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Mid cap & small cap performance

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Mid cap & small cap performance

  1. 1. Emkay Global Financial Services Ltd. Ajay Parmar (Co-Head Investment Banking)
  2. 2. Private & Confidential Mid-Cap & Small Cap Sector Analysis 2 March 18, 2016
  3. 3. Emkay Universe v/s. Indices Mid-cap & Small-cap Performances 3 Parameters ----> Net Sales Growth Ebitda Growth EBITDA Margin growth EBIT margin growth Adjusted PBT Growth Adjusted PAT Growth Interest Cost Growth Tax Growth Sensex -3.7% 0.5% 76 bps 14 bps -1.9% 1.2% 0.2% -11.3% NIFTY -2.6% 0.7% 63 bps 5 bps -3.8% -0.9% 4.3% -8.0% BSE 500 2.1% -1.1% -56 bps -67 bps -5.8% -2.2% 3.1% -13.5% BSE 200 2.2% -2.3% -83 bps -95 bps -6.2% -1.7% -1.1% -16.3% BSE100 -2.8% -3.0% -4 bps -61 bps -9.7% -5.3% 7.3% -19.2% NSE Midcap 22.6% -7.4% -461 bps -364 bps -22.1% -5.1% 7.0% -70.8% BSE 500 ex-Nifty 7.7% -3.6% -167 bps -128 bps -10.1% -5.0% 2.6% -24.7% BSE 200 ex-Nifty 12.0% -8.4% -339 bps -265 bps -13.2% -4.1% -5.3% -40.6% BSE 100 ex-Nifty -3.7% -17.2% -282 bps -332 bps -38.4% -24.8% 12.4% -81.5% Emkay Universe 0.1% -5.9% -101 bps -133 bps -12.7% -7.0% 7.2% -24.1% Emkay Large Cap -0.7% -7.7% -121 bps -157 bps -14.2% -8.0% 5.7% -26.8% Emkay Mid Cap 4.6% 1.3% -52 bps -68 bps -4.3% -4.1% 1.7% -3.9% Emkay Small Cap 6.4% 23.5% 190 bps 186 bps 26.8% 24.5% 20.0% 27.4% Emkay Universe ex Top 3 Cos 2.7% -8.4% -196 bps -227 bps -18.3% -16.3% 9.6% -21.3% Emkay Universe ex Top 5 Cos 2.6% -9.4% -213 bps -244 bps -19.9% -18.0% 9.7% -22.5% Emkay Universe ex Top 3 and Bottom 3 Cos 5.2% 0.0% -96 bps -128 bps -6.4% -3.4% 10.3% -10.5% Emkay Universe ex Top 5 and Bottom 5 Cos 7.0% 5.4% -28 bps -71 bps -0.7% 1.3% 11.7% -6.6% Source: Emkay Research & Exchange website
  4. 4. 3yrs comparative Indices performance Indices Performance 4 -20% 0% 20% 40% 60% 80% 100% 120% Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 Indices Performances Sensex BSE Midcap BSE Smallcap BSE500 Source: Emkay Research & Exchange website
  5. 5. Indices Performance BSE 100 BSE 200 5 -10% 0% 10% 20% 30% 40% 50% 60% 70% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 BSE Auto BSE Capital Goods -10% 0% 10% 20% 30% 40% 50% 60% 70% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 0% 20% 40% 60% 80% 100% 120% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -40% -20% 0% 20% 40% 60% 80% 100% 120% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Source: Emkay Research & Exchange website
  6. 6. Indices Performance BSE Consumer Durables BSE FMCG 6 BSE Healthcare BSE Information Technology -40% -20% 0% 20% 40% 60% 80% 100% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 0% 20% 40% 60% 80% 100% 120% 140% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -40% -20% 0% 20% 40% 60% 80% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Source: Emkay Research & Exchange website
  7. 7. Indices Performance BSE Metal BSE Oil & Gas 7 BSE Power BSE Realty -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -20% -10% 0% 10% 20% 30% 40% 50% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -50% -40% -30% -20% -10% 0% 10% 20% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Source: Emkay Research & Exchange website
