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centercenterCMI LIMITED.

2018
Initiating Coverage on CMI Limited
Under the guidance of Equity Research Analyst, Mr. Siddharth PurohitSubmitted by:
Karishma Jain
1000000CMI LIMITED.

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2018
Initiating Coverage on CMI Limited
Under the guidance of Equity Research Analyst, Mr. Siddharth PurohitSubmitted by:
Karishma Jain

Acknowledgement
The Summer Internship is of immense academic value and the Internship offered by SMC has allowed me grow professionally.

A sincere thanks to Mr. Anurag Bansal (Director) and Mr. Vipul Sharma (Head of Research) who gave me the opportunity to intern at SMC Global Securities.
The Internship opportunity at SMC was a great chance for learning along with professional development. I would like to express my sincere gratitude to Mr. Siddharth Purohit (Equity Research Analyst) who guided me on conducting Equity Research on CMI Ltd. despite his busy schedules.
I would also like to extend my thanks to all co-workers with whom I interacted and gained invaluable insights in the field of Equity Research.
Sincerely,
Karishma Jain
Place: Mumbai
Date: 15.07.2018

CMI Limited
Sector – Cable & Wire
(Other Elect Equip./Prod) CMP 216 Stock Info Face Value 10.00
Market Cap (INR Cr) 315.4
Beta 52 week High/Low 372/172
Sensex 36,600
Nifty 11,026
Shareholding Pattern Promoters 43.55%
Public 56.45%
Stock Chart
July 15, 2018
CMI Limited, the leading specialty cables manufacturer, is engaged in manufacturing cables for various industries such as Railways, Oil & Gas, Telecommunications, Energy, Industrial, Power, Petro-chemicals, etc. The company started its operations in 1967 and gradually diversified into Telecom Railways, Refineries, Energy, Industrial, Power, Petrochemicals, Capital Goods etc. The company has a manufacturing facility located in Faridabad with installed capacity of 44,000 km as on March 31, 2017. In March 2016 the company acquired 100% stake in General Cable Energy India Private Limited, Baddi with installed capacity of 1,80,000 km, which is 4 times of Faridabad facility.

Key Investment Arguments
Acquisition of Baddi Plant: Unutilized Capacity to tap increasing demand-
With the acquisition of Baddi plant from General Cables in 2016, the company is well placed to benefit from increasing demand in cable sector. The Company is fully confident of receiving Category 2 approval from Indian Railways for Baddi plant in June 2018 and approvals from NTPC/PGCIL by end of FY19. The management is guiding for 440 crores of net revenue from Baddi plant.

Huge Capex Investment in Railway, a driving factor for CMI growth-Since, the major revenue CMI receives is by Railways and other PSU sectors, majorly on electrification of Indian railway. It will give a huge order to the company. Indian Railways has planned completion of electrification in next 4-5 years (from October 2017), which will lead to energy savings worth Rs 10,000 crore. So, there a huge revenue growth for CMI Ltd.

GST impact : Unorganized sector moving to Organized sector-The new Indian tax structure will shift unorganised players to the organised sector because the unorganized sector will have to pay tax which would reduce the price gap between the branded products and local one, the result will be consumer opting for branded products.
Working Capital and EBIDTA Margin a concern-
Major part of CMI’s revenue is with public sector entities resulting in WC days above 150 days. The reason company gave is that the Baddi plan is doing more business with electricity board where number of days are more which impact the working capital ,also the impact of GST was another reason in the rise of working capital days. The company believe, WC cycle is likely to remain high for next two years. About the EBITDA margin, raw material price has increase a bit also, the transportation cost from Baddi to Faridabad is added to the product cost and hence a lower margin.

Valuations ; View –Going by the future projection, the estimated net sales to grow by 33% ie.749 crores for the FY19, and 931crores of sales is project -ted for FY20. At the CMP of Rs 216, CMI trades at a P/E of 12.6 in FY18 and FY19E P/E of 7.7x and 6.0x FY20E.

Industry Overview :The wire and cable Industry
The global wire and cable market is expected to grow from an estimated USD 205 billion in 2014 to USD 297 billion in 2019, registering a CAGR of 7.7% during the 2014-19 forecast period.
The industry is expected to move towards a higher share of the organized market as compared to the unorganized market. According to industry data , the unorganized sector currently forms 15% of the Indian wire and cable industry size.

