Dalal & Broacha

Stock Broking Pvt. Ltd.

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Result Update @ Dalal & Broacha

CMC Ltd.
Apurva Shah (Research Analyst)
(022) 6714 1449
Milind Karmarkar (Head Research)
(022) 6630 8667
Nilay Dalal (Equity Sales)
(022) 2282 2992 Ext: 143

October 17, 2013

Buy on D ecline
Cu rre n t Pri ce
Ta rge t Pri ce
Upside
52 W e e k Ra n ge

Rs 1417
Rs 1475
4%
Rs 933 / Rs 1523

KEY SHARE DATA

Market Cap
EV / Sales
EV / EBIDTA
Vol ume (BSE + NSE)
No of o/s share mn
Face Val ue
Book Value
BSE / NSE
Reuters
Bloomberg

Rs 42.9 BN/$0.7BN
2.2
13.1
6864
30.3
10
312.3
517326 / CMC
CMC.BO
CMC IN Equity

Shareholding (%)
Period
Promote rs
MF / Ba nks / FI
FI I
Publ i c & Othe rs
Total

Jun-13
51.1
17.8
23.3
7.7
100.0

140
130
120
110
100
90
80
70

Mar-13
51.1
19.0
21.8
8.0
100.0

CMC Q2FY14 revenue was in line with our expectations, but increase in
subcontracting cost impacted the bottom line.
Net sales for the quarter increased by 15.4% qoq and 22.4% yoy to Rs. 5.6bn
(vs. our expectations of Rs. 5.5bn). On yoy basis System integration (SI) and
ITES grew by 29.5% and 16.5% respectively. Customer service segment revenue
also went up by 14.6% yoy. Revenue from Education & training and SEZ
decreased by 16.1% and 11.7% on yoy basis respectively.
EBIDTA for the quarter increased by 14.8% qoq to Rs. 884.2 mn. Other income
for the quarter came down by 79% qoq to Rs. 21.1 mn. Last quarter dividend
from CMC America and profit from sale of asset significantly contributed to
other income.
PAT for the quarter increased by 26.7% qoq and 36% yoy to Rs. 673 mn. EPS
for the quarter stood at Rs. 22.2
Other highlights:
19 new clients were added, out of that 18 in India and one in America
International business grew by 23% qoq to Rs. 3.88 mn (~69.2% of the
revenue)
Tax rate for the quarter stood at 20% vs. 22.5% in Q1FY14. (After adjusting
additional tax burden on dividend distribution from CMC America)

..
.

Conference call highlights:

Equipment business contributed 6.8% to the revenue vs. 10% in Q1FY14
and 5.2% in Q2FY13
TCS contribution (through go to market strategy) stood at 59% vs. 54% in
Q1FY14 and 56% in Q2FY13
Company added 63 employees on net basis and total headcount during
the quarter stood at 10818. Regular employees were 4542 and contract
employees stood at 6276
Total domestic business increased by 1% to Rs. 1.8 bn mainly on account
of de growth in Customer service business.
Domestic revenue breakup: Customer service - Rs.772.7 mn, System
Integration - Rs. 369.2 mn, ITES - Rs. 450.2 mn

.
.
.
.
.

60
50
40

CMC

Sensex

Valuation:
At CMP the stock is trading at 16x FY14E earnings of Rs. 88.8 and 13.1x
FY15E earnings of Rs. 108. We remain positive on the stock due to its distinct
business model and healthy client addition on quarterly basis. We
recommend to buy the stock around 1150-1250 level.

Year
Net Sales % Growth EBIDTA
OPM %
PAT
FY 12
14,693.4
36.0
2,243.2
15.3
1,518.1
FY 13
19,278.6
31.2
3,168.2
16.4
2,302.3
FY 14E
22,884.9
18.7
3,687.6
16.1
2,690.1
FY 15E
27,595.3
20.6
4,502.1
16.3
3,269.1
Dalal & Broacha Research is available on Bloomberg DBVS<GO>

% Growth
(15.4)
51.7
16.8
21.5

EPS
50.1
76.0
88.8
107.9

P/E (x)
28.3
18.6
16.0
13.1

ROE %
21.3%
26.8%
25.7%
25.7%

RoCE %
28.5%
34.2%
32.4%
32.6%

Dalal & Broacha

Stock Broking Pvt. Ltd.

