Larsen & Toubro Ltd
25/09/2017 Others
Larsen & Toubro (L&T) enjoys several levers across business/geographical segments, and has emerged as the E&C partner of choice in India. This provides it with a robust foundation to capitalize on the next leg of the investment cycle. The management intends to improve consolidated RoE to 18% (12% in FY17) by FY21. Capping investments in concession business/asset monetization are important components of this strategy. Manufacturing businesses (like shipyard, power BTG, and forgings) also offer interesting growth avenues over the longer term. Many of these businesses are difficult to replicate, bolstering L&T’s position as a dominant player. Strong momentum being witnessed across domestic infrastructure verticals – Rail/Metros, T&D, Water, Smart Cities, Airports, and Ports; Hydrocarbons and Defense also witnessing recovery which will improve the revenue further. L&T has been maintaining a healthy dividend payout of 34.59%. It has reported top line growth of 10% CAGR and bottom-line of 8% CAGR over FY2012-17. Further, the company’s debt/equity ratio has improved from 2.22 in FY2015 to1.93 in FY2017 and has maintained hefty cashflow `6234cr in FY2017.EBITDA margin has remained constant between 15-16% from FY2014-17.L&T is trading at 15.48x EV/EBITDA and has reported RoE of 14.12% of FY17 TTM earnings. Hence Buy.
   Indraprastha Gas Ltd
25/09/2017 Others
Indraprastha Gas Limited (IGL), processes and distributes CNG and LPG. IGL had received permission from the Haryana government to lay a city gas distribution network in a part of Gurugram district. Going ahead with more such permissions in other areas of Gurugram can boost the company’s prospects. Led by strong focus on curbing pollution in the National Capital Region, CNG sales volume is likely to grow strongly. Expected restriction on the usage of dirty fuel would propel volume further for the company. Aggressive plans of DIMTS (Delhi Integrated Multi-Modal Transit) to add buses and the Delhi government’s move to introduce new blue-line buses (last mile connectivity for Delhi Metro) will aid CNG volume growth. Further acquisition of 50% stake in Maharashtra Natural Gas (MNGL) will grant IGL entry into Pune with good growth potential. Also, the PNG business represents a long-term opportunity with low penetration of ~10% in the domestic segment. This opportunity is likely to boost IGL’s sales, as it expands its geographical presence in Greater Noida, Ghaziabad, Sonepat, and Panipat. IGL has been maintaining a healthy dividend payout of 20.10%. It has reported a topline growth of 9% CAGR and bottomline of 15% CAGR over FY2012-17. Further, the company is virtually debt free and also the cash flow has improved from `612.11cr in FY2012 to `947.55cr in FY2017. IGL’s return on equity (ROE) is 19.95% for FY17 TTM earnings. Hence Buy.
   Future Lifestyle Fashions Ltd
25/09/2017 Others
Future Lifestyle Fashions Ltd (FLFL) operates its retail outlets in three broad formats, namely Central (big-box fashion retailer), Brand Factory (liquidation channel) and EBO/Planet Sports. The companys retail stores have consistently outperformed peers with respect to like to-like growth, averaging 10% over the past three years. Currently, FLFL has a retail footprint of over 5.5mn sq. ft., which is expected to grow to over 6.6mn sq. ft. by FY19, well ahead of its peers. The top six brands have sales of over `100cr each and reported 12% sales CAGR over FY14-17, higher than overall revenue growth of 9%. Investee brands not only fill gaps in FLFLs portfolio but also provide value unlocking to the company upon divestment. FLFL’s plan is to add 6-7 Centrals and 8-9 Brand Factories every year, leading to an annual capex of ` 220cr. FLFL has been maintaining a healthy dividend payout of 32.27%. It has reported a healthy bottom-line of 25% CAGR over FY2014-17. Further, the company’s debt/equity ratio has improved from 1.05 in FY2014 to 0.35 in FY2017 and also the cash flow has improved from (`592.97cr) in FY2014 to `288.47cr in FY2017.FLFL is trading at 21.36x EV/EBITDA and has reported RoE of 3.42% of FY17 TTM earnings. Hence Buy.
   Asian Paints Ltd
25/09/2017 Others
Asian Paints (APL) is Indias leading paint manufacturer and marketer, with a dominant share in the decorative segment(with market share of 45-50% in the organised domestic paints segment while second-largest player has market share of about 15%).Driven by its leadership position, the groups revenue registered compound annual growth rate of 15% over the last five years. Asian Paints group will maintain its leadership position, driven by its strong brand equity, extensive distribution network, and wide product portfolio. It is planning to invest `1200 in FY18 (`1000 for two new capacities in Mysore and Vizag with 3lac kl each capacity for water-based emulsion paints). Total capacity stands at 11,30,000 kl with 75-80% utilization; lower utilization levels is because of Rohtak plant, which will see levels improving slowly. APL will be key beneficiary of potential recovery in GDP, rising urbanisation and government’s housing push. APL has been maintaining a healthy dividend payout of 45.13%. It has reported a bottom-line of 14% CAGR over FY2012-17. Further, the company is virtually debt free and also the cash flow has improved from `710cr in FY2012 to `1527cr in FY2017. APL has maintained good return on equity (ROE) track record for last 3 Years at 29.58%. Hence Buy.
   Prataap Snacks Limited
19/09/2017 IPO/FPO note
Prataap Snacks is one of the top snack food companies in India and with 27% revenue CAGR between FY13-FY17, it is also one of the fastest growing companies in its sector. It has three product lines i.e. Extruded Snacks, Chips and Namkeen and has brands such as Chulbule and Yellow Diamond. It has 3 manufacturing facilities, 218 distributors and 3,500 super stockists.
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