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Thursday, April 23, 2015

NILKAMAL LTD : GRAB AT EVERY LEVEL !!!

Scrip Code: 523385 / NILKAMAL
CMP:  Rs. 457.80; Market Cap: Rs. 683.15 Cr; 52 Week High/Low: Rs. 205.30 / Rs. 505.80.
Total Shares: 1,49,22,525 shares; Promoters : 95,70,001 shares –64.13 %; Total Public holding : 53,52,524 shares – 35.86 %; Book Value: Rs. 310.10; Face Value: Rs. 10.00; EPS: Rs. 23.39; Dividend: 40.00 %; P/E: 18.39 times; Ind. P/E: 31.37; EV/EBITDA: 6.80.
Total Debt: Rs. 268.81 Cr; Enterprise Value: Rs. 885.10 Cr.

NILKAMAL LIMITED: The Company was founded in 1934 and is headquartered in Mumbai, India. The company was earlier know as Creamer Plastic Ltd and changed its name to Nilkamal Plastics Ltd on August 23, 1990. Nilkamal Limited, together with its subsidiaries, manufactures and sells injection molded plastic articles and polymers primarily in India. It operates in Plastics; Lifestyle Furniture, Furnishings and Accessories; and Others segments. Nilkamal Plastics Ltd came with an IPO on February 1991 with issue of 18,00,000 shares of Face value of Rs. 10 each at par. The company offers various material handling products, including crates, pallets, metal shelving and racking products, material handling equipment, hospitality products, golf cart & resort vehicles, tool storage cabinets, ice boxes, fish tubs, vaccine carriers, road safety products, plastic formwork products, waste management tools, PE manhole products, and cold storage solutions. It also provides premier chairs, baby chairs, chair shells, dining tables, stools, racks, trolleys, school benches, sofa sets, tables, wall units, TV trolleys, cabinets and cupboards, drawers, bedroom sets, metal beds, wooden wardrobes, crystal chairs, office tables and chairs, computer tables, junior study sets, and planters. The company also offers its products to automobile, pharmaceutical, engineering, electrical, logistics, textiles, supermarkets, electronics, retail, food and beverages, agriculture, seafood, hospitality and catering, and other allied business. In addition, the company manufactures and sells mattresses; provides storage systems of metal and mass housings; and operates 19 retail stores in 13 cities under the @home brand. The company also exports its products to Middle East, Europe & America. Company’s subsidiary includes Nilkamal Eswaran Plastic Pvt. Ltd (Sri Lanka) whereby Nilkamal holds 76 %; this company is a leading manufacturer of moulded furniture in Sri Lanka. Another such subsidiary is Nilkamal Crates & Bins FZE (UAE), this a wholly owned subsidiary, which manufactures and exports plastic containers, pallets, parts bins, waste bins, ice boxes, metal wire cage and hand pallet trucks. Nilkamal has two Joint Ventures Nilkamal BITO Storage Systems Pvt. Ltd with 50 % JV, an Indo German JV, this is into manufacturing and selling of metal storage systems. The second JV is Cambro Nilkamal Pvt Ltd: 50 % JV which is into manufacturing of hospitality products suited for large restaurants and hotels. The company is compared with Supreme Industires Ltd, Astral Poly Technik Ltd, Sintex Industries, Peacock Industries, Wim Plast Ltd and Globally compared with Hume Industries Bhd of Malaysia, Teems Inc of South Korea, Duc Thanh Wood Processing JSC of Vietnam, LenCheong Holding Berhad of Malaysia, Crown Holding of USA, AEP Ind from USA, AptarGroup of USA, Avery Dennison Corp of USA, Ball Corporation of USA, Berry Plastics Group Inc of USA, The Pack Corp of Tokyo, Nampak Ltd of South Africa, Mpact Ltd of South Africa, Polyplex Pcl of Thailand, Billerudkorsnas Ab of Sweden, British Polythene Ind of UK, DS Smith Plc of UK, Huhtamaki Oyj of Finland, Resilux NV from Netherlands.

