Summary
of Contents
STOCK UPDATE
Grasim Industries
Cluster: Apple
Green Recommendation: Buy Price target:
Rs2,975 Current market price: Rs2,505
Price target
revised to Rs2,975
Result
highlights
-
The
stand-alone revenues of Grasim Industries (Grasim) grew by a
robust 37.4% year on year (yoy) to Rs2,490 crore, driven by
strong cement realisations and higher volume in viscose
staple fibre (VSF) and sponge iron businesses.
-
The
operating profit grew by 66% yoy to Rs771 crore largely on
account of a 77% year-on-year (y-o-y) rise in cement
earnings before interest, tax, depreciation and amortisation
(EBITDA) to Rs470 crore. Cement margins expanded by 800
basis points on the back of a strong realisation growth. The
VSF business witnessed a lower growth of 29% yoy in profits
to Rs201 crore as the pulp prices remained high during the
quarter.
-
The
interest expenses were up by 55% yoy to Rs36 crore in the
quarter on account of higher borrowings in the period.
Depreciation increased by 15% yoy to Rs87.6 crore.
-
Boosted
by an other income component of Rs78 crore (on account of
the deployment of surplus funds), Grasim's net profit rose
by 69.1% yoy to Rs437 crore.
-
As
mentioned in our previous updates, Grasim is augmenting its
cement capacity at Kotputli and Shambhupura units by 4
million metric tonne (MMT) each by putting up greenfield
plants. The capital expenditure (capex) is progressing well
and the new capacities are expected to get commissioned in
the first quarter of FY2009.
-
The
company is expanding its VSF capacity at Kharach, Gujarat
from 45,625 tonne to 63,725 tonne and is in the process of
getting regulatory clearances for expanding the capacity by
31,000 tonne at Harihar. On completion of both these
projects, the company's VSF capacity will expand to 350,000
tonne.
-
Looking
at the better than expected performance of the VSF and
sponge iron businesses, we are upgrading our consolidated
FY2008 earnings per share (EPS) estimate by 3.8% to Rs245
and introducing our FY2009 EPS estimate of Rs208.
-
At the
current market price of Rs2,505 the stock is trading at
10.1x FY2008E EPS and 11.9x FY2009E EPS. Looking at the
stability imparted to the company by the higher cash flows
from the VSF business, we maintain our Buy recommendation
with a price target of Rs2,975 per share.
Shree Cement
Cluster:
Cannonball Recommendation: Buy Price target: Under
review Current market price: Rs1,091
Q4FY2007
results: First-cut analysis
Result
highlights
-
Shree
Cement's Q4FY2007 net revenues grew by 68% year on year to
Rs378 crore on the back of a 36% year-on-year growth in its
volumes and a 24% year-on-year growth in its
realisations.
-
The
expenditure (adjusting for the depreciation) grew by 67%
year on year to Rs226.9 crore on account of a higher power
fuel cost, which witnessed a 51% year-on-year increase (due
to the rising pet coke prices) and increased freight cost,
which jumped by 35% year on year.
-
The
operating profit grew by 69% year on year to Rs151 crore
whereas the operating profit margin stood at 40%, adjusting
for the pre-operative expenses of Rs20 crore pertaining to
the earlier years (the company reversed the same in the
current quarter).
-
The
interest cost remained flat on a year-on-year basis but
declined sequentially. For the quarter the company provided
a depreciation of Rs154 crore, which included Rs114 crore on
Unit IV commissioned in March 2007 and Rs20 crore of
amortisation of the pre-operative expenditure.
-
The tax
provision for the quarter was marginal at Rs0.3 crore. On
account of the higher depreciation provision, the net profit
was lower at Rs23.8 crore.
-
The net
sales for FY2007 grew by 104% year on year to Rs1,367 crore
whereas the net profit grew by 862% year on year to Rs177
crore. Adjusting for the additional depreciation provision
of Rs199 crore pertaining to Unit II, the net profit stood
at Rs376 crore.
-
We are
in the process of revising our earnings estimates for the
company. We shall update you with the revised earnings and
price target as soon as we meet with the
management. |
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