2333625top0Exhibit 1 : Sector allocation Global wire and cable market
The cable market is estimated to grow from its current size of USD 205 billion in 2014 to USD 297 billion in 2019, registering a CAGR of 7.7% over the 2014-19. The power cable segment is expected to grow at a CAGR of 7.5% over the forecast period (2014 to 2019) to reach USD 219.7 billion by 2019, while the telecom sector is likely to register CAGR growth of around 8.5% to post nearly USD 78 billion in 2019.

48387002385695Source: IEEMA
00Source: IEEMA
031242000Exhibit 2: Global wire and cable market

Domestic wire and cable market
0100076000The domestic wire and cable market is estimated to be around INR 51,842 cr at end-FY18, representing growth of 15% over the previous year. According to industry estimates, the domestic wire and cable market is expected to maintain 15% CAGR over next two years as well as reach a size of around INR 68,561 cr in FY20.
50863502595880Source: IEEMA
00Source: IEEMA
Exhibit 3: Indian wire and cable market
With the Indian electrical equipment industry growing at a CAGR of 15% through FY2021-22, the wires and cables industry is estimated to grow at least at the same pace.

Company Background :CMI Ltd. Incorporated in 1967, initially was known as Choudhari Metal Industries was engaged in copper metal trade. From copper metal rod it diversified its products to manufacturing of variety of cables like telecom cables, control cables, PVC switch board cable, data transmission cable etc. At start, Telecom cables was the core focus of CMI. But due to technology changes, the sales dipped and the company was declared a sick unit. It was then purchased by Mr.Amit Jain (present chairman and managing director of CMI Ltd) in 2007, post which it started producing different products to diversify the risk.

Now the Company’s product range includes EHV Power cables, MV Power cables, Aerial bunched cables, LV Power & control cables, Railway Cables, Fire Survival cables, telecom cables, solar cables etc.

Revenue Contribution :50863502101215Source: Company, Annual reports
00Source: Company, Annual reports

Product Portfolio :Types of Cables Application
Quad Cables
Specialized safety cables used by Railways for counting incoming & outgoing axles/coaches at any particular section to ensure no coach is left behind.

Railway Signalling Cables Used for transmitting signals to signal posts for smooth movement of trains.

Fire Survival Cables Used to maintain circuit integrity in case of fire for 3 hours up to 950oC, to ensure transmission of signals to safety equipment.

Fire Retardant Low Smoke Zero Halogen (LSZH) Cables Ensures better visibility and low toxicity in case of fire.

Highly Flexible Multi-core Copper Shielded Abrasion Resistant Thermoplastic Polyurethanes (TPU) Sheathed Cables Used for gas insulated substations.

EHV/MV/HV/LV Power Cables Used for supplying power.

LV Control Cables Used for special purposes in various sectors.

Polythene Insulated Jelly Filled (PIJF) Telecom Cables Used for last mile connectivity
Fire Alarm & Communication Cables Used for fire detection & alert equipment.

Ethylene Propylene Rubber (EPR) –Chloro-Sulfonated Polyethylene (CSP)-Polychloroprene (PCP)-Silicon Cables Used at high temperature in mines, steel, ship building & wind energy generation industry.

Flexible and Building Wires Building Wire cables – for building wiring on wall surface in conduit Industrial wiring cables – for wiring of pannel & other electrical equipments including UPS cabling.

Low Voltage Cables and Instrumentation and Control Cables Used for power transmission, single transmission
Aerial Bunch Cables Used for power transmission and distribution.

High Voltage Cables Used for power transmission.

Extra High Voltage Cables Used for power transmission.

Company Milestone :
Client Base :
About the Plant :CMI has focused on R&D specifically. They started manufacturing Jelly Filled Telecom cables, for DOT and Railways and became an approved vendor. It is a sole supplier for ISRO for Teflon cable which is used for multi-object tracking system and for Refineries too they had developed a special cable which can survive in a temperature of 950 degree for 90 minutes, maintaining the circuit integrity.