  8. 8. Indices Performance BSE PSU BSE Telecom 8 BSE Technology Nifty -30% -20% -10% 0% 10% 20% 30% 40% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 0% 10% 20% 30% 40% 50% 60% 70% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 -10% 0% 10% 20% 30% 40% 50% 60% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Source: Emkay Research & Exchange website
  9. 9. Top 20 outperformer in last 10 yrs in BSE 100 (initial Mcap below Rs.4,500) BSE 100 - Top 20 outperformer 9 Sr. Company Name CMP (Rs.) Initial Mcap (Rs. in crs) Current Mcap (Rs. in crs) 10yrs CAGR Current Value of Rs.10,000 invested in these companies 10 yrs before (Rs.) 1. Eicher Motors 18,703 742 50,799 53.1% 707,630 2. IndusInd Bank 916 1,396 54,496 34.3% 190,426 3. Lupin 1,749 3,808 78,780 33.8% 184,305 4. Motherson Sumi 242 2,304 31,954 28.7% 124,639 5. Aurobindo Pharma 727 3,246 42,513 28.1% 119,255 6. Divi's Lab. 979 2,193 25,993 27.6% 114,467 7. LIC Housing Fin. 446 1,659 22,502 27.6% 114,158 8. Marico 240 2,946 30,990 25.2% 94,604 9. Yes Bank 804 2,421 33,820 24.5% 89,727 10. Cadila Health. 338 3,773 34,628 23.8% 84,436 11. Godrej Consumer 1,281 3,547 43,626 23.5% 82,769 12. Titan Company 340 3,821 30,185 23.0% 78,996 13. Britannia Inds. 2,719 4,178 32,621 22.8% 77,741 14. United Breweries 802 2,607 21,208 20.9% 66,753 15. Shriram Trans. 909 2,103 20,619 20.6% 65,054 16. Exide Inds. 135 1,916 11,437 18.5% 54,717 17. Glenmark Pharma. 828 3,837 23,363 17.8% 51,253 18. JSW Steel 1,198 3,836 28,956 17.2% 49,014 19. United Spirits 2,547 3,456 37,020 14.3% 38,122 20. Federal Bank 48 1,540 8,311 13.4% 35,189 Source: Emkay Research & Exchange website
  10. 10. 3 yrs Indices Returns Indices Returns 10 Indices 1 yr 2 yrs 3yrs 5 yrs Sensex -11.7% 10.3% 31.0% 26.9% BSE Midcap -3.9% 43.7% 65.7% 48.1% BSE Smallcap -6.0% 44.8% 76.4% 25.2% BSE100 -11.9% 13.1% 33.6% 29.5% BSE200 -11.0% 17.5% 37.7% 32.4% BSE500 -10.9% 18.7% 39.0% 32.4% BSE Auto -11.0% 29.0% 71.4% 84.4% BSE Cap Goods -29.1% 2.1% 36.0% -7.4% BSE Consumer Durables 7.2% 71.1% 57.4% 79.0% BSE FMCG -3.5% 7.6% 26.7% 108.6% BSE Healthcare -9.8% 54.6% 94.7% 158.8% BSE IT -5.0% 23.2% 57.3% 65.4% BSE Metal -23.0% -27.6% -16.8% -54.9% BSE O&G -5.6% -7.3% 5.6% -14.1% BSE Power -19.9% -1.2% 3.5% -37.2% BSE Realty -29.5% -20.1% -34.1% -49.8% BSE PSU -22.4% -7.1% -9.0% -34.1% BSE Telecom -17.9% 1.5% 24.6% -1.1% BSE Tech -7.1% 18.5% 49.0% 50.8% Returns Indices 1 yr 2 yrs 3yrs 5 yrs Nifty -11.7% 11.9% 32.0% 28.5% Nifty Midcap 100 -6.1% 41.7% 64.9% 51.8% Nifty Smallcap 100 -14.8% 29.7% 52.8% 33.6% Nifty100 -11.0% 14.9% 35.9% 32.7% Nifty200 -11.2% 16.8% 37.3% 32.3% Nifty500 -10.6% 19.4% 40.6% 34.8% Nifty Auto -11.0% 32.2% 81.6% 98.6% Nifty Bank -15.1% 21.3% 36.1% 32.1% Nifty Energy -1.2% -1.9% 8.2% -13.8% Nifty FMCG -2.7% 6.9% 26.2% 110.4% Nifty Infra -24.7% -6.5% 10.7% -20.5% Nifty Media 4.3% 27.3% 39.9% 59.6% Nifty Pharma -11.4% 49.2% 91.2% 150.9% Nifty Realty -31.5% -21.7% -33.9% -52.8% Returns Source: Emkay Research & Exchange website
  11. 11. 11 Framework for Fundamental Analysis
  12. 12. Porter’s 5 forces model Michael Poter’s Model 12
  13. 13. Boston Consulting Group Matrix BCG Model 13
