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STOCK UPDATE
Omax
Auto
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs178
Current market price: Rs82
Profit margins below
expectations
Result highlights
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Omax Auto's Q4FY2006 net sales were flat
at Rs142 crore. The earnings before interest, depreciation,
tax and amortisation (EBIDTA) margin for the quarter
declined by 230 basis points to 8.1% mainly due to an
increase in the employee and fuel costs. The profit after
tax (PAT) for the quarter is down by 7% to Rs4.95 crore.
-
For the full year, the sales have
registered a growth of 9.2% to Rs578 crore. Exports for
FY2006 were at Rs27 crore as compared with Rs15 crore in the
previous year.
-
The operating profit for the year rose
marginally by 1% to Rs49.8 crore, as the operating profit
margin (OPM) declined from 9.3% to 8.6%. The net profit for
the year was flat at Rs20.04 crore as compared with Rs20.29
crore in FY2005.
-
The company is aiming to double its
exports in the next two years. The domestic operations are
expected to recover with the stabilisation and improvement
of the performance of its Bangalore and Binola plants. We
are upgrading the earnings estimate for FY2007 by 6.4% to
Rs14.9 and introducing our earnings estimate for FY2008 at
Rs20.8.
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At the current market price of Rs82, the
stock trades at 4.1x its FY2008E earnings. We maintain our
Buy call on the stock with a price target of Rs178.
Lupin
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs1,130
Current market price: Rs982
Lupin to market Cefdinir
suspensions
Lupin has announced that the US
Food and Drug Administration (US FDA) has approved the
company's abbreviated new drug application (ANDA) for Cefdinir
suspension 125mg/5ml.
Welspun
India
Cluster: Emerging
Star
Recommendation: Buy
Price target:
Rs140
Current market price: Rs97
Earnings to grow at a CAGR of
52%
Result highlights
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Welspun India Ltd (WIL) has reported a
profit after tax (PAT) of Rs10.71 crore for Q4FY2006 and
Rs41.55 crore for FY2006. The earnings per share for
Q4FY2006 stood at Rs1.35 and that for FY2006 at Rs5.35.
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The sales grew by 38.9% from Rs147.61
crore in Q4FY2005 to Rs205.10 crore in Q4FY2006. The exports
grew by 37.5% from Rs135.59 crore in Q4FY2005 to Rs186.41
crore in Q4FY2006.
-
The operating profit grew at a lower pace
of 20.4% from Rs26.11 crore in Q4FY2005 to Rs31.42 crore in
Q4FY2006 mainly on account of the increased staff cost and
other expenditure. The PAT stood at Rs10.71 crore in
Q4FY2006 as against Rs10.17 crore in Q4FY2005, a growth of
merely 5.1% on account of the higher depreciation and
interest cost.
-
WIL's net sales have grown by 37.2% from
Rs476.31 crore in FY2005 to Rs653.73 crore in FY2006, led by
a 37.5% growth in exports. However, the PAT growth was muted
at 7.7% year on year (yoy) for FY2006 and the same stood at
Rs41.55 crore in FY2006 as against Rs38.58 crore in
FY2005.
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WIL spent Rs575 crore for capital
expenditure (capex) for the phase I of its expansion, which
has already gone on stream and the benefits of of the same
will be reflected in FY2007. WIL has lined up a capex of
Rs650 crore for phase II, most of which would be completed
by Q4FY2007.
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WIL will be a key beneficiary of the
growth in the home textiles exports as its product offerings
will include terry towels where it is a leading player as
well as bed linen and decorative linen items, making it a
complete home textiles shop. We expect WIL's revenues to
grow at a compounded annual growth rate (CAGR) of 48% over
FY2006-08 and the earnings to grow at a CAGR of 52% over the
same period from Rs41.2 crore in FY2006 to Rs95.9 crore in
FY2008.
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At the current market price of Rs97, WIL
is trading at 7.7x its FY2008E earnings and 6.7x its FY2008E
enterprise value (EV)/earnings before interest,
depreciation, tax and amortisation (EBIDTA). We maintain a
Buy on WIL with a price target of Rs140.
VIEWPOINT
Nagarjuna Construction
Company
Constructing the growth
path
The government in its Union Budget has
unambiguously stated that infrastructure tops its priority
list. To achieve the targeted growth of 8% in the country's
gross domestic product, a substantial ramp-up in the
infrastructure spend is inevitable. Recently the Prime
Minister stated that India's need for investment in
infrastructure is a mouth-watering figure of $150 billion or
Rs675,000 crore. This leaves no doubt that there is an
exciting time ahead for the construction players of the
country. With the kind of projects coming up in various
segments like housing, power, roads, special economic zones
etc, the visibility of the earnings for this sector is very
high. The same could be sensed from the strong order book,
which the industry players are currently relishing. Sensing
the tremendous growth, NCC has rightly increased its capital
expenditure outlay From Rs93 crore in FY2006 to Rs150 crore in
FY2007. These funds will be spent on new machinery and
equipment. With a strong order book of Rs5,428 crore, NCC is
all set to deliver continuous impressive performance. Further
the company's strategy to move towards the high-margin segment
will improve its overall EBIDTA margin and hence the outlook
on the earnings front for NCC remains positive.
Dr Reddy's
Laboratories
Results below
expectations
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Dr Reddy's consolidated net sales showed
a rise of 64% year on year (yoy) to Rs697.4 crore. The
numbers include the sales of the acquired business in Mexico
and close to one-month sales of Betapharm that cumulatively
contributed close to Rs150 crore to the top line.
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The company's gross margins were down
from 47.8% in Q4FY2005 to 42.1% in Q4FY2006. The decrease in
the gross margins was attributed to the lower sales
proportion of the high-margin branded formulations business
and the declining margins of the US generics business.
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The research & development (R&D)
expense was higher by merely 1.3% yoy due to its de-risked
model.
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The company showed earnings before
interest, tax, depreciation and amortisation (EBITDA) loss
of Rs8.6 crore as against a loss of Rs26.5 crore in
Q4FY2005. The higher amortisation expenses related to the
acquisitions increased the net loss further.
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The company had a deferred tax write-back
of Rs6.2 crore as against a deferred tax write-back of
Rs12.7 crore in Q4FY2005. At the net level the company
reported a loss of Rs23.5 crore as compared to a loss of
Rs52 crore in Q4FY2005.
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The company had extraordinary expenses in
Q4FY2005 that included a Rs27.7 crore write-off related to
the Trigenesis acquisition.
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The company's board has recommended a 1:1
issue of bonus shares and a 100% dividend.
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