CMP Rs716, Target Rs805, Upside 12.4%
² Net sales for Q4 FY13 at standalone level stood at Rs11.6bn, a healthy growth of 11.6% on yoy basis. Revenues from Electrical Consumer Durables segment grew by 18% on yoy basis for Q4 FY13 led by jump in revenues from new launches. Revenues from Switchgear and Lighting & Fixture segment witnessed 31.2% and 20.6% yoy growth respectively. Industrial slowdown impacted the cables and wires division with revenue declining by 3.1% yoy during the quarter.
² Operating profit margin of the standalone business for Q4 FY13 contracted by 127bps on yoy basis on account of increase in raw material cost as % of sales by 236bps over the same period. First year of operation for REO switches dragged the EBIT margin for the Switchgears division by ~3.3pps on yoy basis. Electrical Consumer Durables and Lighting & Fixtures divisions reported 115bps and 24bps decline in margins for Q4 FY13. Overall blended EBIT margin contracted by 88bps on yoy basis.
² Revenues (€ terms) from its overseas subsidiary (Sylvania) grew modestly by 1% yoy, with decline of 4.7% in Latin American market and European region registering a revenue decline of 0.9% Sequentially, overall revenues for Sylvania were up by 3%. Operating profit margin for Sylvania stood at 6.1%, decline of 239bps on yoy basis and 30bps sequentially. Slowdown in Europe and Brazil coupled with higher raw material cost and adverse product mix were the key factors for decline in margins for the quarter. The company has guided for 6% EBIDTA margins for FY14.
² We expect strong growth in revenues for the standalone business to continue over FY13-15 coupled with steady expansion in OPM. For Sylvania, we expect revenue to report flattish growth and expect 6% OPM for next two years. We retain our positive stance for the fundamentals of the company in the long term. We maintain our BUY rating on the stock with a revised 9-month target price of Rs805.
Results table
| (Rs m) |
Q4 FY13 |
Q4 FY12 |
% yoy |
Q3 FY13 |
% qoq |
| Net sales |
11,696 |
10,485 |
11.6 |
10,584 |
10.5 |
| Material costs |
(6,281) |
(5,878) |
6.8 |
(5,529) |
13.6 |
| Purchase of traded goods |
(1,202) |
(889) |
35.2 |
(1,070) |
12.3 |
| Personnel costs |
(416) |
(358) |
16.5 |
(472) |
(11.8) |
| Other overheads |
(2,309) |
(1,893) |
22.0 |
(2,151) |
7.3 |
| Operating profit |
1,488 |
1,468 |
1.4 |
1,362 |
9.3 |
| OPM (%) |
12.7 |
14.0 |
(127) bps |
12.9 |
(14) bps |
| Depreciation |
(156) |
(166) |
(6.0) |
(146) |
6.7 |
| Interest |
(27) |
(197) |
(86.5) |
(58) |
(53.7) |
| Other income |
34 |
3 |
959.4 |
15 |
121.6 |
| PBT |
1,340 |
1,108 |
20.9 |
1,173 |
14.2 |
| Tax |
(243) |
(193) |
26.0 |
(227) |
7.1 |
| Effective tax rate (%) |
18.1 |
17.4 |
– |
19.3 |
– |
| Reported PAT |
1,097 |
915 |
19.8 |
947 |
15.9 |
