PVR LIMITED : LEADER IN ITS INDUSTRY !!!

Scrip Code: 532689/ PVR

CMP:  Rs. 664.45; Buy at current levels & Accumulate at every dips.

Medium to Long term Target – Rs. 730; STOP LOSS – Rs. 611.30; Market Cap: Rs. 2,731.30 Cr; 52 Week High/Low: Rs. 705.00 / Rs. 317.05

Total Shares: 4,11,06,220 shares; Promoters : 1,18,95,970 shares – 28.94 %; Total Public holding : 2,92,10,250 shares – 71.06 %; Book Value: Rs. 156.52; Face Value: Rs. 10.00; EPS: Rs. 14.05; Dividend: 10.00% ; P/E: 47.30 times; Ind P/E: 41.05; EV/EBITDA: 14.72.

Total Debt: 601.44 Cr; Enterprise Value: Rs. 3,299.70 Cr.

PVR LIMITED : 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 products 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 centers. PVR, Currently controls 434 screens including 135 screens with Cinemax India Ltd at 92 locations across 37 cities in 13 states and 1 Union Territory. PVR's subsidiaries include CR Retail Malls India Ltd (CRR), Cine Hospitality Private Ltd, PVR Pictures Ltd (PVR Pictures) and PVR bluO Entertainment Ltd (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. 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 sgare 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. This 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. In 2002, the Village Road Show exited the JV and company changed its name to PVR Limited and in 2003, ICICI Ventures made an investment in PVR and from there on it was no looking back. 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 434 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 commands a significant presence in New Delhi and NCR with 55 screens in 16 multiplexes. PVR also has its strong presence in major Indian cities. The Cinemax acquisition makes PVR a leader in the exhibition space and gives a strong bargaining power. PVR has an impressive market share of of around 28 % including Cinemax in the total 1600 multiplex screens in the country. After the Cinemax acquisition, the company has a combined revenue share of 20 % to 22 % in Bollywood and 30 % to 35 % in (Hollywood) of multiplex revenues. The company has about 434 screens as on date and plans to augment its market share by rolling out 60 to 70 screens each year. This leadership position gives PVR the leverage to negotiate better deals with movie producers. It is expected that the total tally at PVR to reach 481 screens with 109 properties in FY15E and 537 screens with 119 properties in FY16E. PVR also plans to approach the next government for a minimum window norm before movie releases are available on other platforms. Management is planning to “re-brand” all the Cinemax screens to PVR which will take 24 months. So far only 2 Cinemax screen is rebranded to PVR and company has seen 25 % increases in revenue. Thus management believes that re-branding is encouraging. As an innovation in marketing strategy, company has tied up with Unilever for marketing on “pay per eye ball” basis. Company is planning to focus on corporate & bulk bookings as a part of new marketing initiative. Currently corporate booking revenue is miniscule at around Rs. 12.5 Cr. However company sees a big potential in this segment. Two marketing employees are allocated at every screen who will market to corporate and colleges in the vicinity of 8 to 10kms. About 8 to 9 % of the all shows were “housefull” shows. The timing of the movies are allotted in such a way that 70 to 75 % occupancy is reached and balance 20 to 25 % are kept as a buffer to handle unexpected increase in demand. 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. Of the total 434 screens, 2/3rd screens are older than 2 years. The Company's growth is slow in East and is still not able to find right malls and location for expansion in East. But management continues to look for good opportunity in East. PVR’s occupancy rate for FY14 was around 34 %. PVR is evolving itself into a lifestyle entertainment company and the acquisition of Cinemax proved to be a master stroke which helped PVR to become industry leader. 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:

