ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 11 February 2020 | 1

Current Reco : BUY 3QFY20 RESULT REVIEW

Previous Reco
CMP
: BUY
: INR332
Ganesha Ecosphere
Target Price : INR530 EBITDA in-line; Margin boosts
Potential Return : 60%
Ganesha Ecopshere (GNPL) reported EBITDA of INR304mn in-line with our
estimate of INR309mn for 3QFY20. Key highlights are: (1) GNPL's overall
Manish Mahawar volume declined ~7% YoY on account of weak demand but expects recovery
+91 22 4031 3433
manish.mahawar@antiquelimited.com
in 4Q; (2) lower realization YoY led by fall in PET prices (3) gross margin
improved 450bps YoY on account of better product mix and lower RM cost
Amit Zade (4) RPSF - Phase 1 of south plant expected to be commissioned in 4QFY21.
+91 22 4031 3395 We believe that sound business model, efficient procurement network along
amit.zade@antiquelimited.com
with capacity expansion, places GNPL in a sweet spot for next leg of growth.
Himanshu Binani We estimate PAT CAGR of 16% over FY19-22 (FY11-19 CAGR of 17% and 17%)
+91 22 4031 3417 respectively. Maintain BUY with revised TP of INR530 based on 12x P/E as
himanshu.binani@antiquelimited.com
we roll over to FY22x. GNPL is currently trading at 8x P/E FY22E which is
discount of 20% to it's historic average.
Overall volume declines 2% YoY
Market data
Sensex : 40,980 GNPL's revenue declined 21% YoY at INR2bn (Antique est INR2.3bn). Overall volume declined
Sector : MidCaps 2% YoY, while realization dipped YoY on account of lower RM prices (down 8-10%). However,
Market Cap (INRbn) : 7.3 realization is likely to stabilize at current level. The installed capacity is running at optimum
Market Cap (USDbn) : 0.102 utilization at present. The gross margin improved 450bps YoY on account of better product
O/S Shares (m) : 21.8 mix and lower RM cost.
52-wk HI/LO (INR) : 380/229 EBITDA margin up 210bps led by superior product mix and lower RM cost
Avg Daily Vol ('000) : 101 GNPL's EBITDA was flat at INR304mn (Antique est INR309mn). EBITDA margin jumped by
Bloomberg : GNPL IN 280bps YoY to 14.6% led by: 1) better product mix 2) lower raw material cost 3) lower
Source: Bloomberg
employee cost 4) reversal of provision of INR10mn in other expenses and 5) savings in power
Valuation costs. EBIT declined 5% to INR234mn. Interest expense stood higher by 61% YoY on account
FY20e FY21e FY22e of one-time impact INR60mn on forex loans, this was offset by increase in other income
EPS (INR) 35.6 36.0 44.0 resulting in PBT decline of 3% YoY. Net profit rose 9% to INR158mn (Antique est INR180mn).
P/E 9.3 9.2 7.5 Further, the company is likely to opt for new tax regime. Hence, tax rate will 25-26% in FY20/
P/BV 1.5 1.3 1.1 21/22. We anticipate that the company will take reversal of deferred tax liability in 4QFY20.
EV/EBITDA 6.0 5.6 4.0
Rise in gross debt, capex on track
Dividend Yield (%) 3.6 4.5 5.4
GNPL's gross debt has increased by INR0.3bn to INR0.9bn in 9MFY20 vs. 0.69bn in 1HFY20
Source: Company, Antique
on account of higher working capital. The company has maintained capex guidance of
Returns (%) INR2.5bn for 75kT capacity in South India of which phase1 capacity of 35KT will be
1m 3m 6m 12m
commissioned in 4QFY21.
Absolute 38 25 25 24
Relative 40 23 15 10
Valuation and Outlook
Source: Bloomberg We expect GNPL to report revenue/PAT CAGR of 1%/16% with better ROE/ROCE of 15-
17% over FY19-22E. We anticipate, commissioning of new RPSF facility in South along-with
Shareholding pattern better RoE/RoCE to be the key catalysts for stock rerating. Maintain BUY.
Promoters : 40% Key financials
Public : 60% Year ended March (INRm) 2018 2019 2020e 2021e 2022e
Others : 0% Revenues (INRm) 7,537 10,205 9,127 9,286 10,654
Source: Bloomberg EBITDA (INRm) 861 1,274 1,262 1,314 1,606

