OPY

C
O
DEM

HOW TO READ THIS REPORT

This box gives the analyst's

estimate of target price of the
stock, the time horizon it would
take to reach and the appreciation
in percentage term during that
period from current price levels.

The date on which valuations are

based and investment opinion was
formed along with the company
code
Analyst rating on the stock that
corresponds to a specific
investment outlook as explained
in rating rationale.

Key factors that we feel would

drive the anticipated future growth
in revenue & profitability.

Know about the company's

background, including top
management and correspondence
details
Identify how much promoters and
institutional interest is there in the
company

The valuation section of provides

our justification for a stock using a
variety of valuation techniques.

A brief snapshot of the company's

size and of market returns
generated along with benchmark
indices return during a specified
period.
Know key financial trends and how
the company measures up on
different valuation parameters for
fair value estimates based on
current and estimated future
growth.

Graph showing how the stock has

performed compared to benchmark
indices over a period of time. It
throws insight into stock's return
potential relative to broader market
indices.

Look for consistent and

rising EPS growth.

Looking for declining forward

P/E as it indicates company's
future growth as forecasted
earning would be higher than
current earnings.

EV/EBIDTA ratio determines the

value of a company. A lower
ratio indicates that the company
may be undervalued.

Improving ROCE/ ROE ratios

indicate the efficiency and
profitability of a company's
capital investments.

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For private circulation only

MAKING SENSE OF THE NUMBERS

Profit and Loss Account
FY08E
All things being equal, companies with
higher sales growth rates are generally
more preferable than those with slower
revenue growth rates.

Total expenses should be seen in

relation to revenue trends for previous
years and quarters, as it impact the
overall profit which is aviable to
shareholderes.
Check for variations in non-operating
expenses including interests,
depreiciation and taxes as these decide
the final profit which is available to
shareholders

Net profit growth is a very important

parameter to look into, however EPS
growth is even more important as
companies with expanding equity base
may show restrictive EPS growth.

FY07E

(Rs crore)
FY06E

Sales
603.32
440.29
311.99
.................................................................................................................................................
% Growth
37.03%
41.12%
26.65%
.................................................................................................................................................
Operating Profit
137.55
89.15
54.72
.................................................................................................................................................
% Growth
54.29%
62.93%
25.96%
.................................................................................................................................................
Other Income
3.72
2.79
1.98
.................................................................................................................................................
Depreciation
7.51
8.34
9.26
.................................................................................................................................................
EBIT
133.76
83.60
47.44
.................................................................................................................................................
% Growth
60.00%
76.24%
29.96%
.................................................................................................................................................
Interest
14.44
12.40
10.82
.................................................................................................................................................
Profit Before Tax (PBT)
119.32
71.20
36.62
.................................................................................................................................................
% Growth
67.60%
94.42%
47.25%
.................................................................................................................................................
Taxation
22.67
13.53
6.96
.................................................................................................................................................
Tax as % of PBT
19.00%
19.00%
19.00%
.................................................................................................................................................
Net Profit
96.65
57.67
29.66
.................................................................................................................................................
% Growth
67.6%
94.4%
45.3%
.................................................................................................................................................
Shares
O/S
3.35
3.35
3.35
.................................................................................................................................................
EPS (Rs)

28.85

17.21

8.85

A Profit and Loss Account or an Income Statement represents how much money a company has made from selling its product/
service during a specified time period (i.e. month, quarter, year, etc.), how much money it spent for selling and making those product/
services and the money it actually earned during that period.

Balance Sheet
When we look for variations in a
balance sheet from year-to-year, one
can detect the companys growth
potential and value. It shows us how
profits are used to finance the
company's operations, and if the
company has enough cash for growth.
Leverage (long-term debt/total net
worth), represents how assets are
financed by the company, that is,
whether by debt or retained earnings. If
a company has a high amount of
leverage, or debt, then its earnings per
share (EPS) would be highly sensitive
and volatile depending upon the
business growth or de-growth.
Another important ratio is the current
ratio (current assets/current liabilities),
that shows the ability of the company to
pay its short-term obligations. When
compared with industry average, a
lower ratio may indicate possible
liquidity problems.