PVR, a pioneer in multiplex in India and is the largest cinema exhibition player in the country today. Post the acquisition of Cinemax, PVR has become India’s largest multiplex chain with 97 properties, 434 screens and 101k seats. PVR is India’s largest and fastest growing multiplex chain with market share of about 23-25 % in Bollywood market and with 33-35 % of market share in Hollywood market. Being the only large player and the way it is expanding itself aggressively will definitely makes PVR an undisputed leader and will further extend its leadership to higher scales. 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. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would further drive Indian M&E industry to new heights. The report also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. Also, 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 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. It is expected that PVR’s Average Ticket Prices to register a growth of 7 % at Rs. 177 by the end of FY15E and a growth of 3 % to Rs. 182 by the end of FY16E. 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. 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. 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. Company is expected to benefit immensely with implantation of GST as the entertainment tax will be offsetted against 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 reported sales of Rs. 314 Cr in 4QFY14, compared to Rs. 335 Cr in 4QFY14, marking a YoY growth of 28 %. On result front, PVR poseted a revenue growth in 4QFY14 was primarily due to delivery of low budget films like Queen and 2 States. EBITDA margin for 4QFY14 stood at 10.5 % as against 6.7 % in 4QFY13, primarily due to higher operating leverage. Company reported PAT at Rs. 80 lakhs in 4QFY14, against Rs. 11.7 Cr in 4QFY13, de-growing by 93 %. This was primarily due to higher tax credit of Rs. 29.4 Cr in 4QFY13 as against Rs. 4 Cr in 4FY14. There was an exceptional gain of Rs. 8.5 Cr during the quarter on account of profit from sale of Anupam Multiplex property; common area maintenance, rent expense, property tax relating to earlier year and assets written off during the period. PVR at the end of FY14 has net debt of Rs. 580 Cr, with given strong operating performance and debt repayment over next 2 years, the balance sheet is expected to improve in meaningful way and it is assumed that there would be an debt reduction of Rs. 30 Cr and Rs. 50 Cr in FY15 and FY16 respectively. Going forward, the cash generation would support capex requirement as well as debt repayment. In past, the company has been aggressively expanding its screens presence, and this has resulted in capex in excess of Operating Cash Flow and that lead to an increase in debt. But now, the capex would be lower than the OCF generation and hence would lead to surplus cash to re-pay its debts and this improving balance sheet will command premium multiple. PVR Management has guided to add 60-70 screens in FY15. They target to add 300-450 screens in next 3-4 years. 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. 664.45, the stock P/E ratio is at 38.63 x FY15E and 23.81 x FY16E respectively. PVR can post EPS of Rs. 17.20 and Rs. 27.16 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. PVR can touch Rs. 875 in near future. 

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	805.00	1,351.20	1,640.10	2,022.50
NET PROFIT (₹ Cr)	45.00	50.40	70.90	113.10
EPS (₹)	11.20	13.60	17.20	27.50
PE (x)	51.50	42.40	33.50	21.00
P/BV (x)	3.60	6.00	5.20	4.30
EV/EBITDA (x)	24.20	12.10	9.40	6.90
ROE (%)	6.90	10.80	16.50	22.30
ROCE (%)	4.60	11.10	15.50	22.30

I would buy PVR LTD for Medium to Long term for target of Rs. 730.00 and may touch Rs. 875.00. 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 ₹ 611.30 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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RETURN ON CAPITAL

WONDERLA HOLIDAYS LIMITED : MORE WONDER TO COME !!!

Scrip Code: 538268 / WONDERLA

CMP:  Rs. 201.95; Accumulate at every dips.

Medium to Long Term Target: Rs. 226; STOP LOSS – Rs. 185.80; Market Cap: Rs. 1141.03 Cr; 52 Week High/Low: Rs. 226.40 / Rs. 125.00.

Total Shares: 5,65,00,670 shares; Promoters : 4,01,00,222 shares – 70.97 %; Total Public holding : 1,64,00,448 shares – 29.03 %; Book Value: Rs. 21.50; Face Value: Rs. 10.00; EPS: Rs. 5.90; Dividend: 15.00 %; P/E: 22.93 times; Ind. P/E: 10.89; EV/EBITDA: 8.60.

Total Debt: 18.60 Cr; Enterprise Value: Rs. 1133.20 Cr.

