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Summary
of Contents
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PULSE TRACK
STOCK
UPDATE
Hindustan
Lever
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs280
Current market price: Rs250
Price
hike to ease margin pressure
There has been a buzz in the last
few days that Hindustan Lever Ltd (HLL) has increased prices
in the soap and laundry categories and in some skin and oral
care products. The company is believed to have taken price
hikes in Lux, Breeze, Hamam,
Lifebuoy, Rexona and Dove brands of
soaps; Wheel and Surf brands of laundry; and a few stock
keeping units (SKUs) of Fair & Lovely, Lakme
and Pepsodent. The average price hike is believed to be
between 5-8%.
International Combustion
(India)
Cluster:
Cannonball
Recommendation: Buy
Price target:
Rs519
Current market price: Rs335
Robust
performance
Result
highlights
-
The revenues of
International Combustion India Ltd (ICIL) grew by 28.0% year
on year (yoy) to Rs20.3 crore in Q2FY2007, in line with our
estimates. The growth was strong due to the good performance
of the gearbox & geared motor drive system division
(GMGBD).
-
The revenues of the GMGBD
grew by 43.1% yoy to Rs5.5 crore, ahead of our estimates.
The revenues of the heavy engineering division (HED) grew by
24.1% yoy to Rs15.0 crore, in line with our estimates.
-
The operating profit margin
(OPM) of the company improved by 460 basis points yoy to
21.1% in Q2FY2007. The margin expansion was driven largely
by the leverage effect that came into play with lower
employee cost and other expenses. Consequently, the
operating profit grew by 64% to Rs4.3 crore.
-
The OPM of the HED grew by
460 basis points yoy to 30.6%. The GMGBD had reported
negative margins in the first quarter and in this quarter
its margins bounced back to 23.4% on the back of healthy
revenues. Though on a year-on-year (y-o-y) basis the same
were down 240 basis points.
-
The other income grew to
Rs0.3 crore from Rs0.1 crore in Q2FY2006 and the interest
cost declined by 63.2% yoy to Rs0.1 crore. The net profit
grew by 64.4% yoy to Rs2.2 crore, in line with our
estimates.
-
The outstanding order book
stands at Rs51 crore after a growth of 59% yoy. The current
order backlog stands at 0.8x its FY2006 revenues, imparting
a strong visibility to the earnings.
-
ICIL is currently trading at
a price/earnings ratio (PER) of 7.1x its FY2008E earnings
and 4.4x its FY2008E enterprise value (EV)/earnings before
interest, depreciation, tax and amortisation (EBIDTA). We
maintain a Buy recommendation on the stock with a price
target of
Rs519. | |