Price performance vs Nifty EBITDA Margin (%) 11.4 12.5 13.8 14.2 15.1
PAT (INRm) 352 620 778 786 961
140
PAT growth (%) 18.1 54.5 25.6 1.0 22.2
120
EPS (INR) 18.4 28.4 35.6 36.0 44.0
100 EPS growth (%) 18.1 54.5 25.6 1.0 22.2
80 P/E (x) 18.1 11.7 9.3 9.2 7.5
Feb-19 Jun-19 Oct-19 Feb-20 P/BV (x) 2.4 1.7 1.5 1.3 1.1
Ganesha Ecosphere NIFTY EV/EBITDA (x) 10.5 6.0 6.0 5.6 4.0
Source: Bloomberg Indexed to 100 Source: Company, Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 11 February 2020 | 2

3QFY20 performance: Actual vs estimates

Q3FY20A Antique Y-o-Y % Consensus
Revenues 2,082 2,292 -9.2% NA
EBITDA 304 309 -1.7% NA
PAT 158 180 -12.6% NA
EBITDA Margin 14.6% 13.5% +110bps NA
Source: Company, Antique

Financial snapshot - Consolidated

(Rs mn) Q3FY20 Q3FY19 YoY (%) Q2FY20 QoQ (%) 9MFY20 9MFY19 YoY (%) FY19 FY20E FY21E
Revenues 2,082 2,651 (21.5) 2,356 (11.7) 6,872 7,654 (10.2) 10,205 9,127 9,286
Raw material 1,218 1,670 (27.0) 1,416 (14.0) 4,160 4,999 (16.8) 6,526 5,456 5,521
Staff costs 139 131 5.8 165 (15.8) 464 369 25.8 504 621 631
Others 420 537 (21.8) 465 (9.7) 1,310 1,451 (9.8) 1,901 1,789 1,820
Total expenditure 1,778 2,338 (24.0) 2,047 (13.2) 5,933 6,819 (13.0) 8,931 7,865 7,972
EBITDA 304 313 (2.7) 310 (1.8) 938 835 12.4 1,274 1,262 1,314
Depreciation 70 67 4.6 70 0.1 210 188 11.6 258 282 285
EBIT 234 245 (4.7) 239 (2.3) 728 647 12.6 1,016 979 1,029
Less: Interest Expense 25 16 61.6 13 94.3 61 85 (28.2) 105 81 41
Add: Other income 28 14 95.6 17 59.8 61 48 26.6 62 74 74
Profit Before Tax 236 244 (3.1) 244 (3.0) 728 610 19.3 973 973 1,062
Less: Provision for Tax 79 99 (20.7) 86 (8.0) 252 225 11.6 353 195 276
Add: Exceptional items 0 0 NA 0 NA 0 0 NA 0 0 0
Reported Profit 158 144 9.1 158 (0.2) 476 385 23.9 620 778 786
Adjusted Profit 158 144 9.1 158 (0.2) 476 385 23.9 620 778 786
Equity capital (FV INR 10) 218 218 218 218 218 218 218 218
No. of Diluted shares outstanding (mn) 22 22 22 22 22 22 22 22
Adjusted Diluted EPS 7.2 6.6 9.1 7.2 (0.2) 21.8 17.6 23.9 28.4 35.6 36.0

As % of net revenues
Raw material 58.5 63.0 60.1 60.5 65.3 64.0 59.8 59.4
Staff expenses 6.7 5.0 7.0 6.8 4.8 4.9 6.8 6.8
Other expenses 20.2 20.3 19.7 19.1 19.0 18.6 19.6 19.6
EBITDA 14.6 11.8 13.1 13.7 10.9 12.5 13.8 14.2
Net profit 7.6 5.4 6.7 6.9 5.0 6.1 8.5 8.5
Source: Company, Antique

