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25 May, 2009
India
Moser Baer
CMP: Rs. 95 Target: Rs. 160
We initiate a buy calll on Moser Baer, on basis of huge potential in its PV business,
stabilizing sales in Optical discs and increasing share in high margins Blu Ray and DVD
Sovid Gupta +911243024840 format production.
Equity Analyst: Fairwealth Securities
Private. Ltd. Also positive Operational cash flows and stable balance sheet is a trigger for the company.
Moser Baer is a potential multibagger which can give huge returns if the the technologioes
company is betting on (Thin film PV vells) establishes itself as best cost PV cells. Company
as well as experts expect PV to acheive Grid parity within next couple of years. Besides
Moser Baer there are many other players in the country which are betting huge on this
Priced on May, 26th , 2009 business like Videocon and Reliance, but Moser Baer, one of the ealiest entrant into the
±% potential 66% business is likely to get maximum benefit due iots manufacturing capabilities and expertise
Target set on in highend technology work.
We initiate a buy call on Moser Baer, with a target price of 160. We recommend Risk
averse(avoiding) investors to ignore this stock.
Last Quarter depreciation increased on back on capitalization of forex losses under AS-11.
FCCB’s worth USD 51 million were bought back at more than 70% discount and
consequently 97 crores of extra-ordinary profits were earned after writing off losses for
Share Holding Pattern (%) startegic investments and provisioning forex losses for previous years.
Promoters 17%
FII 31% We expect further USD 25 million of buyback within this quarter at a discount of around
Foreign Others 37% 35%..
Domestic Inst. & Corp Bod. 5%
Public & Others 10% FY09 Highlighs.
Company had Capital expenditure of USD 260 million in FY09, with majority fo it going
towards PV business( USD 233 million).
Company raised around USD 260 million this year through FCCB/ internal accruals- USD
22 million, USD 144 million thru debt/bridge finance and US$ 94 million thru Equity.
Majority raised by PV business.
Future Estimates.
Capex plan for FY10 is US$ 32 million:
Optical Media – US$ 5 million, PV – US$ Comapny has a very healthy cash Balance of around 750 crores currently, of which
22 million and Entertainment – US$ 5
standalone cash in hand is expected to be around 450 crores.
million lower than guided earlier. Further
capex for PV segment will be finalized in
the due course of the quarter. Funding Going forward Company has said that it does not have any major Capital Expenditure plan
would be: US$ 18 million thru
for FY10E.
FCCB/internal accrual, US$ 14 million thru
debt/bridge finance and US$ 32 million thru
Equit. As it is very difficult raising capital due to current business environment globally and low
attractiveness towards PV business, we understand it would be a prudent move to go slow
with expansion.
Company has finalised its deal to sell power to Rajasthan Government at Rs. 18/ unit
st
( 21 May-Company Website)
Company Description
Moser Baer, headquartered in New Delhi, is one of India's leading technology companies.
Established in 1983, the company successfully developed cutting edge technologies to
become the world's second largest manufacturer of Optical Storage media like CDs and
DVDs. The company also emerged as the first to market the next-generation of storage
Optical Media Bsuiness
formats like Blu-ray Discs and HD DVD. Recently, the company has transformed itself from a
single business into a multi-technology organisation, diversifying into exciting areas of Solar
OM for the quarter improved to 32% against Energy, Home Entertainment and IT Peripherals & Consumer Electronics.
25% in the sequential quarter on the back of
lower input costs.
1. Around 70% revenues contributed by Optical Discs division.
Decrease in Net working Capital to boost 2. MBPV aims to distinguish itself as a significant player in the global photovoltaic
cash flows. market by leveraging its high-volume manufacturing expertise and planned
investments of nearly US$ 3.2 billion in research, development and manufacturing
of products dedicated to generating solar power.
a. fully automated in-line crystalline silicon cell manufacturing facility - 40 MW
PV Business: already in production - this will be scaled up to 240 MW.
Revenue Contribution-33% b. A 40 MW module manufacturing facility with expansion plans to scale it up
to 200 MW.
The Company has current capacity of 80MW c. A 200 MW thin film module plant, capable of producing the world's largest
of crystalline film and 40MW of thin film. The non-flexible thin film modules, is under construction.