The GOI is focusing on infrastructure development, which was slowed down few years ago before UPA Government came into the power. It has planned a huge budget for Railways, Metro projects, Power T&D, Smart cities, etc. There’s also a huge opportunity in Domestic market for specialty and Instrumentation in Railways, Freight Corridors, Metros, Power and Telecom sector. Domestic Cables and Wire Industry which has been growing at the rate of around 15%, will give CMI a good opportunity to grow.
The company has a manufacturing facility located in Faridabad with installed capacity of 44,000 km as on March 31, 2017 and then In Feb-2016 CMI acquired 100% stake in General Cable Energy India Private Limited, Baddi with installed capacity of 1,80,000 km, which is 4 times of Faridabad facility.

Company has two Manufacturing Units: Faridabad Manufacturing Unit (Haryana)
Baddi Manufacturing Unit (Himachal Pradesh).

Plant Location :351472578740
00
952578740
00

Baddi , Himachal Pradesh Faridabad, Haryana
Power Cable Focused Plant Quard , Instrumentation, Specialty Cable Focused Plant.

Energy Efficient Of 20%-30% – Low Operational Leverage Semi-Automated Plant
Environmental Friendly Indian Standard Plant
The Plant Was Commissioned In 2012 As A Greenfield Project Spread Over 100000 Sq.M,5 Year Old Plant It has 30 Year Of Long Operational History
Current Capacity Utilization Of 22% Current Capacity utilisation Of 100%
Revenue Potential Rs. 1000 croresRevenue Potential Of 350 croresKey Person :Name Designation
Mr. Amit Jain
Chairman – cum – Managing Director Mr. Amit Jain is an industrialist with an experience of more than two decades in cable manufacturing. He is a second generation entrepreneur with foresight ; keen business acumen having turned around the loss making unit that CMI Limited had acquired in 2007 to a profitable and ambitious growth aspiring company today.

Mr. V. K. MaheswariPresident – Works (Faridabad) Mr. V. K. Maheswari (Dip in Engg.) has been associated with CMI Limited for more than 30 years. Mr. Maheshwari has played an instrumental role in the Company and has a rich experience in manufacturing various types of cables to national/international specifications.

Mr. Munishvar Gaur
Group President Mr. Gaur has an experience of more than three decades in leading Indian business houses of Electrical and Mechanical Industry. His areas of expertise include Research and Product Development, Quality Management, Operations Management, Project Management, and Marketing ; Sales.

Mr. Rattan Lal Aggarwal
CFO Mr. Rattan Lal Aggarwal is a graduate of Ajmer University and is a qualified Company Secretary and Chartered Accountant. He possesses over 2 decades of post-qualification experience in finance, accounts, project accounting, M;A activities-acquisitions, etc. He has an experience of working with reputed companies and also has an experience in managing all commercial operations relating to purchases, imports, export, open credit Risk, credit control, forex management, etc. He has worked as a team leader, head of Finance ; Account and Chief Compliance Officer continuously for more than a decade.

Mr. Vijay Kumar Gupta
Whole – Time Director Mr. Vijay Kumar Gupta (B.E., DBM) has a vast experience of 42 years in manufacturing and marketing different types of wires and cables for Government and Private sector. During his association with CMI from the last 13 years, he has been instrumental in ensuring a manifold increase in turnover through continuous development of innovative products and growing the customer base.
Key Investment Analysis:
Acquisition of Baddi plant, Game Changer.

Perks of Acquiring Baddi plant (General cables):
CMI cables acquired Baddi Plant from General Cables in 2016 at 100 Crores.

General Cable Corporation, one of the most globally diversified industrial companies, has completed construction on its state-of-the-art manufacturing facility in Baddi, Himachal Pradesh, in the year 2012, April.It was designed and build in compliance with Indian green building Standard. It includes energy saving by 30-40% and water saving of 20-30% comparing to other wire ; industry operation.

The facility also include aerial transmission conductors, low, medium and high voltage power cables, building wire, control, instrumentation and specialty cables. It is capable of generating annual revenues of 1000 crores. General Cable invested 400 cr in 2009 to setup this Baddi Plant. In 2013, the plant had commenced its operation, but a year later the operation was halted due to the major policy shift after the appointment of new CEO of General Cables to close factories in Asia and Africa, so as to focus on its businesses in the America and Europe as part of a restructuring.
Asian Pacific region operations generate, $7 billion worth of annual revenue, roughly 10 percent of total sales. The Baddi plant was among them.

