bps because of market Public 51.9
leader. Going forward, we expect fresh capex in the sector, especially in 3 star hotel
will drive the growth.
3. After significant deterioration in asset quality in FY16 due to slowdown in industry, We
Others –
expect substantial improvement in asset quality on back of recovery/resolution/up-
gradation. We expect about INR 100-110 crore recovery for FY17. Consequently
outstanding GNPA by March is expected to be 55-60 crore. The stressed asset is
secured by 2.x of outstanding loan.
4. TFCI changes the strategy to borrow from CP and bank to offset the pressure from
declining interest rate. We believe net interest margin should improve as CP and bank
borrowing increases.. 120
Riks
1. Excessive fall in interest rate may have negative impact on margin 100
60
Year to March FY14 FY15 FY16 FY17E FY18E
Net Interest Income (INR Cr) 94 87 85 94 107
40
May-15
May-16
Mar-15
Jul-15
Mar-16
Jul-16
Jan-15
Sep-15
Jan-16
Sep-16
Nov-15
Gross NPA ratio (%) 2 3 12 4 2
Net NPA ratio (%) 0 2 10 3 1
Price/Adj. Book Value(x) 1.2 1.1 1.0 0.9 0.9
TFCI Sensex
Price/Earnings (x) 9.0 8.7 9.8 8.6 7.3
Index 8
Voltamp Transformers Ltd (CMP: INR 811; Mkt Cap: INR 821 cr)
Investment Hypothesis
Share Holding Pattern (%)
1. Voltamp Transformer (VTL) is a major manufacturer of distribution, power and dry-
type transformers in India and expected to get significant benefit of spending of
central sponsored schemes (IPDS and DDUGJY) to bolster transmission and Promoter 47.4
distribution infrastructure in India.
2. The company is also a major beneficiary of the standardization drive in distribution
Public 52.5
transformer segment which will reduce unorganized players and thereby bring in
industry consolidation and hence stable realization.
3. VTL is expected to report 19% revenue CAGR and 300 bps of operating margin Others –
expansion during FY16-18E.
4. VTL has been the best managed balance sheet in a industry which has affected
by low utilization, stretched working capital, high debt and low RoCE.
5. With the expansion in operating margin and increase in asset utilization, RoCE is
expected increase to 20% in FY18E against 12.8% in FY16.
Risks 130
May-15
May-16
Mar-15
Jul-15
Mar-16
Jul-16
Jan-15
Sep-15
Jan-16
Sep-16
Nov-15
P/E (x) 18.9 23.1 18.8 15.7 11.6
P/B (x) 1.2 1.5 1.7 1.6 1.5
ROCE (%) 4 6 13 15 20 Voltamp Sensex
ROE (%) 6 6 9 10 13
Index 9
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TFCI 5 years price chart
May-15 May-15
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Indian Terrain 5 years price chart
Jan-16 Jan-16
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Last Years Diwali Picks Performance
20%
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Cholamandalam NIIT Ltd Tata Motors Ltd SRF Ltd. Strides Arcolabs
Finance Ltd Nifty 2015 Mid Cap 2015
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