Investment Rationale:
Nilkamal Ltd is one amongst the world's largest manufacturer of moulded furniture and India's leading manufacturer of Material Handling Systems. Company is also a pioneer in the home retailing segment. Company is spread across the country with 16 large format retail stores with an average of 25,000sq.ft. Per store and plans to open 30 more stores in till 2017. Company is well positioned as a Home Maker store and is a perfect one-stop solution store for home planning, with finest quality furniture, soft furnishing, home accessories and a plethora of a whole lot of Services to enhance customers indoor and outdoor spaces. The design of the products of this company is contemporary yet practical, mirroring Indian taste & finesse. The comprehensive product mix right from bins, crates, pallets to Material Handling Equipment ranging from Pallet Trucks to Stackers, Forklifts, shelving and racking plus which are the equipment’s required for the rapid growing logistics industry. Product quality of Nilkamal is widely accepted, nationally & internationally and has an office in Ajman, UAE to cater to the Middle Eastern Markets. It also exports to most major markets in Europe and Americas which are known for being sticklers for quality. It has consistently won prestigious export awards and is now an Export House. The Company has advanced machinery in Injection Moulding, Rotational Moulding, Vaccum Forming, Polyurethane Injection (of insulation) and capabilities for SMC and Blow Moulding. Occupying a massive total constructed area of 11, 33,738 sq ft. All of Nilkamal’s manufacturing plants are ISO 9001/2008 Certified and practices 6 Sigma manufacturing process and the extensive manufacturing infrastructure is ably supported by their wide and strong sales network, operating through 50 Regional Offices and 77 Warehouses spread across the India. All the plants, warehouses and offices are connected to the Head Office in real time by ERP, SAP-R3. 
Nilkamal in joint venture with Bhoomi Realty has successfully completed it project in Borivali named AURABIPLEX which also homes the famous Kalyan Jewellers. This was a 21 storey Premium project build with an unique and innovative techinques. As far as Moulded Furniture is concerned, Nilkamal is a recognized name in the industry with a market share of 39 % amongst organized players. The demand for moulded plastic furniture is expected to improve owing to its cost effective nature vis-à-vis traditional wooden furniture. Plastic products have application in various industries as well as in households. As per a report by India Brand Equity Foundation (IBEF) on the India plastic industry, the per capita consumption of plastic in India is very low. According to industry reports, the plastic processing industry is highly fragmented with approximately 35,000-40,000 plastic processing units in India, most of which can be classified as small-scale operations. The Annual household income in India is expected to increase from $2632 in 2005 to an estimate of $3823 in 2015 and $6790 for 2020. Citing these increases in household incomes, the usage of plastic across various industries and households would increase also the per capita consumption of plastic is expected to double in the next five years. As per a FICCI 2014 report, the plastic industry is one of the fastest growing industries in India. It has protracted at around 8 % CAGR to reach 8.5 mtpa in FY2014 from 6 mtpa in FY2008. Currently, the Indian plastics industry employs about 40 Lakh people and India has over 2,000 exporters. India operates more than 30,000 processing units, of which 85 % to 90 % are small and medium enterprises (SMEs). India is one of the most promising exporters of plastics among developing countries. The Indian plastics industry produces and exports a wide range of raw materials, plastic moulded extruded goods, polyester films, laminates, moulded-soft luggage items, writing instruments, plastic woven sacks and bags, PVC leather cloth and sheeting, packaging, consumer goods, sanitary fittings, electrical accessories, laboratory-medical surgical ware and travel ware, among other products. Due to change in government at the centre, which has started focusing on development of Infrastructure including power sector, it is expected that Plastic companies will be benefited substantially in near future. Nilkamal has already done a capex of Rs. 460 Cr & has decided to go slow on @Home brand business and may even look at divesting its stake, it will focus on its core business. Nilkamal’s other business segments are also on the verge of a turnaround. Management has expressed confidence that all negatives like aggressive capex, moderation in volume and the pressure on margins is factored in its valuation at present and that likely improvement in volumes and margins and free cash flow generation can lead to a re-rating of the stock

