1st Quarter Analysis Report: ESAB India Ltd. (BUY; Estimated Price: Rs. 850)

ESAB India is a leading supplier of welding and cutting products and has its manufacturing facilities located in various states of India. The company had undergone some significant changes recently. First, Mr Rohit Gambhir became the new Managing Director of the Company with effect from 1st November, 2014. Second, this March, the company changed its financial year from calendar year basis to April to March pattern in order to comply with the requirements of Section 2(41) of the Companies Act, 2013. Third, following a review of manufacturing capacities of the Company's consumable Plant locations, the Board of Directors took the decision to discontinue operations of the Consumables Plant at Khardah, Kolkata. As a result, there was an exceptional expenditure of Rs. 11.63 crores arising out of Impairment loss on fixed assets and one time settlement made to contractors at Khardah Plant. This effected into a negative PAT of Rs. 4.57 crores for the March, 2015 quarter.

The latest quarterly report of June, 2015 reflects that operations are back to normal for ESAB India now. There is no exceptional expenditure during June, 2015 quarter. Although total income from operations has decreased from Rs. 113.89 crores in June, 2014 quarter to Rs. 108.97 crores this quarter, net profit has increased from Rs. 6.49 crores to Rs. 7.81 crores in the same period (Refer Exhibit I). In other words, net profit margin has increased from 5.70% in June, 2014 to 7.17% in June, 2015 quarter.

Looking segment wise, Rs. 79.22 crores of sales, i.e. 73.37%, were pertaining to welding consumables and Rs. 28.75 crores, 26.63%, pertaining to equipment products.

Overall, sales of ESAB India have been more or less consistent in the last few quarters, as can be seen in Exhibit I. ESAB India is still debt free which enables it to have a strong core. Given the improvement in economy and decline in inflation, it is our assumption that this industry will grow in the near future. ESAB India should be able to take full advantage of this opportunity and generate huge profits.

The current market price of ESAB India is Rs. 601.20 in NSE. Using the discounted cash flow method, we projected the stock price of ESAB India to be around Rs. 850.

EXHIBIT - I

Profit & Loss Statement of Last 5 Quarters

(Rs. in Crores)	Jun-15	Mar-15	Dec-14	Sep-14	Jun-14
Net Income from operations	107.97	105.28	109.77	107.64	112.47
Other Operating Income	1.00	1.31	1.73	1.17	1.42
Total Income from Operations	108.97	106.59	111.50	108.81	113.89
Other Income	1.54	2.70	3.10	1.94	1.98
Total Income	110.51	109.29	114.60	110.75	115.87
Expenses
Cost of materials consumed	59.97	58.23	58.11	56.36	57.51
Purchase of stock in-trade	10.03	13.39	11.47	11.03	13.34
Changes in inventories of finished goods, WIP and stock in trade	-2.76	-2.25	4.12	2.72	0.33
Employee benefits expense	10.86	11.23	11.77	10.68	11.42
Other expenses	18.62	19.09	18.95	20.08	17.78
Total operating expenses	96.72	99.69	104.42	100.87	100.38
EBITDA	13.79	9.60	10.18	9.88	15.49
Depreciation and amortisation	2.40	2.54	2.84	2.79	2.82
Profit from ordinary activities before finance costs and exceptional items	11.39	7.06	7.34	7.09	12.67
Finance costs	0.00	0.00	0.00	0.00	0.00
Profit from ordinary activities after finance costs but before exceptional items	11.39	7.06	7.34	7.09	12.67
Exceptional items	0.00	11.63	0.00	0.54	3.55
Profit before Tax (PBT)	11.39	-4.57	7.34	6.55	9.12
Tax Expense	3.58		2.24	1.57	2.63
Net profit after tax (PAT)	7.81	-4.57	5.10	4.98	6.49

About the Author

This report has been prepared by Mridul and Sanyam Mittal. Both are pursuing MBA from Institute of Management, Nirma University located in Ahmedabad, India.

Disclaimer

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidelines only.

Analyst Report : State Bank of India , Quarterly Report, Q1 , FY 2015-16

Here is an interpretation made on the basis of these results and the company’s performance in a nut shell. 

Operating profit of the company increases to 21.90% of the total income as compared to 21.17% to 2014 March quarter. With this the net profit of the company goes to 6.61% of total income as compared to 6.32% for the same quarter previous year. Other income increases to 23.66% of total income vs.  21.09 % for the same quarter last year. Interest expended of the company reduces to 63.32 % of the total income as compared to 64.27% for the same quarter previous year. Gross NPA ratio is down by 66 bps to 4.90% in Q1 FY 15 as against 5.56% in Q1 FY 14. Overall company’s performance is better than the last year.

