ALembic Management Meet; Payback time; Not Rated
dip.research
|
Alembic Ltd. |
|
Payback time |
Not Rated
CMP: Rs 63 Target Price: NR
n De-merger to insulate core pharma business from the volatility of the Pen G business
n Real estate development presents strong value unlocking potential
n Growth drivers for pharma are in place; strong growth trajectory ahead
n Significant room for margin expansion.
n Trading at 30-40% discount to comparable peers; provides substantial room for upside
Regards,
|
Manoj Garg |
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Sr. Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manoj...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 257 | DID : 66242257 | Mob : +919920160699 | |
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dip.research
|
Unichem Laboratories |
|
Gearing for growth |
BUY
CMP: Rs 530 Target Price: Rs 670
n Increased focus on prescription generation, penetration into tier-II to tier-IV markets and turnaround in Niche Generics to drive 25% earnings CAGR over FY10-13E
n International business to start contributing positively from FY12E, expect 38% revenue CAGR over FY10-13E
n Potential new contracts with MNCs to drive growth on account of higher capacity utilization and operational leverage
n Strong balance sheet, zero debt and robust return ratios provide key comfort to investors; initiate coverage with Buy
Deepak Vaishnav
|
Dr. Reddy’s Lab |
|
Higher traction from FY12 onwards |
ACCUMULATE
CMP: Rs1616 Target Price: Rs1763
n Muted performance in US and decline in PSAI segment impacted top line performance in Q2FY11; significant ramp-up in niche products to drive sales from H2FY11 onwards
n Branded formulation markets of India and CIS reported strong traction
n 361 bps YoY expansion in EBITDA margins at 18.6% and 33% growth in recurring PAT led by 592bps expansion in gross margins and lower tax provisioning
n Revise base business earnings for FY11E, FY12E and introduce NPV for limited competition opportunities; Upgrade to Buy with a price target of Rs1769
Deepak Vaishnav
|
Q2FY11 Results Review: Superior performance |
Executive Summary
The Q2FY11 results were above expectation with a combination of a few positive while a few negative surprises. PAT growth for Emkay Universe* (ex- Metals & Mining, Oil & Gas and Banking) was at 11.1% as against expectation of flat growth.
We expected 19.3% and 8.9% growth in Net Sales and EBITDA from Emkay Universe*; the actual turned out to be a growth of 22.5% and 14.1% respectively. The PAT growth for Emkay Universe stood at 11.1% as against expectation of flat growth. We expected EBITDA margin to decline by 195 bps, the actual turned out to be a decline of 142 bps.
Emkay Large Cap, Emkay Mid Cap and Emkay Small Cap showed a PAT growth of 15.3%, -11.8% and -36.5% respectively.
EBITDA margins of Emkay Universe Companies declined by 142 bps YoY as against 39 bps decline in BSE 500. EBITDA margins improved amongst Emkay Universe Companies, for Offshore Oil Field Services (548 bps), Automobiles (206 bps) and Engineering & Capital Goods (71 bps). EBITDA margins declined for Cement (2028 bps), Telecommunications (530 bps), Power (395 bps), Auto Ancillaries (310 bps) and Paper (210 bps).
EBITDA of Emkay Universe Companies improved by 14.1% against 18% of BSE 500. EBITDA increased for Emkay Universe in sectors like Automobiles (56.6%), Agri Input & Chemicals (30.5%), Construction (28.3%), Engineering & Capital Goods (23.8%) and Offshore Oil Field Services (18.7%).
Interest cost decline by 1% YoY for Emkay Universe as compared to 10.6% increase in BSE 500. Interest cost increased for Emkay Universe Companies in Auto Ancillaries (58%), Engineering & Capital Goods (39%), Construction (29%), Paper (25%) and FMCG (25%).
Other Income grew by 17.8% YoY for Emkay Universe as compared to 33.7% decline in BSE 500. Other income increased for Emkay Universe Companies in IT Services (155%), Automobiles (49%), Construction (48%), FMCG (48%) and Print Media (35%).
PAT growth for Emkay Universe Companies was 11.1% YoY as against 22.7% of BSE 500*. Top sectors with significant PAT growth in Emkay Universe Companies are Automobiles (108.9%), Agri Input & Chemicals (35.7%), Engineering & Capital Goods (19.6%), Paper (18.4%) and IT Services (17.4%). PAT declined for Cement (83.1%), Auto Ancillaries (42.6%), Telecommunications (27.9%) and Power (1.8%).
25% of Emkay Universe Companies have shown 0-15% EBITDA growth with 31% showing negative EBITDA growth. 17% of Emkay Universe Companies have shown EBITDA growth of 15-30% while 14% of Emkay Universe Companies have shown EBITDA growth of 30-50%. 17% of Emkay Universe Companies have shown EBITDA growth of >50%.
20% of Emkay Universe Companies have shown 0-15% PAT growth with 32% showing negative PAT growth. 16% of Emkay Universe Companies have shown PAT growth of 15-30% while 13% of Emkay Universe Companies have shown PAT growth of 30-50%. 19% of Emkay Universe Companies have shown PAT growth of >50%.