Outlook and Valuation: 
NILKAMAL was incorporated in 1985, and is a pioneer in the plastic industry and is credited as the leader amongst the leading manufacturers of moulded plastic products in India. The company has three divisions, viz Plastics division which contribute around 82 % of the revenue, Lifestyle Furniture & Furnishings and Accessories, Retail contributes around 12 % of the revenue and Mattress & others contributes 6 % to the Nilkamal’s revenue. The products of these divisions are sold through the company’s own retail chain “@home”. The company has recently forayed into the mattress business. The company’s manufacturing plants are located at Barjora and Hooghly in West Bengal, Hosur in Tamil Nadu, Jammu, Kharadapada and Vasona in Dadra & Nagar Haveli, Noida in UP, Sinnor in Maharashtra and in Pudducherry. Nilkamal is a market leader in the Material Handling segment too, backed by its ability to directly reach a very diverse set of industrial customers through 400+ self-employed sales people & operating from 50+ regional sales offices which is located across India. The Moulded Furniture segment of the company enjoys a 39 % market share in its category. Nilkamal has 26 small format stores along with a strong network of 40+ depots and 1000+ channel partners on a pan India basis, this not only increases the division’s ability to serve remotest rural markets but also further augment Nilkamal’s leader ship position in the near future. Its retail store chain “@home”, operates 18 stores across 13 cities covering a retail space of over 3.15 lakh sq. ft. Nilkamal is well poised to see robust growth across its key segments plastic furniture, mattresses and material handling business on the back of strong economic growth and expected revival in industrial activity from the “Make in India” campaign. Nilkamal enjoys leadership position with a market share of around 32 % and a lead of over two times its closest competitor. While economic growth leading to higher investments by corporates will lead to higher demand & Nilkamal is well geared by adding a variety of products in the seating solutions segments like office chairs, designer chairs etc. for commercial establishment like food courts, malls etc. to address the raising need of the personal consumption for plastics furniture the company has set up one stop furniture showroom “Nilkamal Home Ideas” for all Nilkamal furniture products in the categories of living, bedrooms, sofas, dining, designer chairs etc. In FY14 the company added 7 such new stores ranging from 4,000 to 8,000 sq.ft, taking the total of stores to 26. Company had a huge success in launch of mattress in South, East and West. Nilkamal is currently preparing itself to stabilize with a positioning of an innovator and facilitator for the consumer in selection of right mattress. Higher purchasing power backed by the higher income levels and increased urbanization rising construction activity in housing segment will continue to boost the growth in mattress industry. Such scenario leads to increase in spring mattress segment where Nilkamal has invested in machinery and marketing strategy for growth. Mattress market is throwing up opportunities for premium products which are technically superior. Nilkamal supplies crates, Pallets, metal storage racks and material handling equipment to various industries. The “Make in India” campaign will start the ball rolling for pick up in Industrial activity which eventually will lead to high demand for Nilkamal products. Nilkamal’s Plastic products are made from polymers such as polyethylene (PE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC) which are processed in numerous ways to achieve the desired shape and design of the product and so the key raw material used in manufacturing of Nilkamals products are polymers which are derived from crude oil and the Crude oil prices have corrected from a high of US$115 per bbl in August 2014 to US$ 55/bbl currently which makes Raw material cost for Nilkaml cheaper. Furthermore demand for polymers in China has weakened substantially on the back to economic slowdown. This will translate into marked reduction in raw material prices for Nilkamal resulting in a strong CAGR in nearer future. Nilkamal is one of the strong brands in the plastic segment that can be further classified into material handling commanding market share of around 36 % and moulded furniture category commanding value market share of 40 %. The company has 1200 distributors and over 5000 touch points across India. Further, the consolidated revenues recorded 12.5 % CAGR in FY10-14 while the EBITDA margin remained under pressure due to losses from its retail segment at the operating level till FY13. PAT remained flattish in FY10-14 due to a decline in margin and rising interest cost. Nilkamal has nine manufacturing units for manufacture of plastic moulded furniture and material handling solutions. Material handling and moulded furniture contribute 57 % and 43 % to segment revenues, respectively. The financial performance in the last five years was dragged down by lower volume of the plastic division coupled with losses from the retail segment. This finally resulted in higher working capital requirement and lower returns ratios which were 9 % of RoE & RoCE of 12 %. However, the management guided at an improvement in EBITDA margin, going forward, due to benign raw material prices such as crude derivatives & volume growth in plastic division. Manufacturing products contribute 65 % to top line. The EBIT margin of the segment declined from 12.6 % in FY10 to 8 % in FY14 on the back of a decline in volume growth in the material handling segment. The management is optimistic on a revival in demand for material handling products, going forward, supported by various government initiatives like “Swachh Bharat Abhiyan”. The retail segment especially the large format retail shop @home of the company operates on a completely asset light model wherein the company does not own any retail shops where the average size of the stores is 16000 sq ft. These retail stores are mainly located in Tier-1 cities and the company is aiming to add two to three new stores every year. Apart from this, “Nilkamal Home Ideas” is another format of retail shops with a focus on catering to Tier-2 and Tier-3 cities mainly. The average size of the stores is 8000 sq ft. The revenue of this segment recorded a CAGR of 14 % in FY10-14. However, the segment remained loss making till FY13 and turned into profit in FY14. Nilkamal focused on maintaining the topline growth which is over 10 % for FY16-17E with an EBIT margin of 6 % from this segment. The company has no major capex plans apart from maintenance capex of around Rs. 30 crore for FY16-17E to augment production capacity. It will largely focus on reducing the debt burden from cash generated through operations. This will also help in improving return ratios, going forward under the new business segment i.e. mattress which recorded revenue of Rs. 35 crore in FY14, the company is aiming to achieve Rs. 100 crore turnover by the end of FY18-19. Nilkamal is currently trading at 16x FY14 EPS. NILKAMAL can post EPS of Rs. 24.46 for FY15E & of Rs. 27.02 for FY16 E. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.  

KEY FINANCIALSFY13FY14FY15EFY16E
SALES ( Crs)1,610.651,654.761,800.571,951.82
NET PROFIT (₹ Cr)31.2040.0336.5040.31
EPS ()20.9026.8324.4627.02
PE (x)18.8314.6716.0914.57
P/BV (x)1.371.271.181.09
EV/EBITDA (x)7.005.646.065.70
ROE (%)7.278.657.317.47
ROCE (%)22.3826.9825.4625.93

 As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % on every purchase(Why Strict stop loss of 8 % ?) - Click Here


*As the author of this blog I disclose that I do not hold NILKAMAL Ltd in my any of the portfolios.

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Monday, April 20, 2015

GOD & INVESTOR STORY !!! (FPFS – Day 5)

Hii Friends , 
This is my Fifth and the last day for Five Pics Five Stories challange and my all posts relating to this challenge is here (FPFS- day 4)

I am into a proffession whereby we deal with money, mostly other people's money, so it takes great responsibility to manage that, off course when you win you are praised but when you loose you are critisied. People always asks us what will the markets be, what will so and so stocks prices will be, and I say I dont know, I only know that this company is doing its best and is well managed and I see its future cash flows being intact and so I feel that this business should grow. But do I know what would be its prices be, NO I Dont know, M not GOD we are humans as you are and so we also cant predict future... 