65MW capacity expansion has completed 3. The company is the first to offer home videos in every popular language of India
before schedule. and it is today India's largest Home Entertainment company. It currently offers home
video titles in Hindi, English, Tamil, Telugu, Malayalam, Kannada, Marathi, Gujarati,
Phase-I of 135MW capacity in Gujarat is on Bengali and non-film categories. Moser Baer Entertainment has acquired the rights
track. for close to 10,000 titles in all the popular languages and has already released close
to 3,000 of them in the market.
Estimates:
FY10E FY09 FY08
Total Income 2650 2415 2124
Total Expenditure 1987.5 1847 1590
EBITDA Profit 662.5 568 534
Depreciation 500 500 432
EBIT 163 68 102
Interest 160 205 179
Profit Before Tax 3 -137 -77
Tax -8 2
Reported Net Profit 3 -129 -79
Extraordinary Items 90 21
Adjusted Net Profit 3 -39 -100
Earnings Per Share(Adj)-Unit Curr 0
Book Value-Unit Curr 117
Source: Company Reports, Fairwealth Research
Investment Rational
Optical Media
1. Synergies in all lines of business.
1. High margins in the Optical
Media Segment.(Above 25%) Company has smartly moved across verticals, and rather than expanding its line of business
vertically, it has grown across sectors horizontally with a stronger focus on topline, where one
2. Short term Benefits from AS-11
business leverages other lines of businesses.
3. Increased Cashflows from strong
focus on Networking capital To continue selling Moser Baer Optical discs and to utilize excess capacities. Moser Baer
4. Lower Capex for FY10E(less entered Home Entertainment Business. Capacity utilization for Company’s main line of
than USD 50 million) business has stabilized around 75% levels thanks to continuing sales of Optical Discs from its
5. Post FY10, depreciation costs Home Entertainment business.
from Optical media segment is
Also company has leveraged its manufacturing capabilities by moving PV division.
expected to decline rapidily,
which will give boost to 2. Early mover advantage.
bottomline.
Moser Baer has been the earliest mover in manufacture of PV cells. Company currently has a
capacity of 125 MW and plans to take it to one GW (1,000 MW) by 2010.
With Governements across the world stressing on cleaner power even at higher costs
(around Rs. 15/unit). Companies like Moser Baer will be largest beneficiaries as they have
access to all the technologies( crystalline, thin film and high concentrate PV dvision).
Source:Meta Stock
Moser Baer is in a bullish trend when it closed above a crucial resistance level of 75.Hence we recommend to
buy the stock on every declines for a price Target of 140 in coming few months.
Key Risks:
1. PV still a very risky business. While the capital expenditure in PV business is huge at the
moment, it is likely to fall of sharply, giving late entrants a huge advantage in term of
lower capital requirement. Moreover for existing Photo Voltaic units company is putting
unit life at 20 years which we beleive is high.
2. Optical media business is loosing attractiveness quickly. Constant pressure on topline.
3. High depreciation rates hitting bottomline.
4. Excess Competition-
a. Optical Media:
i. Price competition from Chinese players is hitting domestic sales and margins
ii. Decrease in both volumes and cost per unit highlights despite weaker rupee
highlights unattractiveness of the business.
b. PV
With entry of very large players like Reliance and Videocon, smaller company like
Moser might not be able to face the challenges of the business and downsides linked
to oil prices.
c. Home Entertainment:
Company has waged a price war by lowering the prices of Optical Discs hitting the
margins of other Home Entertainment players like Reliance and Shemaroo, company
will face backlash as such players have stopped keelping Moser Baer labels.
Annexure:
Disclaimer
This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While
the information contained therein has been obtained from sources believed to be reliable; investors are advised to satisfy themselves before making
any investments. Fairwealth Securities Pvt Ltd does not bear any responsibility for the authentication of the information contained in
the reports and consequently, is not liable for any decisions taken based on the same. Further, Fairwealth Research Reports only provide information
updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of Fairwealth Investment Advisory
Services. As a matter of practice, Fairwealth refrains from publishing any individual names with its reports. As per SEBI requirements it is stated that,
Fairwealth Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while this report is
in circulation.