FY08E

FY07E

(Rs crore)
FY06E

Source of Funds
.................................................................................................................................................
Share Capital
49.44
49.44
49.44
.................................................................................................................................................
Reserves & Surplus
236.84
140.19
82.52
.................................................................................................................................................
Secured
Loans
106.31
92.76
82.17
.................................................................................................................................................
Unsecured
Loans
229.32
229.32
229.32
.................................................................................................................................................
Total
626.14
515.93
447.67
.................................................................................................................................................
Application of Funds
.................................................................................................................................................
Net Block
76.52
84.04
92.38
.................................................................................................................................................
Capital Work-in-progress
0.00
0.00
0.00
.................................................................................................................................................
Investments
0.01
0.01
0.01
.................................................................................................................................................
Inventory- Other
65.32
49.18
35.93
.................................................................................................................................................
Cash
416.51
332.68
282.55
.................................................................................................................................................
Loans & Advances
7.42
7.42
7.42
.................................................................................................................................................
Less Current Liabilities & Prov. 88.81
66.84
48.80
.................................................................................................................................................
Trade Receivables
147.00
107.28
76.02
.................................................................................................................................................
Total
626.73
516.52
448.26

Balance Sheet is a snapshot of a company's financial condition at a single point in time (often the end of a fiscal year) and gives
investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

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Cash Flow Statement

Cash flow from operating activities shows the
cash used or generated from normal operations.
It shows the ability of the company to generate
positive on a sustained basis.
Cash flows from investing activities represent
all the cash used or provided for the
purchase/sale of income-producing assets
such as fixed asset etc.
Cash flows from financing activities reflect the
flow of cash between a firm and its owners
and creditors. An increase in cash in this
section could mean the company taking loan
or issuing fresh equity to fund expansion etc.
which would have a bearing on the earnings
per share of the company.
Negative or declining free cash flow indicates
that the Company needs to issue shares, cut
costs, or borrow money to continue whereas
a company with positive or increasing free
cash flow will be able to pay dividends, fund
growth without raising more funds.

FY08E

FY07E

(Rs crore)
FY06E

Profit after Tax

96.65
57.67
29.66
.................................................................................................................................................
Dividend Paid
0.00
0.00
0.00
.................................................................................................................................................
Depn
7.51
8.34
9.26
.................................................................................................................................................
Cashflow before WC Changes 104.17
66.01
38.92
.................................................................................................................................................
Net Increase in Current Liab. 21.97
18.04
10.08
.................................................................................................................................................
Net Increase in Current Assets 55.86
44.51
-2.09
.................................................................................................................................................
Cashflow from operations
70.28
39.54
51.09
.................................................................................................................................................
Purchase of Fixed Assets
0.00
0.00
-0.02
.................................................................................................................................................
(Increase)/Decrease in Invt.
0.00
0.00
0.00
.................................................................................................................................................
Cashflow from investing
0.00
0.00
-0.02
.................................................................................................................................................
Increase/(Decrease) in Debt 13.56
10.59
221.74
.................................................................................................................................................
Cashflow
from
financing
13.56
10.59
221.74
.................................................................................................................................................
Op balance of cash
332.68
282.55
9.70
.................................................................................................................................................
Closing balance of cash
416.51
332.68
282.55

Cash Flow Statement shows the money flowing into a business from sales, borrowings etc. and the amount of money flowing out of
a business through paying for wages, rent, interest owing, paying back loans, buying raw materials etc. If the cash flowing into a
business does not meet the cash flowing out, then the company would be unable to meet its debts and other obligations and could
be forced to close down.