WONDERLA HOLIDAYS LIMITED: Incorporated in 2002, Wonderla Holidays Ltd is one of the largest operators of amusement parks in India. The company came out with an IPO on April 2014 offering 1,45,00,000 equity shares of Rs. 10 each for Rs. 125 per share raising Rs. 181.25 Cr. The object of offer for sale was to set up an amusement park in Hyderabad and for other general corporate purposes. Wonderla Holidays Limited (Wonderla) is an operator of amusement parks in India. The Company owns and operates two amusement parks in Bangalore and Kochi under the brand name Wonderla. The Company also owns and operates a resort beside its amusement park in Bangalore under the brand name Wonderla Resort. The Company’s amusement parks offer a range of water and land based attractions catering to all age groups. Wonderla Kochi is located just 15 kilometers from Kochi city, is home for approximately 55 amusement rides. The dry rides at Wonderla comprise of land rides, sky rides and hi-thrill rides. Currently, Wonderla Holidays is in the process of setting up their third amusement park in Hyderabad. They also own and operate a resort beside the amusement park in Bangalore under the brand name 'Wonderla Resort' which has been operational since March 2012. Wonderla amusement parks offer a wide range of water and land based attractions catering to all age groups. They have 22 water based attractions and 34 land based attractions at Wonderla Kochi, situated on 92.95 acres of land and 20 water based attractions and 33 land based attractions at Wonderla Bangalore, situated on 81.75 acres of land. Wonderla Resort is a 'Three Star' leisure resort located beside their amusement park in Bangalore comprising of 84 luxury rooms, with amenities including banquet halls, a board room, conference rooms, a multi-cuisine restaurant, a solar heated swimming pool, recreation area, kid’s activity centre and a well-equipped gym. Wonderla Holidays Limited is locally compared with Nicco Parks & Resorts Ltd, Galaxy Entertainment Corp Ltd, Cineline India Ltd, Delta Corp Ltd, H.S India Ltd, T. Spiritual World Ltd, Oriental Hotels Ltd, B.L. Kashyap and Sons Ltd, Viceroy Hotles Ltd, Mahindra Holidays & Resorts India Ltd, Sterling Holidays & Resorts Ltd, EsselWorld, Appu Ghar, Queens Land, Vismaya, Tikuji-Ni-Wadi, Funtasia Water Park, Snow World, Jalavihar, Aquatica, Adlabs Imagica, Ramoji Film City and globally compared with The Walt Disney Company of USA, Twenty First Century of USA, Dreamworks Animations Plc of USA, Cedar Point of United states, Europa Park of Germany, Port Aventura of Spain, Six Flags Great Adventure and Wild Safari of USA, Blackpool Pleasure beach of United Kingdom, Everland of South Korea, Canada’s Wonderland of Canada, Ocean Park of Hong Kong, Efteling of Netherlands, Dreamworld on the Gold Coast of Australia, Busch Gardens of USA, Wisconsin Dells of USA.

Investment Rationale:

