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Company report
Videocon Industries Ltd. 03rd March, 2010 BUY
CMP Rs 227.20
Company Snapshot
Target Price Rs 280 Videocon Industries Limited is an India-based company, incorporated in the
year 1985 by Shri Nandlal Madhavlal Dhoot, the founder of this group. The
Company is primarily into manufacturing and distribution of color televi-
BSE Code 511389 sions, refrigerators, washing machines, air conditioners, microwave ovens,
glass shells and other components. The Company, along with its subsidiaries,
Market Cap (Rs Mn) 52543.42 operates in three segments: crude oil and natural gas, consumer electronics
52 Week High/Low 269.50/82.00 and home appliances, and telecommunications. The Company’s subsidiaries
include Paramount Global Ltd., Global Energy Inc., Sky Billion Trading Ltd.,
Industry Consumer electronics
Videocon Global Ltd., Venus Corporation Ltd. and Powerking Corporation
Face Value Rs 10 Ltd., among others. During the fiscal year ended September 30, 2008, the
Company together with its subsidiary, Videocon International Electronics
Shares O/S 23,12,65,091
Limited, acquired 64% interest in Datacom Solutions Private Limited. Video-
con always attempts to use the latest and advanced technology in production
process
EPS (STD TTM) 20.8

CEPS 45.93 Quarterly Financial Highlights

Rs Crore
Book Value 315.73 Particulars Q3FY09 Q4FY09 Q1FY09 Q2FY10 Q3FY10
P/E 10.92 Sales 2074.67 2214.36 2461.37 2621.24 2806.56
P/B 0.7196 Expenditures 1686.57 1806.30 2000.35 2123.17 2317.24
Operating Profit 388.10 408.06 461.02 498.07 489.32
Net Profit 81.56 72.98 124.35 149.26 131.67
OPM% 18.71 18.43 18.73 19.00 17.43
Shareholding Pattern
NPM % 3.93 3.30 5.05 5.69 4.69
EPS 3.56 3.18 5.42 6.51 5.69
Others CEPS 9.58 9.65 11.98 12.59 11.71
owned
22%
Videocon Industries Ltd. has posted good results for Q3FY10. The revenues
of the company have gone up from Rs.2074.67 crore in Q3FY09 to
FIIs
owned
Rs.2806.56 crore in Q3FY10 showing an increase of 35.27%. The operating
3% profits also increased by around 26% from Rs.388.10 crore same quarter last
Public Promoter year to Rs.489.32 crore in Q3FY10. The net profit of the company increased
owned owned
from Rs.81.56 crore in Q3FY09 to Rs.131.67 crore in Q3FY10 showing a
6% 69%
growth of 61.40%. Operating profit margin decline from 18.71% in Q3FY09
to 17.43% in Q3FY10 and the Net Profit Margin increased from 3.93% to
4.69% in Q3FY10. The EPS of the company rose from Rs 3.56 in the same
quarter last year to Rs.5.69 in Q3FY10, Rs.20.80 (TTM standalone).

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Business Details
Videocon is an Indian multinational with interests in Consumer Electron-
ics, Home Appliances, Colour Picture Tube Glass, and Oil & Gas. Video-
con was founded in 1987 by Nandlal Madhavlal Dhoot. At that time it
used to manufacture TV and Washing Machine. In 1995, Videocon
started manufacturing Glass shells for CRT and in 1996 it ventured into
Kitchen appliances and crude oil segment. In the year 2000, Videocon
took over Philips Color TV Plant. In 2005, Videocon took over 3 plants of
Electrolux India and acquired Thomson CPT. Today; it has evolved into a
giant conglomerate with annual revenues of over U$4.1 billion.

Videocon enjoys leadership position in consumer products. Videocon re-

frigerator manufacturing enjoys synergy with its in house compressor
manufacturing technology in Bangalore. Videocon's manufacturing and
assembling plants are located at Chavaj, Gandhinagar (Gujarat) and
Chitegaon (Maharashtra). Among these the Chitegaon plant has the high-
est productivity.

Company always attempts to use the latest and advanced technology in

production process. Keeping pace with the technological developments,
the company keeps on adding sophisticated equipments with focus on
automation to minimize manual intervention in the manufacturing process
thereby ensuring quality of the final products.

Segmental Outlook
India’s consumer electronics devices market is projected at around
US$23.3bn in 2010. This is expected to increase to US$41.1bn by 2014,
driven by rising incomes and growing affordability. Spending on con-
sumer electronics devices is projected to grow at an overall CAGR of
12% through 2014 with the key segments including low-cost mobile
handsets, colour TVs, set-top boxes and notebook computers. With the
increase in income levels, easy availability of finance, increase in
consumer awareness, and introduction of new models, the demand for
consumer durables has increased significantly. Products like washing
machines, air conditioners, microwave ovens, color televisions (CTVs)
are no longer considered luxury items. According to industry sources, in
2010, air-conditioners are expected to grow 25%, split air-conditioners
60%, frost-free refrigerators 54%, washing machines 20%, fully
automatic washing machines 35%, microwave ovens 35%, high-end flat
panel TV 100%, LCD TVs 110% and the plasma TV are likely to register
a 100% growth. Much of the growth will be driven by growing demand
from India’s rural population. The industry expects the government to
deepen its focus on the rural economy with greater fiscal incentives and
rural employment, as the rural demand will get a boost.