Remember no one can buy at the bottom prices & Sell at top, So we try to find out stocks which are available at discounts and looking at margin of saftey, we are humans too and so can do mistakes and thats why we have Strict Stop Loss (why stoploss of 8% - read Here) on our stock picks. Talking on Prices reminds me a short story told by my Uncle about an Investor who met God - 


Commuter reading Daily in Firstclass compartment in
mumbai local in rush hours 
A man dealing with stocks met God - God asked him to make one wish - he said "GOD please give me the copy of news paper dated excatly after 2 years from now"!. God was suprised but still granted his wish and Gave him the NEWSPAPER which was dated 2 years from now...... 

The first thing that man did was opened up the business page & Saw the stocks prices and invested in those stocks immediately which could fetch him multi-millions after 2 years.... After few days of buying spree and as tended by the Human psychology, he felt let me see what would be the news around the world after two years from now and turning on the pages he landed on Obituary section - On Which his Name was the First !!  - So, what this tells us, that do live in present and dont worry what will be there in future, Just live your life at the fullest .. 

This is my last day for the challenge series and I hope you all must have enjoyed reading some of the offbeat post, it was bit difficult for me to going into the creative zone after a long long time, I dont know how it has turnout.. but will say I enjoyed this very much.. after a very long time I was thinking beyond markets ..hehehe :)
Anyways thanks friends for your amazing supports !!

Please do keep on ur support for me & pl do visit again and share the posts :)

 Regards
Bhavikk shah
mumbai  


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I have been tagged by my dear friend Shweta, to take part in Five Photos Five Stories Challenge (FPFS) which is - Post a picture for 5 consecutive days and attach a post to it, fiction,poem or short wrtie-up. It can be anything to suit your taste. Thanks Shweta for tagging me :) I am tagging my blogger friend Priyanka Artiste, She is a brilliant, passionate & talented photographer.. All the best Priyanka... I hope u all enjoyed the 5 day series :)

Sunday, April 19, 2015

Koshish karne walon ki kabhi haar nahi hoti (FPFS – Day 4)

Hii Friends , 
This is my Third day for Five Pics Five Stories challange and my first post relating to this challenge is here (FPFS- day 3)
One more from the treasure of Harivansh Rai Bachhan.... An Inspring poem fits all.



लहरों से डर कर नौका पार नहीं होती,
कोशिश करने वालों की कभी हार नहीं होती।

नन्हीं चींटी जब दाना लेकर चलती है,
चढ़ती दीवारों पर, सौ बार फिसलती है।
मन का विश्वास रगों में साहस भरता है,
चढ़कर गिरना, गिरकर चढ़ना न अखरता है।
आख़िर उसकी मेहनत बेकार नहीं होती,
कोशिश करने वालों की कभी हार नहीं होती।

डुबकियां सिंधु में गोताखोर लगाता है,
जा जा कर खाली हाथ लौटकर आता है।
मिलते नहीं सहज ही मोती गहरे पानी में,
बढ़ता दुगना उत्साह इसी हैरानी में।
मुट्ठी उसकी खाली हर बार नहीं होती,
कोशिश करने वालों की कभी हार नहीं होती।

असफलता एक चुनौती है, इसे स्वीकार करो,
क्या कमी रह गई, देखो और सुधार करो।
जब तक न सफल हो, नींद चैन को त्यागो तुम,
संघर्ष का मैदान छोड़ कर मत भागो तुम।
कुछ किये बिना ही जय जय कार नहीं होती,
कोशिश करने वालों की कभी हार नहीं होती।

-- । हरिवंशराय बच्चन 


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I have been tagged by my dear friend Shweta, to take part in Five Photos Five Stories Challenge (FPFS) which is - Post a picture for 5 consecutive days and attach a post to it, fiction,poem or short wrtie-up. It can be anything to suit your taste. Thanks Shweta for tagging me :) I am tagging my blogger friend Sindhu Devi , She is a brilliant & a passionate Fashion Designer by proffession, but a talented photographer.. All the best Sindhu... I will tag a new person on Day Four :) 

Saturday, April 18, 2015

BAZAAR !!! (FPFS – Day 3)

Hii Friends , 
This is my Third day for Five Pics Five Stories challange and my first post relating to this challenge is here (FPFS- day 2)
This is the beautiful poem by Harivansh Rai Bachhan which I feel fits perfectly on Markets.

Mumbai's famous Chor Bazaar 

यहाँ सब कुछ बिकता है , दोस्तों रहना जरा संभाल के !!!

बेचने वाले हवा भी बेच देते है , गुब्बारों में डाल के !!!


सच बिकता है , झूट बिकता है, बिकती है हर कहानी !!!


तीन लोक में फेला है , फिर भी बिकता है बोतल में पानी !!!



कभी फूलों की तरह मत जीना,



जिस दिन खिलोगे... टूट कर बिखर्र जाओगे ।

जीना है तो पत्थर की तरह जियो;

जिस दिन तराशे गए... "खुदा" बन जाओगे ।।

-- ।। हरिवंशराय बच्चन ।।


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I have been tagged by my dear friend Shweta, to take part in Five Photos Five Stories Challenge (FPFS) which is - Post a picture for 5 consecutive days and attach a post to it, fiction,poem or short wrtie-up. It can be anything to suit your taste. Thanks Shweta for tagging me :) I am tagging my blogger friend Deepa Prabhu, She started photography as a hobby which has now become her passion. A very brilliant photographer will surely amase us with her talent. I will tag a new person on Day Four :) 

Friday, April 17, 2015

THE FISHERMAN & INVESTMENT BANKER (FPFS – Day 2) !!!