Wonderla Holidays, promoted by the Chittilappilly family owns and operates amusement parks in Kochi and Bangalore along with a resort adjacent to its Bangalore Park under the brand name 'Wonderla Resort' which has been operational since March 2012. The company is in the process of setting up their third amusement park in Hyderabad. Both the amusement parks offer wide range of water and land based attractions and attracted combined footfalls of 23 lakh in FY 13 while total footfalls have witnessed 7.4 % CAGR over FY11-13. Bangalore amusement park and resort accounted for 60 % of 9mFY14 revenues while EBIDTA Margin stood at 47 %. Company has acquired 50 acres of land for its proposed Hyderabad Park and has invested about Rs. 38 Cr so far out of the total cost of Rs. 260 Cr. Company has developed an in-house facility in Kochi to construct the rides used in its amusement park and it has constructed 42 rides so far. This has helped to reduce Capex incurred on the rides. The cost of a ride manufactures in-house is one third of the cost of procuring the ride externally. This has helped the company to build in-house maintenance capabilities thereby reducing the cost of maintenance and downtime for a ride. India’s amusement industry is at nascent stage as compared to its global peers, this is evident from several indicators such as the relative small size of Rs. 260 Cr with about 150 amusement parks and high share of ticket sales in overall revenue pie as opposed more or less even split amongst entry fees, accommodation and F&B. This industry witnesses an annual footfall of around 58 lakhs to 60 lakhs; the industry is far undersized in terms of footfalls as compared to some of the large global amusement parks. In terms of seasonality, with four months of monsoon and less extreme weather conditions in several Tier 1 Cities, India offers very conducive environment for amusement parks. Company main customers are kids, and these are the major drivers of amusement parks, school vacations around Diwali, Christmas and summer attract major crowds to amusement parks. Accordingly, Q1 and Q3 are usually the best months for amusement parks. Amusement parks require large upfront capex though once park operations stabilize, growth can be driven by twin factors of rising footfalls and better revenue mix especially in an Indian context where F&B, merchandising and rentals have vast scope for improvement. Amusement parks are broadly categorised into Large Parks, Medium Parks & Small Parks. Capex required for Large parks are more than Rs. 70 Cr with land size of more than 40 Acres and can have annual visitors of around 5 lakhs. Large parks are usually located in Metros cities and in outskirts like Essel World of Mumbai, Nicco Park of Kolkata, Kishikinta of Chennai, Wonderla of Kochi & Bangalore, there are 16 to 18 such Large Parks in India. Medium Parks: Capex required for Medium parks are between Rs. 30 Cr to Rs. 70 Cr with required land size of between 10 to 40 Acres and can have annual visitors of around 3 to 5 lakhs. Medium parks are usually located in Outskirts of metros, Tier 1 Cities like GRS Fantasy Park of Mysore, Ocean Park of Hyderabad, there are about 40 to 50 such parks in India. Small Parks: Capex required for Small parks are about Rs. 30 Cr with required land size of around 10 Acres and can have annual visitors of around 3 lakhs. Small parks are usually located in Tier II cities, small towns, outskirts of metros and Tier 1 Cities like Fun N Food Kingdom of Dehradun, there are about 85 to 95 such parks in India. Wonderla’s existing business enjoys robust returns on its business and more importantly, a sustainable EBIDTA margin which is in excess of 40 %. Return ratios like RoE and RoCE have historically remained healthy. With a large upfront capex on Hyderabad project could impact return ratios in the near term; however, eventually it is expected that these ratio to trend higher once the park starts contributing in a meaningful manner. Wonderla enjoys RoCE of more than 30 % supported by free cash generation from amusement parks as they attain maturity due to high EBIT margins, lower incremental capex and improved revenue mix. Company came with an IPO and those funds are intended to utilise to finance its amusement park in Hyderabad at a total cost of Rs. 26o Cr. This is expected to be operational in FY17.

Outlook and Valuation:

