Date of report Tuesday, March 25, 2008

Company Hi-Tech Gears Limited - Quick & Dirty Analysis

Analyst Dhananjayan J

Contact dhanan12@yahoo.com, dhananjayan.dj@gmail.com

Table of Contents (Please enable the macro attached to this file)

Fact Sheet >>

Quick & Dirty Analysis >>

Disclaimer >>
Fact Sheet

Hi-Tech Gears Limited

BSE: 522073, NSE: HITECHGEAR, Exchange: BSE & NSE India, MCap: 1,074.94 M
Hi-Tech Gears Limited is an auto component manufacturer. The Company is a manufacturer of gears and
450
transmission components. The Company’s products include transmissions gears and shafts for two wheelers,
timing gears for diesel engines, timing gears for power generators, precision forgings and precision 400
machined parts, transmission gears and shafts for four wheelers, power takeoff unit for off-highway vehicles, 350
power transmission shafts for passenger cars, robots - micro and industrial, and e - engineering services and
poducts. 300
250
Website http://www.hitechgears.com
200
Special situation Insider buyings by deputy MD and director. 150

Pro forma valuation 100

50
Price ratio
Price to earnings 11.7 0
Price to free cash flow 11.0 1 4 7 1 14 7 1
Price to tangible book value 2.4 / / / 0/ / / 0
2 2 2 / 11 1 /
Enterprise value ratio
EV / Sales 0.7
EV / EBITDA 5.9
EV / EBIT 8.2
EV / (EBITDA-Capex) 8.0

Debt and interest coverage

Net Debt / EBITDA 2.8
EBIT / Interest expense 2.3

Yield Ratio
Dividend yield 2.2%
Earnings yield 8.2%
FCF1 yield 9.1%

Return on Assets
Return on operating assets 14.1%
Return on capital invested 19.1%

Operating margins
EBITDA 12.2%
EBIT 8.9%
Net income 3.3%

Depreciation Vs. Capex Depreciation

The above valuation ratios are computed after excluding non-recurring expenses in the LTM financial numbers
published by the company. (Refer QAD sheet)

Conclusion
Highly leveraged. Debt component is more than 50% of the whole enterprise value. Half of EBIT goes to interest expense. This i
company. We see no valid catalyst to spur up the value of the overall business. Hence we believe it is fairly valued.
Our Verdict: Fairly valued - not interesting for investment
 450
400
350
300
250
200
150
100
50
0
1 4 7 11 4 7 1 14 7 1 1 R R R R R R R R R R R R R R R R
/ / / 0/ / / 0 / / / 0 / o o o o o o o o o o o o o o o o
222 / 111/ 123/ 2 ww ww ww ww ww w ww ww w

goes to interest expense. This is the major concern for this

t is fairly valued.
QUICK & DIRTY ANALYSIS
(amt in million)
LTM 12/07
Revenue 2,807.62
Growth - YTD 5.7%
EBITDA 343.22
Margin 12.2%
Depreciation 94.38
EBIT 248.84
Margin 8.9%
Interest expense 106.34
Interest income 1.98
EBT 144.49
Margin 5.1%
Tax @ 36.5% 52.74
Net income 91.75
Margin 3.3%
Outstanding shares 9.38
EPS INR 9.78

Total assets 1,976.85

Operating assets 1,766.27
Return on operating assets 14.1%

Fixed assets 1,114.40

Current assets excluding cash 594.02
Current liabilities excluding debt 406.93
Capital invested 1,301.48
Return on capital invested 19.1%

Cash 44.62
Debt 1,002.90
Shareholders equity - book value 452.90
Gross capex 88.53
Sale of fixed assets -
Net capex 88.53

Notional FCF1 before WC invst 97.59

FCF1/share INR 10.40
TBV 452.12
TBV/share INR 48.18

Current price INR 114.55

Mcap 1,074.94
EV 2,033.22

EV/Sales 0.7
EV/EBITDA 5.9
EV/EBIT 8.2
EV/(EBITDA-capex) 8.0

PE 11.7
P/FCF1 11.0
P/TBV 2.4
Net debt / EBITDA 2.8
EBIT / Interest expense 2.3

Dividend per share INR 2.50

Dividend yield 2.2%
Earnings yield 8.2%
FCF1 yield 9.1%
Disclaimer

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