Ratios

Investment ratios are important for investors

as they are good reference points for
ascertaining the value of a company shares.

Profitability ratios measure the ability of the

business to make a profit and tell us how
much profit, on average, business has earned
per rupee of turnover. Look at the trend from
one period to another and check for any
improvements or deterioration
Liquidity ratios measure the company's capacity
to pay its debts. These ratios are often used by
creditors to determine the ability of the business
to repay loans and are indicator of the
businesses' vulnerability to risk.
Efficiency ratios indicates the number of times
sales had been generated by the available
capital employed (CE). An increase in the
asset turnover in the current year over that of
the previous year indicates efficient utilization
of assets which is expected to lead to an
increase in profitability.

FY08E
FY07E
FY06E
EPS
28.57
16.93
8.57
.................................................................................................................................................
Book Value Per Share
57.91
38.36
26.69
.................................................................................................................................................
Enterprise Value
414.92
485.20
524.74
.................................................................................................................................................
EV/Sales
0.69
1.10
1.68
.................................................................................................................................................
EV/EBIDTA
3.02
5.44
9.59
.................................................................................................................................................
Market Cap/Sales
0.82
1.13
1.59
.................................................................................................................................................
Price/Book
Value
2.56
3.86
5.54
.................................................................................................................................................
Operating
Margin (%)
22.80
20.25
17.54
.................................................................................................................................................
Net Profit Margin (%)
15.92
13.02
9.45
.................................................................................................................................................
RONW
33.43
29.91
21.76
.................................................................................................................................................
ROCE
21.36
16.20
10.60
.................................................................................................................................................
Debt/Equity
1.17
1.70
2.36
.................................................................................................................................................
Current Ratio
7.16
7.43
8.24
.................................................................................................................................................
Quick Ratio
6.43
6.69
7.50
.................................................................................................................................................
Fixed
Assets Turnover Ratio
7.88
5.24
3.38
.................................................................................................................................................
Debtors
Turnover Ratio
4.10
4.10
4.10
.................................................................................................................................................
Inventory Turnover Ratio
9.24
8.95
8.68

Ratio Analysis helps us comparing a company against industry benchmarks along with its past performance and is a good way to
gauge what is "normal" and what is "abnormal" with the company.

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For private circulation only

USERS GUIDE
Assets

Current Ratio

The resources owned by a company that is expected to provide

benefits to its business. Total assets are shown in Rupees crores
and represent the last day of the specified reporting period.

Current ration is equal to current assets divided by current liabilities

and is a measure of company's liquidity of a business, i.e. its ability
to meet its short-term obligations. Also referred to as the Liquidity
Ratio.

Asset Turnover
This figure represents how many dollars in revenue a company
has generated per dollar of assets. It is calculated by dividing total
revenues for the period by total assets for the same period. In
comparison, the industry average and S&P 500 are shown for the
most recent fiscal year. Asset turnover can give an indication of
how efficient a company is. A high asset turnover, which
expresses how many times a company sells-or turns over-its
assets in a year is a sign of high efficiency.
Balance Sheet
Balance sheet represents how much a company owns (equivalent
to its assets), how much it owes (equivalent to its liabilities) and
the difference between the two i.e. equity, which is part owned
by shareholders.
Book Value
Book value is also known as equity or net worth which is the same
as total assets minus total liabilities. Book value per share is net
worth divided by shares outstanding and shows how much of
equity is represented by each share of stock
Capital Expenditure
Capital expenditure is the money invested by the company in the
future growth of its business and includes land, plant, equipments,
intellectual property rights etc.
Cash Flow
Cash Flow shows the movement of cash in and out of a business
from day-to-day operations and other indirect effects, such as
capital expenditure, tax and dividend payments etc. Cash flow
adjusts the income figures to a cash basis after including operating
differences such as depreciation, but before adjusting for
investments (such as purchases of plants or equipment) or
financing.
Current Assets
Current assets include cash and anything that is expected to be
converted into cash within twelve months of the balance sheet
date. Current assets when used in comparison with current
liabilities is a good measure of company's short term liquidity.
Current Liabilities
Current liabilities are liabilities which the company expects to pay
within twelve months of the balance sheet date on account of
trade creditors, dividend etc. Current liabilities when used in
comparison with current assets is a good measure of company's
short term liquidity.