Wonderla Holidays Limited is a part of the Kochi based V-Guard group. Wonderla Hoildays is a very unique in business model with inherently strong profitability at an attractive valution. Wonderla has high operating margins; high ROCE, niche & ambitious expansion plans make it an attractive stock to pick. The company's Kochi theme park is spread across 93 acres of land of which only 29 acres is used, this park has 55 rides which consists of 22 water and 33 land rides with 270 employees. It also has 7 restaurants (food is charged extra) and its entry fee is aound Rs. 400 to Rs. 600. Kochi park has a footfalls of 11-12 lakh and have seen a growth of 4 % CAGR. The company's Bangalore park is spread across 82 acres of land of which only 39 acres is currently used, this park has 55 rides which consists of 20 water and 35 land rides with 306 employees. It also has 7 restaurants (food is charged extra) and its entry fee is aound Rs. 600 to Rs. 800. Bangalore park has a footfalls of 11-12 lakh. Wonderla Holidays Ltd garnered Rs. 181.25 Cr through its IPO during the month of April 2014. The company will use the net IPO proceeds to fund its third amusement park in Hyderabad. This third amusement park is being set upped in Ranga Reddy District near Hyderabad which is now a part of Telangana for which 49.57 Acers of land have been acquired for Rs. 25 Cr. The total cost of the park is pegged at Rs. 256, of which Rs. 173 Cr will be funded via IPO proceeds and Rs. 45 Cr via debt funding from State Bank of Travencore and balance Rs. 33 Cr from internal accruals. Till date Company has already spend Rs. 37.70 Cr on this Hyderabad Park mainly towards land purchase and placing order for the new rides. The estimated total cost of the upcoming park in Hyderabad would be similar to the existing gross fixed assets of the company, which implies return ratios like RoCE would be suppressed as the park is likely to commence operation by FY17. Wonderla Bangalore Park which spreads around 93 Acers is operative since 2000 and owns and operates 3 star 84 rooms resort since March 2012 which accounted for Rs. 6 Cr or 4 % of Wonderla’s Annual Revenue. With footfalls of 23.4 lakhs in FY13 at these two parks the company clocked in total income of Rs. 139 Cr of which income from Services was Rs. 125 Cr while sale of products accounted for Rs. 13 cr. While the comapny has seen the footfalls growth of 9 to 10 % in last two years, its revenue rose 22 % in FY13 on back of 19 % growth in services income which was mainly from ticket sales and 54 % jump in sales of products such as food & beverages and mementoes etc. For FY13 it earned EBITDA of Rs. 64 Cr and Net Profit of Rs. 33.5 Cr resulting in EBITDA margin of 46 % and Net Margin of 24 %. Wonderla’s earning per Share for FY13 stood at Rs. 7.97 on the equity of Rs. 42 Cr. During 9 months ended 31 Dec 2013, its total income rose to Rs. 122 Cr with EBITDA of Rs. 58 Cr & Net Profit of Rs. 31 Cr giving an expansion in net margin from 24.1 % to 25.5 %. Company’s 9 month FY13 EPS stood at Rs. 7.38 as against Rs. 7.97 for FY13. The book value of Wonderla as on 31 Dec 2013 stood at Rs. 36.3 with debt of Rs. 18 Cr with a liquid investment of Rs. 15 Cr making it debt free company. Since, footfalls and revenue is seasonal in nature Wonderla’s Q1 and Q3 are better performing than Q2 and Q4. Wonderla is likely to witness a maintained footfalls a 7‐8 % CAGR, while its ticket prices have also seen a similar growth of 8‐9 % CAGR which are likely to be sustained in the future. It is expected that its EBIDTA margins to remain stable though return ratios like RoE and RoCE are expected to be dampened due to the large upfront capex for Hyderabad amusement park. Based on post IPO diluted equity, it is expected that its FY15 EPS to be t Rs. 8.00 & its FY16 EPS to be at Rs. 9.5. Comparing Wonderla with its peers on a PE basis, it appears that enough valuation headroom is left, given that larger US‐listed peers like Six Flags, Cedar Fair trade between 14x‐27x on CY14 basis. Amusement parks attain maturity; they can throw up significant cash flows since they require only maintenance capex: for instance, in FY10 and FY11, when there was no large ongoing project, capex/sales was just 5 to 7 % which helped generate large free cash flows. Given attractive valuations, robust growth prospects and inherently strong profitability, One can buy into this Stock with a target price of Rs. 226 for FY15. At the CMP of Rs. 201.95, the stock is trading at a P/E of 25.24x FY15E and 21.25x FY16E. The company can post EPS of Rs. 8.00 for FY15E and Rs. 9.50 for FY16E. One can buy WONDERLA HOLIDAYS LIMITED with a target price of Rs. 226.00 for Medium to Long term investment.