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Result Update @ Dalal & Broacha

CM C Ltd - R es ult upda te

45 82 .6
3 .8
45 86 .4

492 6.8
2.9
492 9.7

52 28 .8
10 .9
52 39 .7

486 0.4
5.7
486 6.1

5 60 7.4
0.1
5 60 7.6

QOQ
cha ng e
15 .4%
-98 .1%
1 5.2 %

( 186 .1)
( 13 09 .8)
( 17 24 .0)
( 600 .5)
(38 20 .5)

( 27 0.8 )
( 133 0.7 )
( 198 7.4 )
( 50 9.2 )
(409 8.0 )

( 10 35 .4)
( 12 87 .8)
( 15 53 .5)
( 544 .7)
(44 21 .4)

( 44 6.2 )
( 129 1.1 )
( 184 5.7 )
( 51 2.7 )
(409 5.8 )

( 38 0.6)
( 1 41 0.1 )
( 2 38 4.3 )
( 54 8.3)
(4 72 3.4 )

-14 .7%
9 .2%
29 .2%
6 .9%
1 5.3 %

10 4.5 %
7.7 %
3 8.3 %
-8.7 %
23.6%

7 65 .9
( 0 .0)
( 55 .9)
7 10 .0
11 .4
7 21 .4

83 1.7
( 0.1 )
( 5 3.7 )
77 8.0
2 2.7
80 0.7

8 18 .2
( 1 .5)
( 68 .3)
7 48 .4
40 .6
7 88 .9

77 0.4
( 0.0 )
( 6 1.6 )
70 8.7
10 0.7
80 9.4

88 4.2
( 0.0)
( 6 4.1)
82 0.1
2 1.1
84 1.2

14 .8%
4 .0%
15 .7%
-79 .0%
3 .9%

1 5.4 %
5 70 0.0 %
1 4.6 %
1 5.5 %
8 6.0 %
1 6.6 %

( 227 .4)
4 94 .0

( 19 0.0 )
61 0.6

( 175 .4)
6 13 .5

( 27 8.1 )
53 1.3

( 16 8.1)
67 3.1

-39 .6%
26 .7%

-2 6.1 %
3 6.3 %

4 94 .0

61 0.6

6 13 .5

53 1.3

67 3.1

26 .7%

3 6.3 %

E PS
E q u i ty
F a ce V a l u e

16 .3
3 03 .0
10 .0

2 0.2
30 3.0
1 0.0

20 .2
3 03 .0
10 .0

1 7.5
30 3.0
1 0.0

2 2.2
30 3.0
1 0.0

M a rg ins
O PM
PB T
N PM
T a x R a te

1 6.7 %
1 5.7 %
1 0.8 %
3 1.5 %

16.9%
16.3%
12.4%
23.7%

1 5.6 %
1 5.1 %
1 1.7 %
2 2.2 %

15.8%
16.7%
10.9%
34.4%

1 5.8 %
1 5.0 %
1 2.0 %
2 0.0 %

Pa rticula rs (R s . M n)
Ne t Sa le s
O th e r o p e ra ti n g i n co m e
T o ta l S a l e s
M a te ri a l s
S ta ff co s t
S u b co n tra cti n g a n d o u ts o u rci n g co s t
O th e r E xp e n d i tu re
T ota l E x penditure
EBID TA
I n te re s t
D e p re ci a ti o n
PB T ( E xcl u d i n g O th e r I n co m e )
O th e r I n co m e
PB T
Ta x
PA T ( B e fo re M I )
M i n o ri ty I n te re s t
PAT (Afte r M I)

Q 2 F Y1 3

Q 3F Y13

Q 4 F Y1 3

Q 1F Y14

Q 2 F Y1 4

YO Y
Cha ng e
2 2.4 %
-9 7.2 %
22.3%

S eg m ent w is e re v e nue bre a k up

Cu s to m e r S e rvi ce s
S ys te m I n te g ra ti o n
I T e n a b l e d s e rvi ce s
E d u ca ti o n a n d T ra i n i n g
S p e ci a l E co n o m i c Z o n e ( S E Z )
T o ta l

7 77 .1
28 09 .6
7 20 .5
1 62 .6
1 16 .5
45 86 .4

78 0.8
315 7.1
74 5.9
14 4.1
10 1.9
492 9.7

15 60 .8
27 17 .4
6 93 .4
1 43 .6
1 24 .4
52 39 .7

96 6.8
292 9.6
72 3.3
14 4.2
10 2.3
486 6.1

89 0.5
3 63 8.4
83 9.4
13 6.4
10 2.8
5 60 7.5

-7 .9%
24 .2%
16 .1%
-5 .4%
0 .5%
1 5.2 %

1 4.6 %
2 9.5 %
1 6.5 %
-1 6.1 %
-1 1.7 %
22.3%

S eg m ent re s ult
Cu s to m e r S e rvi ce s
S ys te m I n te g ra ti o n
I T e n a b l e d s e rvi ce s
E d u ca ti o n a n d T ra i n i n g
S p e ci a l E co n o m i c Z o n e ( S E Z )
T o ta l