Why General Cables sold Baddi plant?
In 2014 Oct, General cables announced to sell the Asia Pacific region and Africa operations because they want to simplify geographic portfolio and to reduce organizational complexity. They shut down its operation in Africa and Asia, so that they can focus on its businesses in America and Europe. That’s why GC sold Baddi plant to CMI Ltd.

Currently the General Cables sold its complete stake to Milan based Prysmain Group in June 2018.

Baddi plant 2018 Update :Year 1011555231775Current order in hand at 325crores.

CMI is awaiting for the approval from Indian railway for baddi plant
Capacity Utilization : Total capacity 1000cr.

00Current order in hand at 325crores.

CMI is awaiting for the approval from Indian railway for baddi plant
Capacity Utilization : Total capacity 1000cr.

Revenue
FY2017 70 croresFY2018 220 croresFY-2019E 440 crores
Since, the capacity is fully utilized in Faridabad plant, the order received in Faridabad plant was manufactured in Baddi plant and sold it through Faridabad unit.
The Company is fully confident of receiving Category 2 approval from Indian Railways for Baddi plant in June 2018 and approvals from NTPC/PGCIL by end of FY19.

The company is also focusing on exports where the company is targeting to achieve 5-10% of plant’s turnover from exports, assuming that they will have a better pricing level, changing from Aluminium to cooper conductors. At the current level, the company is guiding for INR 440cr of net revenues from Baddi plant in FY19E.

The cost of manufacturing is less in Baddi plant compared to Faridabad unit , which may increase the EBITDA Margin.

Products manufactured at Baddi plant :Solar ; power cables for RENEW, Schneider, ACME etc.

EHV Cables
Instrumentation, power cables and control cables for BHEL, GETCO, Indian railway etc.

Opportunity for the Cable Industry From :
Indian Railway Metro projects Telecom Power (T;D) Oil and gas Renewables Others
Investments of Rs 8.56 lakh crore planned in next five years for decongestion, safety, high speed rail, network expansion, etc.

Projects worth Rs 2.5 lakh crore are under expansion and implementation; About 10% each of the total capital expenditure in metro rail goes to
Signaling /telecom and electrification Strong investments in telecom sector are planned in the coming years with Indian mobile services sector is expected to contribute 8.2% of GDP by 2020 Investments of around Rs 2.6 lakh crore expected in transmission sector by 2022 with nearly Rs 30,000cr to be spent in the transmission system of 220
kV voltage and below Investments in India’s oil and gas sector are expected to touch 2.5-3 trillion over the next few years. Increase in safety measures have augmented demand for fire retardant cables Immense potential exists for renewable energy sources in India; Government targeting to increase renewable power capacity to 175 GW by 2022 from
current 50 GW Make in India: With ‘Make in India’, government is pushing manufacturing growth in India and aiming towards making India as one of the top global
destination for foreign direct investments
Smart Cities Mission: Government has approved investments of around Rs 1.92 lakh crore for smart city plans of 90 cities
-57150318770
00
Major revenue segment
3829050168275
00

5143500158115Source: Company, Annual reports
00Source: Company, Annual reports

Indian Railway:
Since, the major revenue CMI receives is by Railways and other PSU sectors, majorly on electrification of Indian railway would give a huge order to the company. Indian Railways has planned completion of electrification in next 4-5 years (from October 2017), which will lead to energy savings worth Rs 10,000 crore . So, there a huge revenue growth for CMI Ltd.

The govt has also develop three new arms of Dedicated Freight Corridor (DFC) in the various regions of the country, government is planning to invest Rs 3,30,000 crores. Various technologies such as electronic interlocking at all interlocked Broad Gauge stations, Automatic Train Protection(ATP) system have been introduced by Indian Railways.

The Indian Railways is modernizing the signaling systems. The up-gradation of the old signaling system, maintenance of existing RRI system and new RRI deployment will create an enormous demand for cables in India. With an impetus from the Government for electrification and modernization of signaling system, the demand for railway signaling cables will be robust for Cable industry which means a huge revenue for CMI.

47434502950845Source: Indian Railway Anuual Report (IR)
00Source: Indian Railway Anuual Report (IR)

034290000
46863002797175Source: Indian Railway Anuual Report (IR)
Source: Indian Railway Anuual Report (IR)

Power sector and Renewable Energy: It is second largest industry contributing CMI total revenue.