Hii Friends , 
This is my second day for Five Pics Five Stories challange and my first post relating to this challenge is here (FPFS- day 1)
Few weeks ago, I came across this fantastic story about a fisher man and a Investment Banker. 



This is the story that states about the "Be More with Less" principle of life. We are so inclined with the materialistic world today, that we forget the importance of what we have. We work harder and harder to make more & more, so that we can buy more, to have more, like being in a rat race just to have more. I too was no exception to that, atleast before knowing this story. This story makes you realise how important is to live the real life                                   ...... (my Investment banker friends, do read this ) .......

So, the story is - An American Investment Banker was at the pier of small coastal Mexican village when a small boat with just one fisherman docked in. Inside the small boat there were several large yellow fin tuna fishes. Impressed by the catch of the fisherman, the American Investment banker complimented the Mexican fisherman on the quality of his fish and asked how long it took to catch them.

The Mexican replied," Only a little while". The American then asked why didn't he stay out longer in the sea and catch more fish? The Mexican said he had enough to support his family's immediate needs. The American then asked, " but what do you do with the rest of your time?"

The Mexican fisherman replied, " I sleep late, fish a little, play with my children, take a nap in afternoon, stroll into the village each evening where I sip Wine, and play guitar with my amigos. I have a full and busy Life." 

On hearing this the American scoffed, "I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat. With the proceeds from the bigger boats, you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to middlemen you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then to LA and eventually to New York, where you will run your expanding enterprise"

The Mexican fisherman asked, " But, how long will this all take?"

To which the American replied,"15 - 20 years".

"But what then?" Asked the mexican. 

The American laughed and said,"That's the best part. When the time is right you would announce an IPO and sell your company stock to the public and became very rich, you would make millions !!" 

Fisherman said," Millions - then What?"

The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take an afternoon nap, stroll to the village in the evening where you could sip wine and play your guitar with your amigos." 

This story is smiply superb, it brings clarity to what the money game is all about & definitely not about. This story brillantly breaks the illusions of ours for pursuing wealth and financial freedom. We have so forgotten to all the goodness we're surrounded by today just in race to chase the money.

The truth is it doesn't take lot of money to have a truly wealthy life, but it does take freedom. Believe it or not values do determine your path in life, regardless of your financial goals. Having clarity around issues like these develops you as an better financially sound person - at both times, while building wealth and after wealth is achieved.


I hope you like this story which I read somewhere, but the story do teaches US a lots ENJOY!!! 

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I have been tagged by my dear friend, Shweta to take part in Five photos Five stories Challenge (FPFS) which is- Post a picture for 5 consecutive days and attach a post to it , fiction, poem or short write-up. It can be anything to suit your taste. Thank you Shweta for tagging me :)
This is different for me as I have never tried such as U all know I am finance guy but as we say "There's always the First Time" so here it is...I am tagging my dear friend Renu Sethi on my Day Two and as a part of the challenge, I will tag a new person on Day Three.

Thursday, April 16, 2015

My Work Place (FPFS – Day 1)

Hii Friends , 
One of my dearest friend Tagged me with Five Pics Five Stories challange and I was like ... How will I write it and on what topic as I write only on Stocks which are much easeir than this !! Yes it is hehe !!!

Anyways, So I thought let me write on what I know and Yup it clicked me , what could be more intersting than to write on the place where I work !!! Here is my Day 1 of my FPFS challange

                              !! THE ICONIC BSE (PHIROZE JJ TOWER) !!
The iconic Phiroze Jeejeebhoy Tower is in South Mumbai and houses Asia's oldest 140 year old bourse BSE, also known as BOMBAY STOCK EXCHANGE. It's a 29 storey tower with area space of around 3,50,000 sq.ft, accomodating 540 odd entities mainly by brokers and financial institutions since 1980. BSE is located excatly in between of Dalal Street, Hamam Street and Bombay Samachar Marg. which gives easy access to financial institutions with the stock exchange and so BSE Building is not only the important in commercial value but also its a symbol of financial capital. BSE is Asia's first & fastest Stock Exchange with speed of 200 micro seconds. BSE has more than 5,500 companies listed making it world's No.1 exchange in terms of listed members. The companies listed on BSE commands a total market capitalization of US$ 1.69 Trillion of 15 April 2015. The exchange was targeted by terrorists for the first time in 1993 when a powerful car bomd exploded in the basement of BSE claiming 50 lives, after then the security at BSE was fortified with"Z" category security control and half a dozen commandos are always stationed in the building premises permanently.


This is the second enternce at east where a Five foot tall bronze Bull Statue is erected since 2008, u have to get a security clearance, where by you are issued a security pass. This entrence at east is infamous due to superstitious beliefs of old timers that it gave a big fall in markets with Harshad mehta scam soon after this gates was opened.

The most interesting I feel is this particular spot, there is a Sugarcane juice center just in front of the Eastern gate with Bull Statue with a huge screen which plays live news from Business channel. What's intersting is that during lunch time lots of people gather there, some having cane juice and some having  famous sandwiches of Paramesh or famous dosas from Jay Snacks  and
they all would be talking only on stocks.. You will hear people saying so an so stock will go up or down, some would be starring at the screen , some would be calling their brokers giving instructions for buy or sell. This particular place becomes more evedient when there's a fall in the market, all kinds of emotions from traders to proffessionals, even the security commandos are not spared they too enjoy the sites....after all this is for money honey !!! 