1 07 .8
5 33 .7
1 96 .3
20 .4
93 .1
9 51 .4

5 7.7
66 3.5
23 3.6
1 6.2
7 3.7
104 4.8

81 .7
6 26 .3
1 68 .4
25 .7
1 00 .8
10 02 .9

7 8.7
61 6.1
18 7.1
2 0.8
7 7.0
97 9.6

4 0.5
70 8.6
25 0.4
1 3.4
7 8.4
1 09 1.3

-48 .6%
15 .0%
33 .8%
-35 .5%
1 .9%
1 1.4 %

-6 2.5 %
3 2.8 %
2 7.5 %
-3 4.2 %
-1 5.8 %
14.7%

S eg m ent M a rg ins
Cu s to m e r S e rvi ce s
S ys te m I n te g ra ti o n
I T e n a b l e d s e rvi ce s
E d u ca ti o n a n d T ra i n i n g
S p e ci a l E co n o m i c Z o n e ( S E Z )
T o ta l

1 3.9 %
1 9.0 %
2 7.2 %
1 2.5 %
7 9.9 %
2 0.7 %

7.4%
21.0%
31.3%
11.3%
72.3%
21.2%

5.2 %
2 3.0 %
2 4.3 %
1 7.9 %
8 1.0 %
1 9.1 %

8.1%
21.0%
25.9%
14.4%
75.2%
20.1%

4.5 %
1 9.5 %
2 9.8 %
9.8 %
7 6.3 %
1 9.5 %

Dalal & Broacha

Stock Broking Pvt. Ltd.

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Result Update @ Dalal & Broacha

CMC Ltd - Financials

FY 12
FY 13
FY 14E
FY 15E
Cash Flow Statement (Rs Mn)
14,693.4 19,278.6 22,884.9 27,595.3
Net Profit
Add: Dep. & Amortization
Software development expense (4,402.2) (5,216.4) (6,064.5) (7,312.7)
Cash Profit
Equipment purchased for resale (1,450.6) (1,867.9) (2,148.1) (2,534.7)
General and admin. Expenses (6,597.4) (9,026.2) (10,984.7) (13,245.7)
(Inc) / Dec in
Cost of Sales
(12,450.2) (16,110.5) (19,197.3) (23,093.2)
Sundry Debtors
Inventories
Operating Profit
2,243.2
3,168.2
3,687.6
4,502.1
Loans & Advances
Depreciation
(213.7)
(232.0)
(292.7)
(359.9)
Sundry Creditors
PBIT
2,029.5
2,936.1
3,394.9
4,142.1
Others
Other Income
174.6
131.6
144.8
159.2
Change in Working Capital
Interest
(0.2)
(1.8)
0.0
0.0
CF from Operating Activities
Profit &Loss (Rs Mn)
Net Sales

FY 12
1,518.1
213.7
1,731.8

FY 13
2,302.3
232.0
2,534.3

FY 14E
2,690.1
292.7
2,982.8

FY 15E
3,269.1
359.9
3,629.0

(1,299.9)
0.6
(1,022.8)
835.6
483.7
(1,002.8)
729.0

(341.6)
(9.0)
(717.4)
294.9
(101.7)
(874.7)
1,659.6

(576.0)
(45.0)
(412.2)
325.3
204.9
(503.0)
2,479.8

(975.4)
(38.7)
(453.5)
566.7
183.1
(717.7)
2,911.2

Profit Before Tax

Provision for Tax
PAT

2,204.0
(685.9)
1,518.1

3,065.9
(763.6)
2,302.3

3,539.6
(849.5)
2,690.1

4,301.4
(1,032.3)
3,269.1

CF from Investing Activities

(346.8)

(351.0)

(766.9)

(1,200.0)

CF from Financing Activities

(359.3)

(522.7)

(674.7)

(781.3)

Minority Interest
Extraordinary Items
Reported PAT

0.0
0.0
1,518.1

0.0
0.0
2,302.3

0.0
0.0
2,690.1

0.0
0.0
3,269.1

Cash Generated (Utilised)

Cash at the start of year
Cash at the end of year

22.9
565.3
588.2

785.9
588.2
1,374.2

1,038.2
1,374.2
2,412.4

930.0
2,412.4
3,342.3

Balance Sheet (Rs Mn)

