4QFY16 Result Review (Wholly owned subsidiary of Bank of Baroda)

BUY $Com panyName$

Sector: INDUSTRIAL MACHINERY

Nitin Fire Protection Industries Ltd.

10th June, 2016

Result meets expectation ; maintain BUY Nitin Fire Protection Industries Ltd., (NFPIL) reported 4QFY16 result with a consolidated revenue of Rs 3.08bn a YoY /QoQ growth of ~32%/20.6% respectively led by strong traction in UAE business. EBITDA stood at Rs 377mn a YoY/QoQ growth of 76.4%/-10.4% with an expansion in EBITDA margin of 309bps/139bps YoY/QoQ led by optimum capacity utilization and operational efficiency. NFPIL has change its depreciation policy to reducing balance method, which has increased the depreciation to Rs 329mn for FY16 from Rs 144mn last year.

Price

Price Target

Rs.31

Rs.70

Up/Down (%) 122%

Bloomberg Code

Reuters Code

NFPI IN

NIFP.NS

Share Holding (%)

UAE to augment the future growth: NFPIL reported consolidated revenue of Rs 3.08bn, a YoY/QoQ growth of 32%/-20.6% respectively. In FY16 the revenue stood at Rs 14.7bn, a YoY growth of 29% mainly due to strong traction from UAE business. The total contribution from UAE business increased to 68% in FY16 from 57% in FY15. As per the company, the current order book for UAE/India business stood at Rs 7.45bn/ Rs 2.52bn. The management foresees huge growth potential from UAE and further, expect to increase the contribution from UAE business. We expect, NFPIL to grow at a CAGR of ~33% over FY16p-18e backed by strong order book and traction from UAE business led by stringent policy for fire protection system.

As on March 2016

Promoters

72.5

FIIs

12.6

DIIs

2.5

Stock Data Nifty

8,204

Sensex

26,763

52 week high/low

55/27

Maket Cap F.F. (Rs. Bn)

EBITDA margins expansion of 155bps YoY: The full year EBITDA stood at Rs 1.7bn, a YoY growth of 49% with EBITDA margin expansion 155bps to 11.6% in FY16 led by operational efficiency and optimum capacity utilization with the increasing orders from UAE. The management expects to improve the margins to 14-15% over next two years. However on conservative basis, we expect EBITDA margin expansion of 100bps over FY16-18e to 12.6%.

9.2

Price performance (%)

1M

3M

6M

1Y

Absolute

-4.9

-14.1

-30.1

9.2

Relative to Sensex

-8.5

-22.6

-35.8

9.7

Relative Performance

BSE Sensex

Valuation: The stock at CMP of Rs 31 is trading at 9.3x/6.8x/4x of FY16p/FY17e/FY18e. We believe that NFPIL with the improving operational efficiency and strong order book from UAE will grow its revenue/earnings at a CAGR of 33%/36% respectively over FY16p-18e We maintain our BUY rating with the price target of Rs 70. (15x PE on EPS FY17e).

Apr-16

May-16

Mar-16

Jan-16

Feb-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jun-15

Opportunities from UAE and India to remain strong: The company foresees huge demand from Dubai led by the stringent policy on fire protection after the recent fire accident in a Dubai hotel and Dubai Expo 2020, as well as projects within the key industrial and/or government-related sectors such as, power, education and health care. In India, business growth is slow but, NFPIL is hopeful on government investments and improving domestic business sentiments.

Jul-15

190 170 150 130 110 90 70 50

NFPI

Source:-Bloomberg

Exhibit 1: Financial summary (Rs mn) Y/E March

FY14

FY15

FY16p*

FY17e

FY18e

10161

11466

14797

19323

26263

Growth (%)

44.2

12.8

29.1

30.6

35.9

Operating margin (%)

11.2

10.1

11.6

11.8

12.6

PAT

665

671

986

1356

2284

Adjusted PAT

714

671

986

1356

2284

Net sales

EPS (Rs)

2.4

2.3

3.4

4.6

7.8

Growth (%)

20.2

-6.0

46.9

37.5

68.4

P/E(x)