| Adj. PAT margin (%) |
9.4 |
8.7 |
65 bps |
8.9 |
43 bps |
| Ann. EPS (Rs) |
35.2 |
29.3 |
19.8 |
30.3 |
15.9 |
Source: Company, India Infoline Research
Cost analysis
| As a % of net sales |
Q4 FY13 |
Q4 FY12 |
bps yoy |
Q3 FY13 |
bps qoq |
| Material costs |
53.7 |
56.1 |
(236) |
52.2 |
146 |
| Purchase of traded goods |
10.3 |
8.5 |
180 |
10.1 |
16 |
| Personnel Costs |
3.6 |
3.4 |
15 |
4.5 |
(90) |
| Other overheads |
19.7 |
18.0 |
169 |
20.3 |
(58) |
| Total costs |
87.3 |
86.0 |
127 |
87.1 |
14 |
Source: Company, India Infoline Research
Segmental results
| (Rs mn) |
Q4 FY13 |
Q4 FY12 |
% yoy |
Q3 FY13 |
% qoq |
| Revenues |
|
|
|
|
|
| Switch Gears |
3,118 |
2,376 |
31.2 |
2,697 |
15.6 |
| Cables and Wires |
4,620 |
4,767 |
(3.1) |
4,085 |
13.1 |
| Lighting & Fixtures |
1,823 |
1,511 |
20.6 |
1,770 |
3.0 |
| Electrical Consumer Durable |
2,136 |
1,813 |
17.8 |
2,032 |
5.1 |
| Total |
11,696 |
10,467 |
11.7 |
10,584 |
10.5 |
| EBIT |
|
|
|
|
|
| Switch Gears |
977 |
823 |
18.7 |
950 |
2.9 |
| Cables and Wires |
279 |
424 |
(34.2) |
414 |
(32.5) |
| Lighting & Fixtures |
449 |
376 |
19.4 |
423 |
6.2 |
| Electrical Consumer Durable |
571 |
505 |
12.9 |
508 |
12.2 |
| Total |
2,276 |
2,129 |
6.9 |
2,295 |
(0.8) |
| EBIT Margin (%) |
|
|
|
|
|
| Switch Gears |
31.3 |
34.7 |
(332) bps |
35.2 |
(387) bps |
| Cables and Wires |
6.0 |
8.9 |
(285) bps |
10.1 |
(409) bps |
| Lighting & Fixtures |
24.6 |
24.9 |
(24) bps |
23.9 |
74 bps |
|
Electrical Consumer Durable |
26.7 |
27.9 |
(115) bps |
25.0 |
169 bps |
| Blended |
19.5 |
20.3 |
(88) bps |
21.7 |
(222) bps |
Source: Company, India Infoline Research
Sylvania’s Q3 FY13 result snapshot
| (€mn) |
Q4 FY13 |
Q4 FY12 |
% yoy |
Q3 FY13 |
% qoq |
| Revenues |
113 |
112 |
1.1 |
110 |
2.9 |
| Operating Profit |
6.9 |
9.5 |
(27.4) |
7.0 |
(1.4) |
| OPM (%) |
6.1 |
8.5 |
(239) bps |
6.4 |
(27) bps |
| PBT |
4.8 |
6.8 |
(29.4) |
3.0 |
60.0 |
| PAT |
6.1 |
4.3 |
41.9 |
3.0 |
103.3 |
| NPM (%) |
5.4 |
3.8 |
155 bps |
2.7 |
266 bps |
Source: Company, India Infoline Research
Financial Summary
| Y/e 31 Mar (Rs m) |
FY12 |
FY13E |
FY14E |
FY15E |
| Revenues |
65,182 |
72,479 |
83,028 |
93,240 |
| yoy growth (%) |
16.1 |
11.2 |
14.6 |
12.3 |
| Operating profit |
6,574 |
6,689 |
8,588 |
10,031 |
| OPM (%) |
10.1 |
9.2 |
10.3 |
10.8 |
| Pre-exceptional PAT |
3,700 |
3,870 |
5,695 |
6,727 |
| Reported PAT |
3,700 |
5,814 |
5,695 |
6,727 |
| yoy growth (%) |
21.9 |
57.2 |
(2.1) |
18.1 |
|
|
|
|
|
|
| EPS (Rs) |
29.6 |
31.0 |
45.6 |
53.9 |
| P/E (x) |
24.1 |
23.1 |
15.7 |
13.3 |
| Price/Book (x) |
9.3 |
6.2 |
4.6 |
3.5 |
| EV/EBITDA (x) |
14.6 |
13.9 |
10.5 |
8.5 |
| Debt/Equity (x) |
0.9 |
0.6 |
0.3 |
0.1 |
| RoE (%) |
46.0 |
32.3 |
33.6 |
29.9 |
| RoCE (%) |
32.6 |
28.2 |
32.6 |
34.7 |
Source: Company, India Infoline Research