One year forward P/E

(INR)
600
15x
500

400 11x

300

200 6x

100
2x
0
Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17

Feb-18

Feb-19

Feb-20

Source: Company, Antique

ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 11 February 2020 | 3

Financials
Profit and loss account (INRm) Cash flow statement (INRm)
Year ended 31 Mar 2018 2019 2020e 2021e 2022e Year ended 31 Mar 2018 2019 2020e 2021e 2022e
Net Revenue 7,537 10,205 9,127 9,286 10,654 PBT 541 973 973 1,062 1,299
Op. Expenses 6,676 8,931 7,865 7,972 9,048 Depreciation & amortisation 205 258 282 285 380
EBITDA 861 1,274 1,262 1,314 1,606 Interest expense 130 90 81 41 20
Depreciation 205 258 282 285 380 (Inc)/Dec in working capital (478) (306) (60) (16) (226)
EBIT 656 1,016 979 1,029 1,226 Tax paid (119) (217) (195) (276) (338)
Other income 30 62 74 74 93 Less: Interest/Div. Income Recd. (6) (13) (74) (74) (93)
Interest Exp. 146 105 81 41 20 Other operating Cash Flow 17 46 - - -
Reported PBT 541 973 973 1,062 1,299 CF from operating activities 290 830 1,007 1,022 1,042
Tax 188 353 195 276 338 Capital expenditure (791) (260) (800) (800) (100)
Reported PAT 352 620 778 786 961 Inc/(Dec) in investments 46 (386) 280 - -
Net Profit 352 620 778 786 961 Add: Interest/Div. Income Recd. 5 9 74 74 93
Adjusted PAT 352 620 778 786 961 CF from investing activities (741) (637) (445) (726) (7)
Adjusted EPS (INR) 18.4 28.4 35.6 36.0 44.0 Inc/(Dec) in share capital - 1,000 - - -
Inc/(Dec) in debt 586 (930) 200 (749) (409)
Balance sheet (INRm) Dividend Paid (28) (39) (53) (66) (79)
Year ended 31 Mar 2018 2019 2020e 2021e 2022e Others (121) (83) (81) (41) (20)
Share Capital 192 218 218 218 218 CF from financing activities 437 (53) 66 (856) (508)
Reserves & Surplus 2,437 3,971 4,697 5,417 6,299 Net cash flow (14) 139 628 (559) 527
Networth 2,628 4,189 4,915 5,635 6,517 Opening balance 112 47 514 862 303
Debt 1,823 958 1,158 409 - Closing balance 98 187 1,142 303 830
Net deferred Tax liabilities 31 169 169 169 169
Capital Employed 4,482 5,316 6,241 6,213 6,686 Growth indicators (%)
Gross Fixed Assets 4,494 4,600 4,650 4,700 6,250 Year ended 31 Mar 2018 2019 2020e 2021e 2022e
Accumulated Depreciation 1,334 1,476 1,758 2,044 2,424 Revenue(%) 11.8 35.4 (10.6) 1.7 14.7
Capital work in progress 25 - 750 1,500 50 EBITDA(%) 8.6 47.9 (0.9) 4.2 22.2
Net Fixed Assets 3,185 3,124 3,641 4,156 3,876 Adj PAT(%) 18.1 75.8 25.6 1.0 22.2
Current Assets, Loans & Advances Adj EPS(%) 18.1 54.5 25.6 1.0 22.2
Inventory 1,332 1,297 1,271 1,286 1,462
Debtors 786 884 900 916 1,051 Valuation (x)
Cash & Bank balance 47 514 862 303 830 Year ended 31 Mar 2018 2019 2020e 2021e 2022e
Loans & advances and others 233 298 298 298 298 P/E 18.1 11.7 9.3 9.2 7.5
Current Liabilities & Provisions P/BV 2.4 1.7 1.5 1.3 1.1
Liabilities 533 276 231 233 265 EV/EBITDA 10.5 6.0 6.0 5.6 4.0
Provisions 567 526 500 512 565 EV/Sales 1.2 0.8 0.8 0.8 0.6
Net Current Assets 1,297 2,192 2,600 2,057 2,810 Dividend Yield (%) 2.2 3.6 3.6 4.5 5.4
Application of Funds 4,482 5,316 6,241 6,213 6,686
Financial ratios
Per share data Year ended 31 Mar 2018 2019 2020e 2021e 2022e
Year ended 31 Mar 2018 2019 2020e 2021e 2022e RoE (%) 14.3 18.2 17.1 14.9 15.8
No. of shares (m) 19 22 22 22 22 RoCE (%) 16.6 22.0 18.2 17.7 20.4
Diluted no. of shares (m) 19 22 22 22 22 Asset/T.O (x) 1.8 2.1 1.6 1.5 1.7
BVPS (INR) 137.1 191.9 225.2 258.2 298.6 Net Debt/Equity (x) 0.7 0.1 0.1 0.0 (0.1)
CEPS (INR) 29.1 40.2 48.6 49.1 61.4 EBIT/Interest (x) 4.7 10.3 13.0 27.0 65.9
DPS (INR) 1.2 2.0 2.0 2.5 3.0 Source: Company Antique

Margins (%)
Year ended 31 Mar 2018 2019 2020e 2021e 2022e
EBITDA Margin(%) 11.4 12.5 13.8 14.2 15.1
EBIT Margin(%) 8.7 10.0 10.7 11.1 11.5
PAT Margin(%) 4.7 6.0 8.5 8.4 8.9

Source: Company, Antique

ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 11 February 2020 | 4

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