  14. 14. Few parameters Benchmarking 14 Revenue growth Market share Production costs Employee turnover Process cycle time Margins Valuation parameters Customer profile
  15. 15. Factors considered for identification Identification of Company 15 Management Industry profile Positioning of the Company within the industry Sustainable business model Competitive strength Core values Customer satisfaction Financials and balance sheet Valuations Cashflows Dividend policy Capital allocation
  16. 16. Emkay Evaluation Matrix Evaluation Matrix 16 Parameters Reading Points Parameters Max Points Weightage Points Earned Weightage % Points Earned Profitability Profitability 20 31% 7 16% 35% EBITDA Margin 19% 2 Growth 10 15% 10 23% 100% Adj. PAT Margin 10% 2 Leverage & Coverage 15 23% 10 23% 67% RoCE 14% 1 Cash Flow 5 8% 4 9% 80% RoE 18% 2 Corporate Governance 5 8% 5 11% 100% + EPS in all last 5 yrs. Y √ Others 10 15% 8 18% 80% Dividend paid in all last 5 yrs. Y √ Total Points 65 100% 44 100% 68% Growth Positive Negative Net Sales (Last 5 Yrs.) 39% 5 No. of Ticks 8 4 Adj. EPS (Last 5 Yrs.) 36% 5 Leverage & Coverage D / E 1.1x 3 Gross Debt / EBITDA 3.6x 2 EBIT / Interest Expense 4.5x 5 Cash Flow + FCF N X CFO / Adj. PAT 47% 4 Corporate Governance No. of Independent Directors 71% 5 Chairman - Executive Y √ Criminal Cases Against Promoter N √ Change in Depreciation Accounting Policy N √ Disclosure on Derivative Contracts N X Capitalization of R&D Costs Y X Others Dividend Payout Ratio 14% 3 Promoter Holding 60% √ FII Holding Y √ Promoter Pledge 0% 5 Capital raised in last 5 yrs. Y X Interest in Unrelated Businesses N √ Scorecard
  17. 17. Listed companies match our criteria (Rs. cr) Companies fit our criteria (screener) 17 Sr. Company Mcap Net Sales 3yrs CAGR RONW (%) ROCE (%) D/E Div. Pay. EBITDA (%) 1 TCS 463,395 94,648 24.6% 40.19 51.4 0.0 77.9% 31.0 2 Infosys 266,492 53,319 16.5% 25.98 36.14 - 41.3% 30.0 3 Sun Pharma.Inds. 199,325 27,433 50.7% 24.86 22.87 0.3 15.9% 28.3 4 HCL Technologies 114,869 36,701 20.8% 33.36 39.02 0.0 32.6% 26.8 5 Tech Mahindra 47,049 22,621 60.3% 24.81 27.85 0.1 22.0% 18.1 6 Godrej Consumer 43,944 8,276 19.4% 24.15 20.57 0.6 20.6% 18.2 7 Zee Entertainmen 37,091 4,884 17.1% 27.34 27.11 - 22.1% 28.2 8 Cadila Health. 34,480 8,651 18.0% 30.85 22.71 0.7 21.4% 26.3 9 Pidilite Inds. 30,514 4,844 15.7% 24.08 31.65 0.0 29.0% 23.7 10 Divi's Lab. 25,862 3,115 18.7% 26.37 33 0.0 31.2% 41.1 11 GlaxoSmith C H L 24,807 4,308 15.9% 29.73 41.29 - 39.6% 26.9 12 Emami 21,355 2,217 15.1% 50.04 57.72 0.0 32.7% 27.5 13 Torrent Pharma. 21,262 4,653 20.0% 34.19 25.69 0.9 25.4% 49.1 14 P & G Hygiene 19,963 2,334 21.6% 31.02 45.27 - 28.4% 21.7 15 UPL 18,696 12,089 16.4% 21 20.56 0.6 18.7% 19.7 16 Amara Raja Batt. 15,407 4,211 21.2% 26.83 36.92 0.1 15.0% 18.8 17 CRISIL 12,756 1,253 15.8% 35.25 47.54 - 26.6% 31.2 18 Page Industries 12,717 1,543 30.4% 58.01 54.51 0.5 41.0% 22.0 19 Ajanta Pharma 11,972 1,481 29.8% 43.2 55.98 0.1 17.0% 35.3 20 Mindtree 11,017 3,562 23.0% 29.36 37.25 - 26.6% 20.1