Debt to equity ratio

Debt/equity ratio equals company's total debt (including short term
and long term obligations) divided by shareholders equity (also
known as networth). This ratio indicates the amount of liabilities
the business has for every rupee of shareholders' equity. This
ratio is a good indicator of a business's capacity to repay its creditors
and is considered very important by most term lenders.
Depreciation
Depreciation is a non cash charge taken against company's profit
for the deterioration of its asset value over its useful life
Dividend
Portion of profits that a company distributes to its shareholders.
Dividend payout ratio indicates percentage of the earnings paid to
shareholders in cash.
Dividend Yield %
The dividends per share of the company over the trailing oneyear period as a percentage of the current stock price
Earnings per share (EPS)
EPS is the amount of profit a company earns from its continuing
operations in a given year divided by the average number of shares
outstanding.
EBIDTA
EBIDTA (Earnings before interest depreciation and amortization)
is calculated by looking at earnings before the deduction of interest,
tax, depreciation amortization expenses. EBIDTA is useful in
analysis companies that have large amounts of fixed assets which
are subject to heavy depreciation charges (such as manufacturing
companies) or in the case where a company has a large amount of
acquired intangible assets on its books and is thus subject to large
amortization charges (such as a company that has purchased a
brand or a company that has recently made a large acquisition).
Enterprise Value (EV)
EV is a measure of what the market believes a company's ongoing
operations are worth. Enterprise value is equal to (company's
market capitalization + debt - cash and cash equivalents). EV is of
significant importance to both individual investors and potential
acquirers considering a takeover of the company.
EV/EBITDA
EV/EBITDA is the enterprise value of a company divided by
earnings before interest tax depreciation and amortisation. EV/
EBITDA has an edge over P/E ratio as it is unaffected by company's

4
For private circulation only

financing structure as it compares the value of the business, free

of debt to earnings before interest. If a business has debt, a buyer
of that business clearly needs to take that debt into account in
valuing the business, which the EV reflects.
Forward P/E
A stock's current price divided by the EPS estimate for the next
fiscal year. This ratio indicates how cheap or expensive a stock is
as compared to forward earnings estimates. The lower the forward
P/E, the cheaper the stock.
Intangible assets
Intangible assets as distinguished from tangible assets includes
items like goodwill, trademark, or patent and do not have any
physical existence
Free Reserves
Free reserves are profits retained by a company in its books and is
available for distribution to shareholders. These reserves do not
include capital redemption reserve, or asset revaluation reserve.
Leverage
Leverage is company's long-term debt in relation to equity in its
capital structure. The larger the long-term debt, the higher the
leverage.
Leveraged Company
A company which has higher proportion of debt in its capital
structure.
Market Capitalization
Market capitalization represents the total market value of the
company at the current price, of the total number of equity shares
issued by a company.
Net Profit
The final profit of a company, after all deductions including interest,
depreciation and taxes. It is also knows as the bottom line.
Net profit margin
Net profit margin is a measure of a company's profitability and
efficiency and is calculated by dividing net profits by sales.
P/E Ratio (or Price-Earnings Ratio)