Equity Capital
Reserves
Net Worth

FY 12
303.0
7,418.9
7,721.9

FY 13
FY 14E
FY 15E
303.0
303.0
303.0
9,159.6 11,175.0 13,662.8
9,462.6 11,478.0 13,965.8

Ratios
OPM
NPM
Tax Rate

FY 12
15.3
10.3
(31.1)

FY 13
16.4
11.9
(24.9)

FY 14E
16.1
11.8
(24.0)

FY 15E
16.3
11.8
(24.0)

Secured Loan
Unsecured Loan
Total Debt
Capital Employed

0.0
0.0
0.0
7,721.9

0.0
0.0
0.0
9,462.6

0.0
0.0
0.0
11,478.0

0.0
0.0
0.0
13,965.8

Growth Ratio
Net Sales
Operating Profit
PAT

36.0
15.3
(15.4)

31.2
16.4
51.7

18.7
16.1
16.8

20.6
16.3
21.5

Gross Block
Accumulated Depreciation
Net Block
Capital WIP
Total Fixed Assets

3,542.7
(961.3)
2,581.4
333.9
2,915.2

4,027.2
(1,163.6)
2,863.6
833.1
3,696.6

5,227.2
(1,456.4)
3,770.8
400.0
4,170.8

6,427.2
(1,816.3)
4,610.9
400.0
5,010.9

Per Share
Earning Per Share (EPS)
Cash Earnings (CPS)
Dividend
Book Value
Free Cash flow

50.1
57.2
12.5
254.8
12.6

76.0
83.6
17.5
312.3
43.2

88.8
98.4
19.0
378.8
56.5

107.9
119.8
22.0
460.9
56.5

Valuation Ratios
P/E (x)
P/B (x)
EV / Sales
EV / EBIDTA
Div. Yield (%)
FCF Yield (%)

28.3
5.6
2.9
18.9
0.9
0.9

18.6
4.5
2.2
13.4
1.2
3.0

16.0
3.7
1.8
11.3
1.3
4.0

13.1
3.1
1.5
9.0
1.6
4.0

Return Ratios (%)

ROE
ROCE

21.3%
28.5%

26.8%
34.2%

25.7%
32.4%

25.7%
32.6%

Goodwill
3.4
Investments
1,515.8
Inventory
134.1
Sundry debtors
3,821.2
Cash & bank
588.2
Loans & advances and Other CA 3,405.0
Sundry creditors
(2,619.8)
Other Liabi.
(618.1)
Provisions
(1,532.8)
Working Capital
3,181.2
Deffered Tax
109.7
Misc. Expense
0.0
Capital Deployed
7,721.9

3.4
3.4
3.4
853.3
853.3
853.3
143.1
188.1
226.8
4,162.8
4,738.7
5,714.1
1,374.2
2,412.4
3,342.3
4,122.4
4,534.6
4,988.1
(2,914.7) (3,239.9) (3,806.6)
(769.5)
(846.5)
(888.8)
(1,279.7) (1,407.7) (1,548.5)
4,841.9
6,383.1
8,030.8
70.7
70.7
70.7
0.0
0.0
0.0
9,462.6 11,478.0 13,965.8

Dalal & Broacha

Stock Broking Pvt. Ltd.

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Disclaimer
This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are
accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be
responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment
referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document.
For Further details
Contact

Email ID

Mr. Milind Karmarkar

milind.karmarkar@dalal-broacha.com

Mr. Chirag Shah

Ms. Hiral Sanghvi

Contact No.

Sector

022 67141445

Head Research

chirag.shah@dalal-broacha.com

022 67141447

Head Equity Sales

hiral.sanghvi@dalal-broacha.com

022 67141444

Retail, Cement

Mr. Kunal Bhatia

kunal.bhatia@dalal-broacha.com

022 67141442

Auto, Auto Ancillary, FMCG

Mr. Lalitabh Shrivastawa

lalitabh.s@dalal-broacha.com

022 67141450

Banking & NBFCs

Mr. Ashutosh Garud, CFA

ashutosh.garud@dalal-broacha.com

022 67141448

Capital goods

Ms. Purvi Shah

purvi.shah@dalal-broacha.com

022 67141446

Pharma

Mr. Apurva Shah

apurva.shah@dalal-broacha.com

022 67141449

IT, Agrochemicals, Fertilizers

Address :- 508, Maker Chambers V, 221 Nariman Point, Mumbai 400 021

Tel: 91-22- 2282 2992, 2287 6173, (D) 6630 8667

E-mail: research@dalalbroachaindia.com, equity.research@dalal-broacha.com

Fax: 91-22-2287 0092