12.8

13.7

9.3

6.8

4.0

ROE (%)

20.7

16.5

19.1

21.9

30.3

ROCE (%)

14.0

13.1

15.0

16.1

21.3

Debt/equity (x)

1.06

0.94

0.91

0.87

0.68

1.9

2.1

1.6

1.4

1.1

P/Bv (x) Source: Company, BOBCAPSe

p*-provisional

Vaishali Parkar Kumar | [email protected] | +91 22 6138 9382 Rishabh Mehta | [email protected] | +91 22 6138 9384

Nitin Fire Protection Industries Ltd. | 10 June 2016

(Wholly owned subsidiary of Bank of Baroda)

Exhibit 2: Quarterly Financial (Rs Mn) Net Sales Raw material consumed (%) of net sales Staff cost (%) of net sales Manufacturing & Other Expenses (%) of net sales EBITDA Depreciation EBIT Interest Other Income PBT Less: Taxation Less: Minority Interest Recurring PAT Exceptional items Reported PAT EPS

4QFY16

4QFY15

YoY (%)

3QFY16

QoQ (%)

3,082 2,079 67 128 4 499 16 377 137 240 174 23 89 -25 0 113 0 113 0.4

2,339 1,946 83 55 2 124 5 214 49 165 123 28 69 1 1 68 0 68 0.2

31.8 6.8

3,880 3,134 81 122 3 203 5 421 69 351 105 38 285 13 0 272 0 272 0.9

-20.6 -33.7

131.4 301.1 76.4 45.6

27.7

67.8 67.8

4.3 146.0 -10.4 -31.7

-68.8

-58.3 -58.3

Source: Company, BOBCAPS

| Equity research |

2

Nitin Fire Protection Industries Ltd. | 10 June 2016

(Wholly owned subsidiary of Bank of Baroda)

Financials Exhibit 3: Income Statement Y/E Mar (Rsmn) Net sales growth (%) COGS Staff Cost Changes in inventories SG&A Cost EBITDA growth (%) Depreciation & Amortization EBIT Other income Interest paid Extraordinary/Exceptional items PBT Tax Minority interest PAT Non-recurring items Adjusted PAT growth (%)

FY14 10,161 44.2 8,211 258 3 552 1,137 41 106 1,031 19 305 (49) 744 30 665 49 714 20

FY15 11,466 12.8 9,450 313 (83) 631 1,155 2 144 1,011 113 414 710 39 671 671 (6)

FY16p* 14,797 29.1 10,960 459 (244) 1,903 1,720 49 329 1,391 145 525 1,011 25 986 986 47

FY17e 19,323 30.6 15,460 527 (10) 1,063 2,282 33 454 1,828 160 561 1,428 71 1,356 1,356 38

Exhibit 4: Balance Sheet Y/E Mar (Rsmn) Cash & Bank balances Other Current assets Investments Net fixed assets Goodwill Other non-current assets Total assets

FY14 368 6,211 954 1,041 188 8,761

FY15e 846 6,665 1,059 1,041 188 9,798

FY16p* 158 8,369 397 1,884 1,030 1,027 12,864

FY17e 739 10,090 397 1,680 1,030 188 14,124

FY18e 955 13,090 397 1,432 1,030 188 17,092

Current liabilities Borrowings Other non-current liabilities Total liabilities

1,110 3,923 17 5,050

1,221 4,155 19 5,394

1,533 5,394 35 6,962

1,983 5,634 35 7,651

2,552 5,885 35 8,472

Share capital Reserves & surplus Shareholders' funds Total liabilities

438 3,273 3,711 8,761

585 3,819 4,404 9,798

585 5,318 5,902 12,864

585 5,888 6,473 14,124

585 8,035 8,619 17,092

Source: Company, BOBCAPSe

| Equity research |

FY18e 26,263 35.9 20,803 716 (13) 1,445 3,312 45 499 2,814 176 586 2,404 120 2,284 2,284 68

p*-provisional

3

Nitin Fire Protection Industries Ltd. | 10 June 2016

(Wholly owned subsidiary of Bank of Baroda)