Quick Ratio
The quick ratio is defined as current assets minus inventories and
then divided by current liabilities. It measures the liquidity of a
company and indicates whether the company can meet its
obligations from the current assets. It is also known as the acid
test ratio.
Return on Equity (ROE) or Return on Networth (RONW)
Return on equity is an important financial ratio & indicates how
well the company firm has used reinvested earnings to generate
additional earnings.
Return on Assets (ROA)
Return on Assets is equal to the net income divided by assets and
indicates how much profit a company generates on its total assets.
Unlike ROE, ROA does not get impacted by the firm taking in
more debt.
Return on capital employed (ROCE)
ROCE is a fundamental financial performance measure and is
arrived by dividing profit before interest against the money that is
invested in the business. (profit before interest and tax/capital
employed x 100) which indicates how much profit the company
is generating at the operating level.
Revenue Growth
Revenue growth represents the rate of revenue growth over the
trailing one-year period and gives a good picture of the rate at
which companies have been able to expand their businesses.
Retained Earnings
Retained earnings are part of a company's earnings which is not
distributed as dividends but held back and accumulated for its
growth.
Share
A share is one unit of ownership of a company.
Shareholders' funds
A measure of the shareholders' total interest in the company
represented by the total share capital plus reserves.

Market price per share divided by the firm's earnings per share. It
is the most commonly used valuation tool and shows how much
investors are willing to pay for a rupee earned by the company.

Tangible Assets

PEG Ratio

Total Revenue

PEG ratio is arrived by dividing forward P/E of a stock by its

projected EPS growth. PEG ratio represents how much the
investors are paying for company's growth.

Revenue is a measure of how much money a company has brought

in within a given period. It is used in the context of revenue figures
for previous years and quarters and is a common way to measure
the size of a company.

Price/Book Ratio
Price/Book Ratio compares a stock's market value to the value of
total assets less total liabilities (book). It is also called market-tobook and still is a popular tool and measures tangible assets of the
company.

Tangible assets are assets that have a physical existence, like

cash, gold, real estate, machinery, etc.

Yield
Yield is arrived at by dividing the annual dividend per share by the
current stock price and displayed as a percentage.

5
For private circulation only

FAQs ABOUT DETAILED COMPANY REPORTS

How should I use the detailed company reports for my investments?
The detailed company report is an ideal product for a long-term investor who is looking for decent returns over the next six to 18 months.
How do you select the company and how are the recommendations made?
The detailed company reports are prepared by analysts who are specialists in that particular sector and who have deep understanding of
the sector dynamics, business fundamentals, industry trends, etc. Every report is made only after meeting the management of the
company and understanding the future prospects. Detailed forecasting of the profit and loss and balance sheet is done subsequently to
give a fair picture of the future of the company to the investors.
What should I do if the stock is above the recommended price?
You can buy the stock even if the stock has moved up by 10-15% after recommendation. An investor should look at the upside potential
from his entry price considering the target price. For example if the recommended price is Rs 100 and the target price is Rs 150 and the
current market price is Rs 115, one can still enter the stock for an upside potential of Rs 35.
When should I book profits?
Ideally one should wait for the target price to be achieved. However, if you are satisfied with the profits you may exit the stock.
The recommended stock has not moved up for quite some time. What should I do?
We come up with updates every quarter and you should look for any change in recommendation. If for some reason the performance fails
to live up to the expectation we may revise the rating and advise an appropriate action in the stock.
What happens if the stock falls below the recommended price?
Typically there will be few cases when the stock will fall below the recommended price. As the stock is for the long-term one should hold
on to the stock. However, due to some unforeseen circumstances the stock falls below the recommended price we would communicate
the next action in the updates.
What should I understand from the Profit and Loss Account, and Balance Sheet numbers?
See page 2.
How much money should I invest in one stock?
One should not invest more than 5-10% of the total investible surplus in one stock. For example if you have Rs 100,000 to invest, not
more than Rs 5000-Rs 10,000 should be invested in the stock.

Harendra Kumar

Head - Research and Content

harendra.kumar@icicidirect.com

ICICIdirect Research Desk

ICICI Brokerage Services Limited,
2nd Floor, Stanrose House,
Appasaheb Marathe Road,
Prabhadevi, Mumbai - 400 025
research@icicidirect.com

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