Power sector plays a vibrant role in the growth of Indian economy and it is growing at rapid pace. In the last three years, India’s total power capacity has increased from 243GW in March 2014 to 320GW in March 2017, a rise of 31%.

Renewable Energy, Smart Cities, Flue-Gas Desulfurization (FGD), Telecom are other major of areas which will require large volumes of Power, C;I and Specialty Cables.

The government of India increased its target for renewable power capacity to 175GW by 2022 led by solar power contributing 100GW, followed by wind backing 60GW, 10GW from bio-power and 5GW by small hydropower. According to MNRE, renewable energy capacity of 100GW is estimated to be added between 2022 and 2027, reaching the total renewable capacity to 275 GWlefttop.

-476261497330Source: National Energy Plan, MNRE Annual Report 2016-17
00Source: National Energy Plan, MNRE Annual Report 2016-17

Recently, the government of India increased its target for renewable power capacity to 175GW by 2022 led by solar power contributing 100GW, followed by wind backing 60 GW, 10GW from bio-power and 5GW by small hydropower.

According to MNRE, renewable energy capacity of 100GW is estimated to be added between 2022 and 2027, reaching the total renewable capacity to 275GW.

With strong product portfolio in renewable energy sector, the Company is likely to be the key beneficiary of growth prospects of renewable energy industry.

Oil ; Gas:
Oil ; Gas, Petrochemicals ; Fertilizers segment is the third largest industry, after railways and power sector, contributing to the overall revenue of CMI Ltd.

For the fiscal year 2018-19, state oil companies have planned a capital expenditure to the tune of Rs. 89,000 crore for developing new oil and gas fields and enhancing production from existing fields. ONGC has capex target of more than 32,000 crore while Indian Oil would cough up close to Rs. 23,000 crore.

2018-19 budget breakup
48000 croreExploration and production
35800 croreRefining and marketing
3952 croreInvestment in petrochemicals
Oil and gas sector is estimated to attract global investments worth over Rs. 250,000 crore over the next five years.

Planned investments in Oil ; Gas sector opens up a significant opportunity for CMI Ltd.

Company Investment Timeframe
Indian Oil INR 1,75,000 cr 7 years (FY16 – FY22)
Bharat Petroleum INR 1,00,000 cr 5 years (FY16 – FY21)
Hindustan Petroleum INR 3,25,000 cr 6 years (FY16 – FY22)
5143500100330Source: Company data
Source: Company data

Metro projects
In August 2017, the government approved the new Metro Rail Policy, 2017. This policy aims to facilitate innovative financing, revive private investment by making PPPs mandatory, promote transit-oriented development and provision of last-mile connectivity, and improve project appraisal procedures. In another major initiative, in April 2017, the government introduced the norms to procure at least 75% of rail cars and 25% of critical equipment locally under the Make in India initiative.

