Summary of Contents
STOCK UPDATE
Sun Pharmaceutical
Industries Cluster: Ugly Duckling Recommendation: Buy Price
target: Rs810 Current market price: Rs706
Strong performance
Result highlights
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Sun Pharmaceuticals' net sales for Q4FY2006
increased by 40.5% year on year (yoy) to Rs405.4 crore due to the
strong performance of the formulation segment in both the domestic
and export markets.
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The operating profit margin (OPM) declined by
680 basis points yoy to 23.9% due to continued pricing pressure in
the various markets, increased research and development (R&D)
expense and consolidation effects. The earnings before, interest,
tax, depreciation and research (EBITDR) margin stood at 36.5% as
against 40.6% in Q4FY2005.
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The earnings before interest, tax, depreciation
and amortisation (EBITDA) saw an increase of 49.3% yoy to Rs170.9
crore due to a higher other income.
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The company had a net one-time income of Rs10
crore during the quarter. On an adjusted basis, the profit after
tax (PAT) showed an increase of 28.5% yoy and stood at Rs132.8
crore.
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At the current market price of Rs706 the stock
is trading at 17.5x FY2008 earnings estimate. We maintain our Buy
recommendation on Sun Pharma with the price target of Rs810.
Tata
Tea Cluster: Apple
Green Recommendation: Buy Price target:
Rs1,040 Current market price: Rs615
Good set of numbers
Result highlights
-
Tata Tea's (TTL) consolidated sales grew by
3.4% year on year (yoy) for Q4FY2006 to Rs816.7 crore. The
domestic operations grew by 12.1% yoy for Q4FY2006. Tetley's sales
grew by 5.4% yoy during the same period.
-
The domestic operations managed to post a
300-basis-point expansion in the operating profit margin (OPM) to
5.1% due to lower employee cost. The international operations
reported a 140-basis-point expansion in its OPM. As a result the
consolidated net profit grew by 19% yoy to Rs121.1 crore.
-
The consolidated net profit adjusted for
extraordinaries grew by 50% yoy as the interest cost declined by
16% yoy.
-
For FY2006, the consolidated revenues were at
Rs3,123.9 crore, up by 2.7% yoy. The consolidated operating profit
grew by 4.2% yoy over the same period. The consolidated net profit
adjusted for the extraordinary items was up by 20.7% yoy.
-
The tea prices have seen an upward trend over
the last couple of months, both domestically as well as
internationally. We expect the international tea prices to remain
high over the next couple of months and then soften.
-
We expect the depreciation of the rupee as well
as the dollar vis-à-vis the pound to help TTL partly offset the
rising raw material prices.
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At the current market price of Rs615, the stock
is quoting at 9.3x its FY2008E earnings per share and 5.6x its
FY2008E enterprise value/earnings before interest, depreciation,
tax and amortisation. We maintain our Buy recommendation on the
stock with the price target of Rs1,040.
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