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	137.90	159.50	184.10	212.50
NET PROFIT (₹ Cr)	33.50	38.00	45.10	53.50
EPS (₹)	5.90	6.70	8.00	9.50
PE (x)	21.10	18.60	15.70	13.20
P/BV (x)	4.30	3.50	1.90	1.70
EV/EBITDA (x)	8.60	7.70	7.50	7.10
ROE (%)	30.90	26.80	17.40	13.80
ROCE (%)	40.40	35.90	23.90	19.70

I would buy WONDERLA HOLIDAYS LTD for Medium to Long term for target of Rs. 226.00. 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 ₹ 185.80 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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RETURN ON CAPITAL

MONSANTO INDIA LTD : ACCUMULATE AT EVERY DIPS !!!

Scrip Code: 524084 / MONSANTO

CMP:  Rs. 1807.95; Buy at current levels.

Short Term Target: Rs. 1900.00; Medium to Long Term Target: Rs. 1988.00; STOP LOSS – Rs. 1662.85; Market Cap: Rs. 3,121.01 Cr; 52 Week High/Low: Rs. 2115.40 / Rs. 581.10.00.

Total Shares: 1,72,62,748 shares; Promoters : 1,24,54,044 shares –72.14 %; Total Public holding : 48,08,704 shares –27.86 %; Book Value: Rs. 236.01; Face Value: Rs. 10.00; EPS: Rs. 75.58; Dividend: 220.00 %; P/E: 23.87 times; Ind. P/E: 11.49; EV/EBITDA: 19.68.

Total Debt: ZERO Cr; Enterprise Value: Rs. 3,108.37 Cr.

MONSANTO INDIA LTD: Monsanto India Limited was founded in 1949 and is based in Mumbai, India. Monsanto India Limited operates as a subsidiary of USA based Monsanto Co. The company was previously known as Monsanto Chemicals of India Limited and later changed its name to Monsanto India Ltd in year 2000. The company came out with an IPO on February 1989 offering 3,40,500 equity shares of Rs. 10 each for Rs. 18 per share. The object of offer for sale was to reduce the equity holding in the company to 40 % or less. Monsanto India Limited engages in the production and sale of chemicals and hybrid seeds. The company operates through 100 year old brand which offers hybrid maize seeds under the Dekalb brand name acquired from Cargill in 1998; and glyphosate herbicide under the Roundup brand name. The company is also a manufacturer of Agricultural Chemicals. The Company’s segments include Seeds and Traits and Crop Protection. The Seeds and Traits segment consists of the Monsanto’s global seeds and traits business, and genetic technology platforms, including breeding, biotechnology and genomics. Monsanto India’s Dekalb is a hybrid maize seed. Dekalb has a diverse portfolio, which includes Dekalb 900M Gold, DKC 9081, Dekalb Pinnacle, Dekalb Super 900M, Dekalb Supreme, Dekalb I-lishell, Dekalb Double, Dekalb Prabal and DKC 9072. Roundup (a glyphosate-based product) is an herbicide, and the flagship brand of its Crop Protection Chemicals business. It has pioneered the chemical weed control concept in the country and is the market leader in the Rice herbicides which are marketed under the brand name MACHETE. It also markets LASSO a board spectrum herbicide and AVEDEX a herbicide used to protect wheat corp. In India, the Monsanto group operates through 3 entities i.e. (1) the listed entity Monsanto India Ltd (MIL) which is primarily involved in Maize seeds and Herbicides; (2) 50:50 JV between Mahyco and Monsanto Holdings Pvt. Ltd known as Mahyco Monsanto Biotech (MMB) which is sub-licensed to distribute Bio-Techonological cotton technology in India; and (3) Monsanto Holding. MIL’s team comprises of over 375 employees, a majority of whom are from rural backgrounds. In India the company is spread across Mumbai, Chandigarh, Eluru, Hubli, Kolkata, Coimbatore, Siliguri, Silvassa. The company’s R&D, Quality and Manufacturing Sites are: - Corn Seed Research Breeding stations at Udaipur, Bangalore and Jalandhar; A Biotechnology Research Centre at Bangalore; A Seed Processing Facility at Hyderabad; A Quality Assurance Laboratory at Hyderabad; A Chemistry Plant in Silvassa. MONSANTO INDIA Ltd is locally compared with Advanta Ltd, Camson Bio-Technologies ltd, Dhanuka Agritech Ltd, Kaveri Seeds Co Ltd, Sabero Organics Gujarat Ltd, Excel Industries Ltd, Punjab Chemicals and Crop Protection ltd, Rallis India Ltd, Insecticides India Ltd, Bayer CropScience India ltd, UPL Ltd, Bharat Rasayan Ltd, Meghmani Organics ltd and Globally compared with Monsanto Co of USA, Du Pont (E.I.) De Nemours (DD) of Delaware, FMC Corporation of Pennsylvania, Sumitomo Chemical Co Ltd of Japan, Syngenta AG of Switzerland, Vilmorin & Cie of Paris, Bayer Aktiengesellschaft of Germany, KWS SAAT AG of Germany, Sakata Seed Corporation of Japan, Yukiguni Maitake Co Ltd of Japan, Akikawa Foods & Farms Co Ltd of Japan, Hob Co Ltd of Japan, Hokuto Corporation of Japan, Kaneko Seeds Co ltd of Japan.