476252667635Source: Company data
Source: Company data

Peer Comparison :ROCE 2012-13 2013-14 2014-15 2015-16 2016-17
Cmi0.11 0.12 0.16 0.13 0.09
Kei 0.13 0.11 0.13 0.15 0.14
Daimond0.07 0.08 -0.11 -0.05 -0.25
Universal 0.0561 0.0013 0.0014 0.0010 0.0009
ROE 2012-13 2013-14 2014-15 2015-16 2016-17
Cmi0.47 0.5 0.55 1.92 2.03
Kei 1.87 0.61 2.22 4.05 6.34
Daimond2.80 1.89 -2.00 -5.34 -2.98
Universal -0.20 -1.73 -1.50 0.56 1.62
EBITDA Margin 2012-13 2013-14 2014-15 2015-16 2016-17
Cmi9.23% 11.19% 11.72% 18.71% 14.12%
Kei 10.42% 9.53% 9.61% 10.56% 10.65%
Daimond10.60% 10.84% 4.16% -4.56% -55.85%
Universal Cables 10.63% 7.24% 3.56% 9.87% 9.09%
PAT 2012-13 2013-14 2014-15 2015-16 2016-17
Cmi1.66 1.77 6.30 26.98 30.07
Kei 26.34 11.60 34.25 62.55 98.635
Daimond104.06 110.03 -184.43 -326.28 -804.76
Universal Cables -6.95 -40.06 -34.71 19.55 28.39
ASSET TURNOVER 2012-13 2013-14 2014-15 2015-16 2016-17
Cmi15.24 19.83 16.51 1.38 2.24
Kei 5.32 5.15 6.71 6.58 6.54
Daimond2.67 2.44 1.87 2.14 0.84
Universal 4.34 3.95 4.77 5.57 5.74
Financials : Income Statement (Consolidated)
CMI ( Rs in Cr) Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19E Mar-20E
Turnover 99 118 151 270 421 574 780 950
% Ch. YoY- 19 28.2 79.0 55.9 36 35.9 21.8
Revenue Line 2 0.7 1.3 1.5 12.7 4.8 3 – –
Less: Excise Duty 10.1 12.5 15.0 29.7 42.9 14 31.2 19.0
Net Sales 89 106 137 253 383 563.0 749 931
% Ch. YoY- 19.3 29.0 84.3 51.3 47.1 33.0 24.3
Total Expenditure 81 97 121 208 329 484 654 817
% Ch. YoY- 20.0 24.9 71.4 58.3 47.0 35.0 25.0
PBIDT 8 9 16 45 53 79 101 126
% Ch. YoY- 12.5 72.9 182.4 18.7 47.7 28.3 24.3
% Margin 9.2 8.6 11.59 17.77 13.94 14.00 14% 14%
Interest 5 6 6 9 21 29 37.4 41.9
Depreciation 1.0 0.8 0.9 1 10 10 11 14
PBT excl. OI 2.47 2.80 9.13 34 23 39 52 70
Other Income – – – 79.0 – – – –
PBT incl OI 2.469 2.80 9.13 113.45 22.65 39 52 70
Tax (0.80) (1.03) (2.83) (7.52) 7.41 13.58 10.5 14.0
PAT 1.7 1.8 6.3 27 30.1 25.8 42 56
EPS (Rs) 4.70 5.00 5.50 75.23 20.34 17.17 28 37
DPS 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
FV 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
No of shares 0.4 0.4 1.1 1.4 1.5 1.5 1.5 1.5
Balance Sheet :CMI Ltd. (Rs. In crores) Mar-15 Mar-16 Mar-17 Mar-18
SOURCES OF FUNDS : Share Capital 11.5 14.1 14.8 15.0
Reserves ; Surplus 24 160 190 223
Foreign Currency Translation Reserve 1 1 –
Net Worth 37 175.3 204.6 238
Secured Loans 3 62.58 51 45
Unsecured Loans 30 47 80 166
Total Loan funds 33 109.9 131 210
Capital Employed 70.00 285.23 336.46 449.52
Gross Block 23.0 196.1 203.6 214.0
Less: Depreciation 15.5 32.8 41.8 52.0
Net Block 7.6 163.3 161.8 162.0
Cap. WIP – 7 5 4
Fixed Assets 8.22 173.495 168.62 167.16
Intangible Assets 0.7 2.9 1.9 0.9
Investments 0 0 0 –
Sundry Debtors 37 65 141 227
Cash ; Bank Bal3 7 9 12
Loans ; Advances 10 39 37 15
Inventory 35 45 100 128
Other Current Assets 0 2 0 31
Curr Assets, Loans ; Adv84 159 288 413
Curr Liabilities 21 43 130 145
Sundry Creditors 17 35 102 91
Other Creditors 5 8 27 21
Provision 3 9 11 1
Curr Liab ; Prov25 52 141 146
Net current asset 60 107 147 267
Deferred Tax Assets 0.9 2.0 17.9 16.4
Other Asset 1.3 2.5 2.8 Total Assets 70.0 285.23 336.45 450.25
Key Ratios :CMI CABLES FY14 FY15 FY16 FY17 FY18
Growth Net Sales 19.3 29.0 84.3 51.3 47.1
Adjusted Net Profit 6.3 256.5 1,580.3 (71.6) (14.2)
EBITDA 12.5 72.9 182.4 18.7 47.7
EPS 6.3 10.1 1,267.0 (73.0) (15.6)
CEPS (7.6) (10.0) 204.8 88.3 (35.3)
Gross Fixed Assets (0.1) 18.1 751.6 3.8 5.1
Capital Employed 16.8 38.0 307.5 18.0 33.6
Valuation EPS (Rs.) 5.0 5.5 75.2 20.3 17.17
CEPS (Rs.) 7.6 6.8 20.8 39.2 25.3
BVPS (Rs) 40.0 32.3 124.5 138.4 158.4
PER (x) 43.2 39.2 2.9 10.6 12.6
PEG (x) 6.9 3.9 0.0 (0.1) (0.8)
P/CEPS (x) 28.5 31.6 10.4 5.5 8.5
P/BV (x) 5.4 6.7 1.7 1.6 1.4
EV/EBITDA (x) 12.1 17.4 9.1 8.3 6.6
EV/Net Sales (x) 1.0 2.0 1.6 1.2 0.9
Profitability ROCE (%) 17.8 24.9 24.6 13.9 17.4
ROE (%) 13.3 24.6 99.8 15.8 11.7
EBIDTA Margin (%) 8.6 11.6 17.8 13.9 14.0
EBDTA Margin (%) 3.4 7.3 14.1 8.6 8.9
Net Profit Margin (%) 1.7 4.6 10.6 7.9 4.6
Tax/PBT (%) (36.9) (31.0) (663.1) 3,272.0 3,447.2
Turnover Avg. Collection Period (Days) 80 97 94 135 147
Avg. Payment Period (Days) 55 56 67 128 76
Asset Turn Over ( Gross Block) 6.0 6.5 1.4 2.1 2.7
Net Fixed Assets (x) 20.1 18.1 1.5 2.4 3.5
Total Assets (x) 2.1 2.0 0.9 1.1 1.3
Market Price per share 216 216 216 216 216
Market Capitalisation76 247 304 319 325
Enterprise Value 111 277 407 441 523
Dividend Yield 0.5% 0.5% 0.5% 0.5% 0.5%

