Summary
of Contents
PULSE
TRACK
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June 2006 IIP
grows at 9.6% ahead of expectations
STOCK UPDATE
Gateway
Distriparks Cluster:
Cannonball Recommendation: Buy Price target:
Rs250 Current market price: Rs169
Price target lowered to Rs250
Result highlights
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Gateway Distriparks Ltd (GDL) reported a
consolidated net profit of Rs19.8 crore for Q1FY2007. The net
profit is marginally below our expectation primarily because of a
lower-than-expected realisation per twenty feet equivalent unit
(TEU) during the quarter.
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The consolidated revenues for the quarter stood
flat at Rs34.5 crore as the realisation per TEU dropped by 5.6% to
Rs6,012. However the 6% increase in the volume restricted the drop
in the revenues.
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The realisation per TEU fell as the share of
the container freight stations (CFSs) at Chennai and Vizag in the
total volume increased. Chnennai and Vizag have much lower
realisation as compared to that of Rs7,000 per TEU for the
Jawaharlal Nehru Port Trust (JNPT) CFS. The realsiation at even
the JNPT CFS fell marginally.
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The operating profit margin (OPM) for the
quarter declined by 4.2% points to 56.5%, as the realisation
dropped. The fall in the OPM coupled with flat revenues resulted
in a 7% drop in the operating profit for the quarter.
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However an eight-fold increase in the other
income (on account of the investment of the proceeds from a global
depository receipt [GDR] issue in bank deposits) helped the
earnings before interest, depreciation, tax and amortisation
(EBIDTA) to jump up by 20% year on year (yoy) to Rs26 crore.
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The company's interest expenses declined by
39.7% as it repaid a substantial part of its debt. The net profit
for the quarter jumped by 15% to Rs19.8 crore.
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The quarter saw the launch of the rail
container freight (RCF) service in May. Further GDL is planning to
ramp up the capacity of its first ICD at Garhi and set up a second
rail-linked ICD at Faridabad. This will enable GDL to be a
significant player in the rail freight container business that
offers integrated port based logistic services.
Jaiprakash
Associates Cluster: Ugly
Duckling Recommendation: Buy Price target:
Rs562 Current market price: Rs415
A mixed bag
Result highlights
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Jaiprakash Associates Ltd's (JAL) Q1FY2007
operating profit at Rs213 crore is ahead of our expectations;
however a higher tax charge has muted the net profit to Rs92
crore.
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JAL registered a growth of 10% in its revenues
and the same stood at Rs895 crore for the quarter, mainly driven
by a 32% growth in the cement division.
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The operating profit grew by an impressive
37.4% to Rs213 crore, as the operating profit margins (OPMs)
expanded by 480 basis points to 23.8%.
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The earnings before interest and tax (EBIT)
margins of the cement division jumped by 900 basis points to 25.7%
during the quarter whereas the EBIT margins of the construction
business fell by 370 basis points to 20%.
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Overall the profit before tax (PBT) grew by 47%
year on year (yoy) to Rs141 crore. However the net profit
registered only a meagre growth of 10% to Rs92 crore on account of
a jump in the tax rate from 13% to 34.5%.
Alphageo
India Cluster: Emerging Star Price
target: Book Profit Current market price: Rs155
Book profits We had initiated coverage on
Alphageo India on December 27, 2005 at a price of Rs81 with a price
target of Rs135. The stock has reached our price target and we
recommend investors to book profit at these levels.
Sun Pharmaceutical
Industries Cluster: Ugly
Duckling Recommendation: Buy Price target:
Rs1,000 Current market price: Rs807
Price target revised to Rs1,000
Result highlights
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Sun Pharmaceuticals' consolidated net sales
grew by 31.1% year on year (yoy) to Rs511.6 crore in Q1FY2007. The
strong growth was driven by an increase of 59.3% in formulation
exports and a 15.5% growth in the domestic formulation business.
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Caraco Pharma's performance was impressive in
view of the fierce competition in the US market. It recorded sales
of $24.8 million and a net profit of $5.1 million.
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Lower raw material costs boosted the company's
operating profit margin (OPM), which expanded by 260 basis points
to 35.4% in Q1FY2007, causing the operating profit (OP) to
increase by 41.4% to Rs181.1 crore.
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The company's profit after tax (PAT) increased
by a strong 29.9% yoy to Rs176.7 crore in the quarter, despite a
lower other income, a higher depreciation and a higher share of
minority interest.
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At the current market price of Rs807, Sun
Pharma is valued at 23.6x FY2007 and 20.0x FY2008 fully diluted
earnings. The valuations, we believe, do not fully capture the
value that Sun Pharma could command with a ramp-up in its overseas
business, continued momentum in the domestic formulation space, a
de-risked business model and the positive contributions of its
acquisitions. In view of the consistent growth and sustainable
margins, we remain positive on the company's future prospects and
maintain our Buy recommendation with a revised price target of
Rs1,000. |