Investment Rationale:

Monsanto India is India’s largest selling hybrid maize seed brand company with 25 % market share. It operates through 100 year old brand called Dekalb acquired from Cargill in 1998. Over the last 2 years it has aggressively launched 7 to 8 hybrids seeds and is leading to regain of market share from players like Pioneer and DuPont which has market share of around 20 to 23 % each. Monsanto India currently derives 40 % of its revenues from products launched in last 2 years. This has not only helped Monsanto to gained market share in FY14, but also helped to reduce the age profile of its portfolio from 10 years in 2009 to 8 years in 2013. Monsanto has a very strong Rabi portfolio as compared to Kharif. The management plans to aggressively roll out newer hybrid products for Kharif, which was under the development since last 3 to 4 years and now driving margins. Over the last few years, operational efficiencies and consolidation measures has helped to reduced seed write off to less 7 % of revenues from average of 20 % for the last 3 years and reduction of sales returns by 15 % which in turn are driving growth. It is expected that the top-line to grow at 25 % CAGR and PAT at 30 % CAGR over FY14-16E. It is believed that the investment done in FY09-FY12 will start paying off for Monsanto India in terms of new product launches and market share gain. There is a huge potential and Scalability opportunity it has to offer over the long term from GM Food and RR Flex. Weeds are plants which can cause yield losses up to almost 60 % of the crop potential. Labour shortage, rising wages due to NREGA implementation and rising urbanization trends have accelerating demand for herbicides. Herbicides market in India is a very highly underpenetrated with its share in agro-chemicals standing at just 20 % as against global standards of 48 %. Glyphosate is a leading safest herbicide and accounts for 30 % of global herbicide sales and 70 % of Indian herbicide sales. Monsanto has around 60 % market share in the global US$ 540 Cr glyphosate industry and around 25 % market share in the Indian Rs. 800 Cr glyphosate industry selling products under the 'Roundup' brand. Monsanto enjoys a premium positioning in the market place with its glyphosate selling price at Rs. 340 per litre and competitors around Rs. 310-320 per litre. In FY14 cost for glyphosate has gone by 30 to 35 % leading to price increases of around 15 to 20 % to protect margins and drive growth.  In India, all companies can start the field trials for Genetically Modified food crops, once its approved by all bodies, thereby providing significant opportunities of newer growth avenues. Monsanto, Syngenta, Pioneer, Dow has been working on field trials across various crops prior to monotorium imposed by government and hence are much ahead of other competitors. MIL has been working on Roundup Ready® and Yieldgard® in- the-seed technologies to offer maize farmer's choice of superior insect protection, with convenient, flexible and effective weed management, to optimize maize yields. Currently Monsanto GM corn is currently at BRL2 stage and management has guided that it will take at-least 3 -4 years for commercial launch to happen. The initial research and trials suggest that Monsanto GM corn can increase yields by 20-40 %. This will lead to substantial re rating for the stock post its commercial launch. Monsanto's current technology of BT is likely to be replaced by RR Flex (BG 2 RR). RR flex has gone through RCGM and is awaiting final approval from GEAC. RR-Flex has trait of herbicide tolerance thereby negating chances of damage to crop due to usage of herbicide and also reducing labour cost. Monsanto India has 7 R&D Seed Breeding Stations, Corn Seed Drying & Processing Plant in Hyderabad, State-of-the-art QA Seed Testing Laboratory and AgroChem facility at Silvassa. It also has more than 300 acreages of farmer land available for breeding and around 40, 000 acres for seed production. It engages 21,000+ growers for seeds production.