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Videocon to launch mobile services
Focused Oil & Gas business
Planning to start 500MW power Plant in
Maharashtra
Discovery of high-quality net oil pay
Videocon plans pan India presence
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Investment Rationale
Videocon Group will launch its mobile services in Mumbai and
Chennai by March, it is planning to increase the number of its retail
outlets across the country to facilitate its foray. The company plans
to cover the entire country with its GSM mobile services within the
next 18 months. . Datacom has now been renamed as Videocon
Telecommunication Ltd, which has earmarked an investment of
Rs9,000 crore and is looking at becoming profitable in coming
years.
The group has a strong presence in the oil exploration business,
both domestic and overseas. It is currently involved in exploration
activities in various oil blocks. It has oil blocks in Australia, Brazil,
Mozambique and Istanbul. Videocon is planning to enter the oil
extraction business and has received some proposals from foreign
players. The company also plans to start extraction activities in one
of its Brazilian blocks by next year.
Videocon Group, a consumer electronics giant, is planning to set up
a 500MW power plant in its homeland, Maharashtra. It also expects
to achieve financial closure for its Gujarat-based 1,200MW power
plant by end-March. The financial closure for the first phase of
600MW has been achieved; the second phase’s financial closure is
getting completed. The company is looking into the land availabil-
ity issue and other issues like coal transportation
The BM-C-30 offshore block in the Campos Basin of Brazil, owned
by a consortium of which Videocon Industries and Bharat Petro-
leum Corporation (BPCL) are part through their units, has discov-
ered more than 90 feet of high-quality net oil pay while drilling the
Wahoo-2 or Wahoo North well in the region. The Wahoo North
well is located five miles to the north and down-dip from the origi-
nal Wahoo discovery well, which had encountered oil in 2008.
Anadarko also expects to drill two to four additional exploration
wells in the Rovuma Basin this year.
Leading conglomerate Videocon, has forayed into mobile handset
space, it plans to achieve a pan-India presence by end of February
and roll out 15 more models of handsets in two months in addition
to exploring the option of coming out with 3-G handsets. Videocon
is also planning to develop Dual SIM mobile handsets.
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Consolidated Financial Matrix

Rs.Crore

Particulars FY06 FY07 FY08 FY09 FY10E FY11E FY12E

Net sales 7580.33 8710.26 12237.05 10673.73 12488.26 14174.18 16511.50
Growth% 14.91 40.49 -12.78 17.00 13.50 16.49
Expenditure 6270.68 7064.68 9739.14 8831.60 9950.23 11362.02 13445.32
EBITDA 1309.65 1645.58 2497.91 1842.13 2538.03 2812.16 3066.19
Growth% 25.65 51.80 -26.25 37.78 10.80 9.03
EBITDA margin 17.28 18.89 20.41 17.26 20.32 19.84 18.57
Other income 165.44 166.36 95.28 102.92 110 125.46 119.25
Depreciation 335.55 418.39 780.49 588.76 615.89 680.36 715.14
EBIT 1139.54 1393.55 1812.70 1356.29 2032.14 2257.26 2470.30
EBIT margin 15.03 16.00 14.81 12.71 16.27 15.93 14.96
Interest 225.88 310.65 532.60 747.82 759.23 728.46 680.24
PBT 913.66 1082.90 1280.10 608.47 1272.91 1528.80 1790.06
Tax 95.16 227.68 340.48 192.74 395.04 473.93 537.02
Adjusted PAT 818.50 855.22 938.70 415.73 877.87 1054.87 1253.04
Growth % 4.49 9.76 -55.71 111.16 20.16 18.79
Net Profit margins 10.80 9.82 7.67 3.89 7.03 7.44 7.59
Equity Capital 220.84 220.95 229.30 229.41 229.41 229.41 229.41
Reserves & Surplus 3847.63 5357.91 6600.44 7013.72 7891.59 8946.46 10199.50
Net Worth 4068.47 5578.86 6829.74 7243.13 8121.00 9175.87 10428.91
Equity Shares 22.08 22.10 22.93 22.94 22.94 22.94 22.94
EPS 37.06 38.71 40.94 18.13 38.27 45.98 54.62
CEPS 52.26 57.64 74.98 43.79 65.11 75.64 85.79

Ratios
Particulars FY06 FY07 FY08 FY09
Sales to equity 34.32 39.42 53.37 46.53
RONW 20.12 15.33 13.74 5.74
Book Value 184.23 252.49 297.85 315.73
Interest Coverage Ratio 5.04 4.49 3.40 1.81
Debt to Equity 1.52 1.25 1.66 1.57
ROCE 11.10 11.12 9.98 7.30

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Past Price movement of the stock

Valuation
The company has posted good results on Q-o-Q basis. We hold a
positive outlook towards the company on the back of Videocon’s ex-
pansion plans. The growth will be driven by its consumer electronics
division as well as its crude oil and natural gas division. Presently the
company is running at a P/E multiple of 10.92x to its TTM (stand-
alone trailing twelve months) EPS of Rs.20.80. We recommend to
BUY the stock with a medium term price target of Rs.280.which is
23% up from the current level of Rs. 227.20.
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