A GLIMPSE FROM HISTORY !!



This was my first attempt so hope that u all like it.. do share in your views and comment on .. Have a wonderful day Ahead :)



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I have been tagged by my dear friend, Shweta to take part in Five photos Five stories Challenge (FPFS) which is- Post a picture for 5 consecutive days and attach a post to it , fiction, poem or short write-up. It can be anything to suit your taste. Thank you Shweta for tagging me :)
This is different for me as I have never tried such as U all know I am finance guy but as we say "There's always the First Time" so here it is...I am tagging my blogger friend Namrata Kumari on my Day One and as a part of the challenge, I will tag a new person on Day Two.

Monday, April 13, 2015

PVR LTD : LIGHT CAMERA & ACTION !!!

Scrip Code: 532689PVR
CMP:  Rs. 668.85; Market Cap: Rs. 2,768.83 Cr; 52 Week High/Low: Rs. 750.00 / Rs. 490.0o; Total Shares: 4,13,96,888 shares; Promoters : 1,22,55,260 shares –29.60 %; Total Public holding : 2,91,41,628 shares – 70.40 %; Book Value: Rs. 94.32; Face Value: Rs. 10.00; EPS: Rs. 13.39; Dividend: 25.00% ; P/E: 49.98 times; Ind P/E: 36.93; EV/EBITDA: 15.34. Total Debt: 502.12 Cr; Enterprise Value: Rs. 3,258.38 Cr.

Priya Village Roadshow (PVR) Cinemas: PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. PVR Ltd came with an IPO on December 08, 2005 with an issue price of Rs. 225 per share and raise about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. The Company also generates revenue from in-cinema advertisements and product displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centres. PVR, Currently controls 398 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. Company’s subsidiaries include CR Retail Malls (India) Limited (CRR), PVR Pictures Limited (PVR Pictures) and PVR bluO Entertainment Limited (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. PVR Ltd announced the opening of a multiplex on August 15, 2012, at Empress Mall, in Nagpur in the state of Maharashtra. The multiplex consists of five screens. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69 % followed by the open offer for another 26% in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per share from the Rashesh Kanakia and family. PVR Ltd is locally compared with Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd, Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California,  UTV Media PLC of UK, Dreamworks Animation Skg Inc of California, Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states, Geo Dinos Company Ltd of Japan, Nakanihon Kogyo Company Ltd of Japan.