Economist Report : MAY 2015- INDEX OF INDUSTRIAL PRODUCTION ANALYSIS

MAY 2015- INDEX OF INDUSTRIAL PRODUCTION ANALYSIS

The quick estimates of the Index of Industrial Production (IIP) for the month of May were released on 10^th July 2015 by the Central Statistics Office (CSO). The base for IIP is the fiscal year 2004-05. The IIP as an index measures the growth in the activity levels of various sectors of the economy.

The index as compiled by the CSO reflects growth in the form of ‘Use-Based’ goods produced within the country as well as on the basis of the National Industrial Classification (NIC-2004).

The ‘Use-Based’ classification has been shown in Table 1 along with the weights assigned to each of the categories. The industries included in the NIC-2004 based compilation has been included in Appendix 1.

Table 1 IIP (Use Based)

CATEGORY	WEIGHT
BASIC GOODS	456.82
CAPITAL GOODS	88.25
INTERMEDIATE GOODS	156.86
CONSUMER GOODS
·         DURABLES	84.60
·         NON-DURABLES	213.47
IIP INDEX	1000.00

3rd Quarter Analysis Report: Symphony Ltd. (SELL; Estimated Price: Rs. 1853)

3^rd Quarter Analysis Report: Symphony Ltd. (SELL; Estimated Price: Rs. 1853)

In March 2015 quarter, volume growth has been about 13% with 213,000 coolers sold which is lower than the sales in March 2014 on account of unseasonal rains and hailstorms. In the next quarter as well, it is projected that sales will be hampered as sales are closely knit with the weather. Looking at the segment revenue, home appliances have not shown much of an increase and have gone up to Rs. 138.90 crores from Rs. 113.64 crores whereas corporate funds have grown tremendously to Rs. 7.39 crores from Rs. 1.91 crores. Gross revenue including treasury income stood at Rs. 146 crores in March 2015 quarter versus Rs. 116 crores in March 2014, registering a growth of about 27%.  Bulk of the business of Symphony, in fact more than 90%, is from residential air coolers and rest is centralized air cooling. Symphony has taken initiatives to grow the centralized air cooling segment but it is still relatively small. The company has succeeded to sign in the rate contracts with HDFC Bank and ICICI Bank for their rural and semi-rural low cost branches. Even all Decathlon stores will have symphony air coolers to cool their showrooms.

Looking at the international business, during the quarter the operations have been restarted. The company has tapped a new market in Vietnam, Cambodia. But in some of the Middle East countries like Egypt and Syria because of political unrest the exports have been partially affected during the quarter and the first nine months supplies to IMPCO have steadied. However, in order to tap the export market Symphony is planning an acquisition but things are in the primitive stage right now so no disclosure has been made.

PAT stood at 36.5 crores versus 27 crores that is an increase of 35% while PAT percentage to gross revenue jumped from 23.4% to 25%. Looking at EBITDA numbers, EBITDA stood at 51 crores versus 36 crores in March quarter showing growth of 43% in absolute number while EBITDA percentage to sales stood at 37% versus 32% last time.

Overall, the growth of Symphony has suffered. However, the reasons for this sufferance are of less significance as weather conditions can never be controlled. Our estimated price of Symphony is around Rs. 1853 per share whereas the current market price is Rs. 1894.90 per share.

Economist Report : STATE OF THE ECONOMY

INTRODUCTION

Our economy is expected to attain a growth rate of 7.5% in FY2015-16 and would consequently surpass China as per a Global Economic Prospects (GEP) report that was recently released by the World Bank. A number of macro-economic variables, such as inflation as measured by the CPI and WPI indices, have also played out favourably in this regard. This in turn provided sufficient headroom to the RBI to have a more accommodative stance with regards to the monetary policy.

The central bank lowered the policy rate by 25bps twice this year and followed it with another cut of 25bps on 7^th May, 2015, making it amply clear that there was uncertainty regarding monsoon and the expected increase in rates by the US Federal Reserve down the line (though we do have forex reserves to the tune of $350Bn) among other factors. Following the announcement the SENSEX tanked by more than 600 points.

Though the stock markets nosedived, it is important to understand that monetary policy can perhaps only act as a catalyst in the process of growth and not substitute for deeper and broader changes that would be required in different sectors of the economy. It is vital that a number of issues are tackled so as to actually sustain India’s higher growth rate as compared to its peers in the coming years.

(It would be pertinent to note that a decrease in the policy rate would not always automatically lead to lower lending rates by banks and consequently an increased appetite for consumption of capital or consumer goods by the people.)

Recently changes were introduced in the method of GDP calculation as well as the revision of base year from 2004-05 to 2011-12. The CPI index was also modified.