Concern:
Working capital will be a concern for the next two year:
Major part of CMI’s business is with public sector/government resulting in working capital days above 150 days. The reason company gave is that the baddi plan is doing more business with electricity board where number of days are more which impact the working capital ,also the impact of GST was another reason in the rise of working capital days. The company believe, WC cycle is likely to remain high for next two years.

Raw material price volatility
Copper and Aluminium is a key raw material used in the manufacture of cables. Changes in prices of copper would have major impact on margins. If we see in India, power cables are being used on Aluminium conductor, whereas in export market, that segment is making copper conductors. So the raw material they use is aluminium in India and copper for export market. If we see the pricing, copper is 3X times in price compare to aluminium, same with the weight. So it has 9x impact on pricing level while manufacturing copper cables. That’s why they are also exploring export market so they can diversify their risk regarding the pricing of raw material.

Customer concentration risk
Nearly 55-60% of its revenues is dependent on Railways. The company had diversified its product, but not the revenue segment .Slowdown in the Railway ordering could impact its revenues and profitability.

Conclusion:
The company has achieved EBITDA of Rs. 78.82 crores during FY18 as compared to Rs. 53.36 crores in FY17, also the Revenue grew by 36% for the FY2018.
There’s a decline in PAT level, ie. PAT level profit of Rs. 25.81 crores during FY18 as compared to previous year PAT of Rs. 30.07 crores. The reason was taxation impact at the PAT level because of Baddi plant. The company were having first year of operation for the full year, with the 25% of total utilization. The company created the deferred tax assets last year which had an impact for FY17 as compared to FY18. They had a normal tax provision in FY18, this was the reason PAT level had come down compare to last year. Going by their financials as compared to PBT level then we can see they have achieved a PBT of Rs. 39.38 crores during FY 18 as compared to previous year of Rs. 22.63 crores. So in that way they have achieved a good performance as compared to the previous year.
While considering the strong demand in cables in railways, metros, refineries, telecom etc., there’s a positive outlook on growth of CMI. Going by the future projection, the estimated net sales to grow by 33% ie.749 crores for the FY19, and 931crores of sales is projected for FY20.
At the CMP of Rs 216, CMI trades at a P/E of 12.6 in FY18 and FY19E P/E of 7.7x and 6.0x FY20E. On the back of strong revenue, the company will have a strong incremental growth.

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