Investment Rationale: 
Priya Village Roadshow (PVR) Cinemas is a leading cinema chains in India. The company began as a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow limited in 1995 with 60:40 ratios. PVR pioneered the multiplex revolution in the country by establishing the first multiplex cinema in 1997 at Saket, New Delhi. The opening of the first multiplex opened up a new era in the Indian cinema viewing experience, which also set a role model for others to follow suit. PVR has set new benchmarks in the cinema exhibition business including establishment of the first largest 11 screen multiplex in the country, Gold Class Cinema, luxury cinema, IMAX theatres and ECX (Enhanced Cinema Experience). PVR, Currently controls 398 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. It also plans to open another 500 screens by 2015. PVR has an impressive market share of around 25 % including Cinemax of the total 1600 multiplex screens in the country. The Indian Media and Entertainment (M&E) industry is around Rs. 83,000 crore (US$ 13.23 billion) and is on high growth trajectory. Proving its resilience when the global economy was going through tough times, the Indian M&E sector was on the cusp of a strong phase of growth, backed by rising consumer payments and advertising revenues across all sectors. The industry has been largely driven by increasing digitisation and higher internet usage over the last decade. In today’s times, the Indian entertainment segment is largely driven by digitisation and internet penetration. More than 22.7 Cr Indians use their mobiles, computers, tablets or other devices to access internet to listen to music, watch a film, a TV show or a cricket match. India ranks third in the world in watching videos online through a PC/laptop and fourth in the world when it comes to watching videos on the phone, according to the statistics. The CII-PwC report named 'India Entertainment & Media Outlook 2013' estimates that the Indian M&E industry would exceed Rs. 224,500 crore (US$ 35.8 billion) by 2017, growing at a CAGR of 17 per cent from 2013. The growth would be majorly driven by increasing penetration of digital platforms across the industry segments. While the print sector is expected to register a CAGR of 9 % and touch Rs 33,100 crore (US$ 5.28 billion) of revenues by 2017, sectors such as internet access, internet advertising, gaming and music are expected to continue on their high growth trajectory, said the report. The report highlighted that immense use of the internet, high penetration of smart phones; digital advertising, wireless broadband, digital content consumption and supportive regulatory eco-system have had and will continue to have a significant impact on the E&M sector. PVR has an impressive market share of 25 % including share of Cinemax and has the total of 1,600 multiplex screens in the country. After the Cinemax acquisition, PVR now has a combined revenue share of 20-22 % from Bollywood films and 30-35 % from Hollywood films as in multiplex revenues. The company has about 462 screens as on date and plans to raise its market share by rolling out 70-80 screens each year. This leadership position gives PVR the leverage to negotiate better deals with movie producers. It is expected that in FY16E the total screens of PVR can reach 525 in 114 properties and in FY17E the total number of screens could be 575 in 123 properties. The Annual maintenance capex comes at 1-2 % of revenue. Every screen requires refurbishment after 6-8 years to keep the cinema maintained and fresh. This amounts to 20-30 % of original capex. Capex required is on an average of Rs. 2.5 Cr per screen. PVR also plans to use this immense bargaining power to negotiate with the government so that there can be some minimum window before movie releases are available on other platforms. Owing to its strong competitive position after the Cinemax acquisition the company has been able to effectively pass on price hikes. The average ticket prices (ATPs) have been on an upward trajectory since FY13. As the demand for the movies are increasing so do the investments in movies are increasing. Hence, there would be an increase in ATPs. Moreover, the consolidation in the multiplex industry and with PVR being a market leader it would be in best position and be able to pass on price hikes effectively. Also, there are some major releases in the pipeline and several Hollywood releases would help PVR to take price hikes as per the heavy demands for star-studded movies. It is expected that Average Ticket Prices to grow at a CAGR of 4.2 % to Rs. 186.4 by FY17E. PVR also benefits from its strategy of following differentiation pricing based on the regions, target audience and the movie to be released. PVR has always remained quite consistent with its property roll-out guidance. The company has the first mover advantage in various smaller towns and cities where it has already cornered the best location. In Q4FY13, as the Cinemax numbers were consolidated the tally of the properties increased from 47 to 86. As on date, the company has 104 properties with 462 screens in total. The company has rolled out about 73 screens at the end of FY14. The company guided at maintaining the run rate of 70-80 screens for the coming two years. PVR has 60 million footfalls, which makes advertisers comfortable to advertise with PVR as the audience is also easily traceable. PVR is strategising to augment its advertising revenues by about 25-30 % on a YoY basis by providing advertisers various deals such as pay per eyeballs and other innovative deals. The company has earned about Rs. 141.9 crore in FY14. There is also an uptrend seen in the Spends per head in the food and beverage (F&B) segment. This gives PVR an ability to take price hikes and higher operating leverage in the coming future and this will in turn help in the margin expansion to the tune of about 17.2 % in FY16E and 18.1 % for FY17E from 16.0 % in FY14. PVR has entered into a share purchase agreement with L Capital for purchase of their entire investment in equity shares and preference shares of PVR Leisure. L Capital had bought the stake at Rs. 50 Cr in 2012. L Capital will be exiting its investment at a loss and PVR will be buying its stake at Rs. 37 Cr. Since PVR Leisure has Rs. 15 Cr to Rs. 16 Cr cash, net outflow for PVR will be Rs. 22 Cr. Apart from one property scheduled to be opened in Ludhiana in the next 23 months, PVR will not be expanding further in the bowling business. L Capital will continue to be a significant shareholder in the main company. Also, PVR Cinemas has entered into a 5 year strategic partnership with BookMyshow.com to be its online ticketing partner across India. The multiplex targets to sell tickets worth of Rs. 1000 crores over these five years exclusively on BookMyshow.com besides its existing sale of tickets from its Box Office and other channels. Also with the GST coming into force by 2016 and the GST rate being fixed at 16 %, it could potentially lead to a 4.50 % to 5.50 % improvement in EBITDA margin for PVR. Given the fact that movie watching is a discretionary spend and the category has pricing power, so PVR will be in good position to absorb all benefits of GST rather than passing it on to consumers. PVR’s has good prospects with improvement in RoCE and RoE with free cash flow visibility and with the timely execution of the given aggressive roll-out plan it will maintain its leadership position.