Exhibit 5: Cash Flow Y/E Mar (Rsmn) Profit after tax

FY14

FY15e

FY16p*

FY17e

FY18e

665

671

986

1,356

2,284

Depreciation Chg in working capital

99

144

329

454

499

(964)

(341)

(2,218)

(433)

(2,431)

Total tax paid

(2)

-

-

-

-

Cash flow from operations

(202)

475

(903)

1,377

351

Capital expenditure

(271)

(250)

(1,154)

(250)

(250)

-

-

(397)

-

-

Cash flow from investments

(271)

(250)

(1,540)

(250)

(250)

Free cash flow

(473)

225

(2,443)

1,127

101

Change in investments

Issue of shares

(3)

146

-

-

-

Net inc/dec in debt

394

231

1,239

240

252

Dividend (incl. tax)

(1)

(1)

(1)

(1)

(1)

(125)

(123)

517

(785)

(136)

265

253

1,755

(546)

115

(208)

478

(688)

581

216

Other financing activities Cash flow from financing Inc/(Dec) in Cash & Bank bal.

Exhibit 6: Ratio analysis Y/E Mar

FY14

FY15

FY16p*

FY17e

FY18e

EPS

2.4

2.3

3.4

4.6

7.8

CEPS

2.8

2.8

4.5

6.2

9.5

DPS

0.2

0.4

0.5

0.5

0.5

16.9

15.1

20.2

22.1

29.5

Gross margins

16.7

14.9

22.8

17.3

18.1

Operating margins

11.2

10.1

11.6

11.8

12.6

7.0

5.9

6.7

7.0

8.7

12.8

13.7

9.3

6.8

4.0

P/BV

1.9

2.1

1.6

1.4

1.1

EV/EBITDA

9.2

10.8

8.1

6.0

4.1

Per share data (Rs)

BV Profitability ratios (%)

Net margins Valuation ratios (x) PE

EV/Sales

1.0

1.1

0.9

0.7

0.5

RoE

20.7

16.5

19.1

21.9

30.3

RoCE

14.0

13.1

15.0

16.1

21.3

RoIC

10.4

8.8

10.7

12.5

18.9

Source: Company, BOBCAPSe

| Equity research |

p*-provisional

4

Nitin Fire Protection Industries Ltd. | 10 June 2016

(Wholly owned subsidiary of Bank of Baroda)

Sales and Dealing Team Anil Pawar – Senior Manager – Dealing

+91-22-6138 9325

[email protected]

Sachin Sambare – Manager– Dealing

+91-22-61389331/33

[email protected]

Ashwin Patil – Executive – Dealing

+91-22-6138 9326

[email protected]

Research Team

Sectors

Vaishali Parkar Kumar – Analyst

Agri, Auto, Defence

+91-22-6138 9382

[email protected]

Padmaja Ambekar – Analyst

Auto Ancillary, Infra, Midcap

+91-22-6138 9381

[email protected]

Akanksha Tripathi – Analyst

Footwear, FMCG Textile, FMCG, Chemicals Bio Tech, Pharma

+91-22-6138 9383

[email protected]

+91-22-6138 9384

[email protected]

+91-22-6138 9351

[email protected]

Kshitij Kelkar

+91-22-61389386

[email protected]

Kiran Sawardekar

+91-22-61389385

[email protected]

Nisha Rasal

+91-22-61389385

[email protected]

+91-22-61389336

[email protected]

Rishabh Mehta – Analyst Hareesha Kakkera – Associate

Infra,

Retail Dealing Team

Debt Dealing Team Minaxi Tiwari

UTI Tower, 3rd Floor, South Wing, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051. India. Ph.: +91.22.6138.9300 || Fax: +91.22.6671.8535 || Email: [email protected]|| Web: www.bobcaps.in NSE SEBI No. (CASH): INB231304537 NSE SEBI No. (DERIVATIVES): INF231304537 BSE SEBI No. : INB011304533 SEBI Registered Research Analysts: INH000000040 valid till 03rd February, 2020

Disclaimer BUY. We expect the stock to deliver >15% absolute returns. HOLD. We expect the stock to deliver 5-15% absolute returns. SELL. We expect the stock to deliver