Summary
of Contents
STOCK
UPDATE
ACC Cluster: Apple
Green Recommendation: Buy Price target: Rs1,250 Current
market price: Rs1,100
Stupendous quarterly performance
Result highlights
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ACC put up an
excellent performance for the fourth quarter clocking a 250%
year-on-year (y-o-y) growth in the profit after tax (PAT) at Rs329
crore, ahead of our estimates.
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The top line
grew by a healthy 51% year on year (yoy) to Rs1,619 crore on the
back of a 42% y-o-y growth in the realisations and a 7% y-o-y
growth in the volumes.
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The operating
expenditure grew by 25.8% yoy to Rs1,151 crore driven by a 12.7%
y-o-y rise in the power & fuel costs and a 19.7% rise in the
freight costs.
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On account of
the higher realisation growth, the operating profit witnessed a
197.5% y-o-y growth to Rs468 crore. The operating profit margin
expanded by 1,420 basis points yoy and by 230 basis points quarter
on quarter (qoq) to 28.9%.
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Consequently,
the earnings before interest, tax, depreciation and amortisation
(EBITDA) per tonne jumped three-fold to Rs975 per tonne on account
of the company's high leverage to the cement prices.
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The interest
cost fell by 80.1% yoy to Rs4.1 crore whereas the depreciation
provision stood higher at Rs77.1 crore.
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The
pre-exceptional profit stood at Rs329 crore translating into a
y-o-y growth of 249.9%. Adjusting for the extraordinary items, the
PAT was up 86.1% yoy at Rs358 crore.
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The company
has declared a dividend of Rs15 per share for the year ending
December 2006 implying a dividend payout of 27%.
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ACC is adding
capacity of 0.9 million metric tonne (MMT) at Lakheri along with
the setting up of a 25MW captive power plant (CPP). The company is
also expanding the capacities at various other locations post
which, its total capacity is expected to increase by 3.19MMT to
23.1MMT by December 2007. The company is also adding 1.18MMT
capacity coupled with a 30MW CPP at its Bargah Cement unit
(expected to be commissioned in the first quarter of CY2008) and
is putting up a fresh 3MMT plant at Wadi, which is expected to be
commissioned in the next 24-30 months.
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At the current
market price of Rs1,100, the stock is discounting its CY2007E
earnings by 15.7x and EBITDA by 9.2x. On an enterprise value (EV)
per tonne basis, the stock is trading at USD198 per tonne. We
believe the stock is very attractive considering its leverage to
the cement prices, better cost structure as well as its improving
financials. We thus maintain out Buy recommendation on the stock
with a price target of Rs1,250.
Ashok
Leyland Cluster: Ugly Duckling Recommendation:
Buy Price target: Rs56 Current market price: Rs49.8
Spillover boosts January numbers
Key points
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Ashok Leyland
has reported a magnificent growth in its January numbers. The
higher than expected growth was a result of the spillover of sales
from the previous month due to the implementation of the
value-added tax in Tamil Nadu w.e.f January 1, 2007.
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The company
reported an overall growth of 67% year on year (yoy) as its
vehicle sales jumped to 9,650 units in the month. Its domestic
sales grew by 62% while its exports rose by a whopping
228%.
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The
medium-duty vehicle (MDV) goods segment (which accounts for the
bulk of the company's sales) turned a brilliant performance,
reporting a growth of 69.6% yoy with sales of 7,870 vehicles. The
MDV passenger segment, where the company has been losing market
share, is beginning to show signs of improvement grew by 56% in
January.
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In January the
sales of its light commercial vehicles stood at 28 units, marking
a growth of 16.7% yoy.
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Looking at the
year-till-date numbers, the company has reported an overall growth
of 41.7% with the MDV goods segment growing by 61% yoy and the MDV
passenger segment marking a decline of 4.7%. w At the current
market price of Rs49.8, the stock quotes at FY2008E PER of 12.4x
and at an EV/ EBIDTA of 6.9x. We maintain our Buy recommendation
on the stock with a price target of Rs56.
Sundaram
Clayton Cluster: Apple Green Recommendation:
Buy Price target: Rs1,550 Current market price: Rs1,202
Higher efficiencies improve margins
Result highlights
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Sundaram
Clayton Ltd's (SCL) Q3FY2007 results are in line with our
expectations. The net sales for the quarter marked a growth of
29.5% to Rs204.7 crore, in line with our expectations. Both the
air brakes and die-casting divisions performed well during the
quarter registering revenue growth of 17% and 52%
respectively.
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The operating
margins have improved by 90 basis points year on year (yoy) to
15.6% because of increasing operating efficiencies. Consequently,
the operating profit rose by 37.4% to Rs31.9 crore for the
quarter.
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The other
income was higher due to the accounting of the dividend income;
while the interest cost has also risen due to the higher capital
expenditure incurred by the company. Consequently, the profit
after tax (PAT) for the quarter was up 17.3% at Rs24 crore.
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Due to a lower
dividend income, and higher interest costs in the year-till-date
period, we are lowering our FY2007 PAT estimates by 6%. However,
we are very positive on the long-term prospects of the company
considering the continuing buoyancy in the commercial vehicle (CV)
industry, strong outsourcing potential and a huge opportunity in
anti-lock braking system (ABS).
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The value of
SCL's total investment in the group companies works out to Rs660
per share. While computing SCL's value, we have assumed a 75%
discount to the company's total investment. After adjusting for
the same, the SCL stock is currently trading at 14.1x its
stand-alone FY2008E earnings and at 11.5x its stand-alone FY2008E
earnings before interest, depreciation, tax and amortisation
(EBIDTA). We maintain our Buy recommendation on the stock with a
price target of
Rs1,550. |