Outlook and Valuation:
Innovative ways to book tickets
via online and app
PVR is the largest and the most premium film entertainment Company in India and is listed as the “Most Trusted Brand” in the Category of Entertainment by the “Brand Trust Report, 2013”. PVR, a pioneer in multiplex in India and is the largest cinema exhibition player in the country today. There are about 9,000 screens in India of which multiplexes account for approximately 25 %. The screen density in India is 8 per million as in comparison with 117 per million in US. For multiplexes, it is less than 1 per million. Malls will continue to guide the future of multiplexes. Multiplexes form only tenth space at the mall. The recent KPMG report anticipates the market size of Indian Music & Entertainment sector to touch Rs. 1,45,700 Cr (US$ 25.51 billion) by 2016. The Investments inflows in the movie production space are set to multiply, several movie studios such as Virgin Produced India, Fox Star Studio plans to step up investments in Bollywood. Along with the higher investments and with higher quality content driven by heavy investments would lead to higher demand for movie related entertainment. PVR would be benefited from the increased occupancies and rising Average Ticket Price (ATPs). PVR would be benefited from the increased occupancies and rising Average Ticket Price (ATPs). PVR has offerings across the consumer segments like in Luxury Cinema Viewing it has Directors Cut with ticket prices ranging from Rs. 1,044 to Rs. 1276; in Comfortable Reclining Seats it has Gold Class with ticket prices ranging from Rs. 696 to Rs. 928; in Catering to Upper Middle Class it has PVR Premiere with ticket prices ranging from Rs. 174 to Rs. 348; in Comfortable Regular Seatings it has PVR Mainstream with ticket prices ranging from Rs. 116 to Rs. 174; in Low cost Multi-screen cinemas it has PVR Talkies with ticket prices ranging from Rs. 58 to Rs. 116. Every ticket of Rs. 100 sold is divided as Rs. 20 as entertainment tax, Rs. 36 to distributors and then Rs. 44 for the multiplexs. Multiplexes enjoys margin of around 30 % on Exhibition, margin of around 65 % on food & berverages and margin of around 80 % on advertisement - translating into revenue of around Rs. 68 for exhibition, Rs. 25 for food & berverages and Rs. 7 for advertisment. It is expected that PVR’s Average Ticket Prices can register growth of 7 % at Rs. 177 by the end of FY15E and a growth of 3 % to Rs. 182 by the end of FY16E. Currently, spends per head (SPH) as % of ATP is at 36 % and it can go as high as 4550 %. Moreover, as disposable incomes increase, Foods & Beverages (F&B) spends are also expected to rise to Rs. 60 in FY15E and to Rs. 62 by the end of FY16E, from Rs. 53 currently. In US, this ratio is much higher. In India, the potential is high due to the concept of intervals. Colas and popcorns contribute 65 % of total F&B sales, which also have high margins. PVR is strategizing to augment its advertising revenues by about 25 to 30 % YoY by providing advertisers various deals such as pay per eyeballs and other innovative deals. For multiplexes, in cinema advertising and food sales are bigger businesses. These two businesses have now grown to account for more than a third of the income for multiplex operators. And these segments have grown profitability as they offer bigger margins than its core business of selling movie tickets. Non Ticket segments contributes on an average of 35 % to the revenue of the multiplexes. For PVR revenue from in cinema advertising has been growing in the range of 35-40 % every year in last five to six years. PVR has a deal signed with HUL on ‘Pay for eyeballs’ basis. HUL contributes less than 2 % of overall ad revenues. However, HUL gives confidence to other FMCG advertisers to advertise in multiplexes. PVR has many national advertisers too. Management is maintaining its guidance of 1517 % YoY overall ad growth in FY15. The company has earned about Rs. 141.9 crore in FY14. PVR has about 59.9 million footfalls segregated on various counts, which gives advertisers unmatched opportunity to reach the target audience. It is expected that PVR can see a growth rate of 15 % and 13 % to reach or Rs. 163 and Rs. 184 crore of advertisement revenues by FY15E and FY16E, respectively and thus Advertisement revenue would be PVR’s new noticeable revenue stream. Moreover, a gradual recovery in economic activity will increase disposable incomes to keep growth buoyant. Tepid boxoffice collections impacted performance as many movies fared below expectations. However, this was an aberration. Business is driven by content to a large extent. Bang Bang and Happy New Year did well in PVR’s circuit and met management expectations. Footfalls at malls were high and Movies are still the number one format of entertainment in India. During the weekday/weekend footfalls split ratio is 50:50.  PVR thoroughly checks out the two main parameters of quality of assets and value of opportunity. Also, IRR should be upwards of 15 % for the acquired company. The Company has been trying alternate content at its screens. However, it is still too premature to comment on performance, though early signals are very positive. Interest rate for the company declined from 12.0% a couple of years ago to 11.5 % due to refinancing of debt via NCDs. While gross debt stood at Rs. 720 Cr, net debt stood at Rs. 660 Cr. Ad inventory of peers is higher than PVR and PVR is planning to add 21 screens in Q4FY15. Over FY15E/FY16E, tax rate will be in single digits. PVR has earmarked capex of INR450500mn for next 3 years (FY1416) to be utilised for renovation and rebranding of Cinemax properties. Company is expected to benefit immensely with implantation of GST. Average entertainment tax is believed to reduce from 23 % currently to 16 % post the implementation of GST. Also, company will be able to avail tax credit of tax paid on input cost if the act is implemented which will reduce its tax liability. PVR has the pricing power with regards to ATP, F&B and advertising and also the company will be a key beneficiary of possible uptick in urban consumption. PVR has earmarked overall capex of Rs. 45 Cr to Rs. 50 Cr spread over next 3 years to be utilised for renovation and rebranding of Cinemax properties. The Management has no plans for equity dilution and signals that PVR is adequately funded for the future growth. A 50-bp drop in the average occupancy ratio erodes could affect the price of the stock by 5 %. At the current market price of Rs. 668.85, the stock P/E ratio is at 51.45 x FY15E and 22.67 x FY16E respectively. PVR can post EPS of Rs. 13.00 and Rs. 29.50 respectively. The content pipeline of the company is exciting and would propel the further growth of PVR. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. 

KEY FINANCIALSFY14FY15EFY16EFY17E
SALES ( Crs)1,347.501,541.201,906.302,236.10
NET PROFIT (₹ Cr)50.4051.40119.50137.80
EPS ()12.9013.0029.5034.00
PE (x)53.1052.5023.1020.10
P/BV (x)7.006.305.004.10
EV/EBITDA (x)16.3014.409.908.10
ROE (%)10.1012.6024.1022.40
ROCE (%)9.7010.9016.2018.50

*As the author of this blog I disclose that I do not hold PVR Ltd in my any of the portfolios.

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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