Outlook and Valuation:

Monsanto India Limited is a subsidiary of Monsanto Company, USA and is the only publicly listed Monsanto entity outside USA. With a presence of more than six decades in India, Monsanto India is committed to help the Indian farmer produce more while conserving sustainably and be successful. Monsanto focuses on Maize under the brand name Dekalb, India’s largest selling hybrid maize seed brand and agricultural productivity products and India’s largest selling glyphosate herbicide. The company tries to boost crop productivity through its advance research in maize cultivation, access to a wide library of global maize germplasm, breeding technology and techniques, new high yielding hybrids seed, best in class manufacturing facilities extensive agronomic activities and on farm technology development. Monsanto India restructured its business in order to focus on seeds business in 2008. Post consolidation, the company had branded seed products, paddy hybrids and herbicides covering wide range of market segments. This consolidation also resulted in promoters share increasing in listed Monsanto India from 40 % to 72 %. Today, Monsanto had made Dekalb corn seeds and Roundup herbicide as its core business in India, in addition to the biotech traits business. Monsanto India is a now a market leader with 25 % market share with its 100 year old branded product Dekalb® which is also the India’s largest selling hybrid maize seed brand and the market share of other players like Pioneer has 22 % and DuPont having 23 %, Kaveri has market share of 14 % and Nuziveedu at 10 %. Monsanto currently has 17 to 18 hybrids and sells across in 18 major states of India. Around 90 % of the Corn is produced in 6 to 7 States namely TN, AP, Maharashtra, Gujarat, MP, UP, Rajasthan, Bihar for Rabi. Monsanto India started launching its own product line from FY08 onwards under the DeKalb brand. The revenues from herbicide business of Monsanto India now stand at 35 % which is expected to be 65 % for FY14. It is expected that the company’s topline can grow at 25 % CAGR and PAT at 30 % CAGR over FY14-16E. And the investments done in FY09-FY12 will start paying off for Monsanto India in terms of new product launches and market share gain. The company also a huge potential and scalability opportunity & it has many more to offer over the long term from GM food and RR Flex. At the current market price of Rs. 1807.95, the stock is currently trading at 17.28x FY15E and 13.45x FY16E EPS respectively. The company can post Earnings per share (EPS) of Rs. 104.60 in FY15E and Rs. 134.40 in FY16E. One can buy MONSANTO INDIA LIMITED with a target price of Rs. 1988.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 1900.00

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	442.40	581.90	741.10	910.80
NET PROFIT (₹ Cr)	67.30	137.90	180.60	231.90
EPS (₹)	39.00	79.90	104.60	134.40
PE (x)	41.00	20.00	15.30	11.90
P/BV (x)	6.80	5.50	4.30	3.30
EV/EBITDA (x)	37.10	16.80	12.40	9.10
ROE (%)	17.00	30.40	31.70	31.70
ROCE (%)	19.10	33.80	35.30	35.30

I would buy MONSANTO INDIA LTD for Medium to Long term for target of Rs. 1988.00 and for the shorter term the target would be Rs. 1900.00. 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 ₹ 1662.85 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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