  18. 18. Listed companies match our criteria (Rs. cr) Companies fit our criteria (screener) 18 Sr. Company Mcap Net Sales 3yrs CAGR RONW (%) ROCE (%) D/E Div. Pay.(%) EBITDA (%) 21 AIA Engg. 8,737 2,184 15.5% 22.55 29.67 0.1 17.5% 32.5 22 Symphony 8,413 579 22.7% 37.25 50.23 - 42.2% 34.4 23 Syngene Intl. 7,811 860 27.3% 23.27 21.61 0.2 65.0% 34.0 24 Kajaria Ceramics 7,472 2,187 18.5% 29.11 33.91 0.4 18.1% 19.0 25 Tata Elxsi 5,956 849 16.4% 39.3 58.24 - 33.6% 24.5 26 Bajaj Corp 5,609 826 20.4% 40.65 51.54 - 98.2% 29.1 27 Persistent Sys 5,226 1,891 23.7% 22.12 29.05 - 27.5% 22.3 28 eClerx Services 5,209 942 25.8% 35.23 44.5 - 46.3% 38.9 29 La Opala RG 3,222 223 24.8% 29.48 36.67 0.1 17.3% 34.8 30 Kaveri Seed Co. 2,682 1,161 46.1% 47.36 48.31 - 17.2% 24.1 31 CCL Products 2,579 881 20.6% 24.27 22.76 0.7 21.2% 22.1 32 Vinati Organics 2,118 772 19.9% 31.12 37.74 0.3 15.6% 37.2 33 Wonderla Holiday 2,044 182 17.1% 20 27.36 0.1 16.7% 55.3 34 Sharda Cropchem 1,989 1,061 20.0% 20.32 28.66 0.1 18.3% 18.6 35 Navneet Educat. 1,940 994 16.4% 25.52 29.95 0.4 40.2% 26.5 36 Mayur Uniquote 1,876 506 16.8% 34.29 36.12 0.2 21.4% 26.8 37 Caplin Point Lab 1,523 252 32.9% 53.09 67.12 0.0 18.4% 23.3 38 Poly Medicure 1,300 390 21.6% 26.76 29.47 0.4 17.7% 22.8 39 Wim Plast 1,033 366 22.0% 23.36 32.65 - 15.6% 19.6 40 SQS India BFSI 965 214 20.8% 20.61 29.08 0.1 116.7% 22.9
  19. 19. Listed companies match our criteria (Rs. cr) Companies fit our criteria (screener) 19 Sr. Company Mcap Net Sales 3yrs CAGR RONW (%) ROCE (%) D/E Div. Pay.(%) EBITDA (%) 41 Astra Microwave 891 634 46.3% 23.55 28.87 0.3 15.6% 24.7 42 R Systems Intl. 762 649 16.6% 27.36 38.04 0.0 95.5% 26.1 43 MT Educare 641 254 21.8% 24.45 35.04 0.0 35.5% 29.0 44 Alkyl Amines 630 476 18.3% 27.44 24.91 0.9 18.1% 18.6 45 Arrow Coated 596 49 129.8% 59.93 76.53 - 15.7% 82.9 46 Control Print 471 113 19.3% 20.5 27.57 0.1 20.9% 28.6 47 Stovec Inds. 439 102 19.4% 21.37 30.62 - 27.9% 25.3 48 Orbit Exports 373 158 15.7% 32.33 31.95 0.5 23.3% 33.7 49 Cupid 369 44 19.6% 36.02 48.5 0.1 21.7% 41.8 Criteria for Screener: 1. 3 yrs CAGR more than 15% 2. 9 months EBITDA (9mFY16) margin should be more than 18% 3. ROE & ROCE (FY15) should be more than 20% 4. Dividend Payout (FY15) more than 15% 5. Leverage (FY15) less than 1.00x 6. Market Capitalisation (latest) of more than Rs.300cr+
  20. 20. Thank You DISCLAIMER: Emkay Global Financial Services Limited and its affiliates are a full-service, brokerage, investment banking, investment management, and financing group. We along with our affiliates are participants in virtually all securities trading markets in India. Our research professionals provide important input into our investment banking and other business selection processes. Investors may assume that Emkay Global Financial Services Limited and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Emkay Global Financial Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be distributed in Canada or used by private customers in United Kingdom. All material presented in this report, unless specifically indicated otherwise, is under copyright to Emkay. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Emkay. All trademarks, service marks and logos used in this report are trademarks or registered trademarks of Emkay or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Emkay Global Financial Services Ltd. 7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com

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