Post Q2 results; we have revised earnings of 65 companies (33 upwards, 32 downwards). We have also changed recommendation for 33 companies (10 upwards, 23 downwards) and changed target prices of 73 companies (56 upwards, 17 downwards).
Emkay Universe companies are estimated to show 20%, 17% and 10% growth in sales, EBITDA and PAT respectively for FY11.
Emkay Universe is currently trading at 16.7X FY11E and 14xFY12E earnings which is at a discount of 10% and 9% respectively to consensus Sensex PE.
Surprises
|
Positive |
Negative |
|
Century Ply |
Dishman Pharma |
|
Coromandel International |
Emco |
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GSFC |
H Honda |
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Punj Lloyd |
HBL Power |
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Sun Pharma |
Indo Tech Transformer |
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Tata Motors |
IVRCL Infra |
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TCS |
Jubilant Life |
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TNPL |
Mahindra Satyam |
|
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Orient Paper |
|
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Shree Cement |
|
|
Tata Chemicals |
|
|
TRF |
|
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Ultratech |
|
|
Voltamp |
Regards,
|
Ajay Parmar |
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Head - Institutional Research | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : ajay....@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 258 | DID : 66121258 | Mob : +919820102726 | |
|
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Deepak Vaishnav
|
Mphasis Ltd |
|
No Negative Surprise is a positive surprise |
HOLD
CMP: Rs 561 Target Price: Rs 630
n Marginally ahead of estimated revenues at $ 290 mn (+7% QoQ) mainly driven by recoveries of revenues forgone in Q3 in Asia Pac Region
n EBITDA mgns were at 23.8%, down by ~90 bps QoQ on reported basis (we estimated flat margins) while were down by ~110 bps to 22.3% (ex hedging contribution)
n Overall headcount addition was flat driven by reduction in BPO Headcount by 1,141 and increase by 300/836 in Apps/ITO (Total Headcount at 39,962). Pricing was nearly flat
n Current Valuations at 10.7x/10.2x based on E EPS Rs 52.3/55 for Oct11/Oct12 with HOLD rating and target price of Rs 630, will be reviewed post the call scheduled at 11.30 a.m. today
Regards,
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Manik Taneja |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manik....@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 253 | DID : 66121253 | Mob : +919833934924 | |
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Deepak Vaishnav
|
MOIL LTD. |
|
Attractive valuation; ‘SUBSCRIBE’ |
SUBSCRIBE
n MOIL is the largest manganese ore producer in India, contributing 50% of the total domestic production. Globally it ranks fifth among all the manganese producers
n The company is among the lowest cost manganese ore producers with an EBITDA margin of ~70% during H1FY11. It has ~22 mt of good quality manganese ore reserves
n MOIL is a debt free company with net cash of Rs 105 per share during H1FY11. The company has a planned capex of Rs 7680 million to ramp up its capacity to 1.5 mtpa by FY16
n At the upper band of Rs 375, the stock looks attractively valued with potential upside of 40% on 6x FY12E EV/ EBITDA basis - Recommend SUBSCRIBE
|
Issue Details |
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|
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Date |
26-Nov — 01-Dec |
|
|
Price Band (Rs) |
340- 375 |
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Offer size (Rs) |
12,380 mn |
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Offer size (shares) |
33.6 mn |
|
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Post issue (shares) |
168.0 mn |
|
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M.Cap (Rs) |
61,900 mn |
|
|
|
|
|
Regards,
|
Goutom Chakraborty |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com| | Email : goutam.ch...@emkayglobal.com |
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Board No. +91-22-66121212 | Extn. 275 | DID : 66121275 | Mob No. : +919867361765 | |
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Deepak Vaishnav
|
Fertiliser Policy Update |
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Lower subsidy - Negative for complex fertiliser players |
n Government of India (GoI) has negatively surprised by reducing subsidy rates on complex fertilisers by ~20% under Nutrient Based Subsidy (NBS) scheme w.e.f. 1st Apr ’2011
n Although, the policies indicate GoI moving towards complete decontrol of the fertiliser industry, they are likely to have negative impact on complex fertiliser players in the near term
n Impact on earnings will mainly depend on 1) company’s ability to negotiate lower prices with global raw material suppliers and 2) price increase to the farmers
n We estimate FY12E earnings downgrade by 15-20% for Coromandel and GSFC while Tata Chemicals, Chambal, GNFC and Deepak Fertilisers are unlikely be affected
Possible earnings downgrade - FY12E
|
Company |
Reco |
Revised EPS (Rs) |
% chg |
|
Coromandel |
Buy |
50.2 |
-13% |
|
GSFC |
Buy |
55.9 |
-16% |
Regards,
|
Rohan Gupta |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : rohan...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 248 | DID : 66121248 | Mob : +919619321479 | |
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Deepak Vaishnav
|
Bharati Shipyard |
|
Tebma acquisition – No near term benefits |
REDUCE
CMP: Rs 239 Target Price: Rs 196
n Bharati Shipyard plans to acquire controlling 51% stake in Tebma Shipyard at an investment of Rs757.5 mn
n Tebma (an offshore vessel manufacturer) has order book of Rs7.5 bn. In FY10, it posted loss of Rs1.9bn, had a networth of Rs(-)0.5 bn and debt of Rs4.3 bn
n Expect no positives from the above deal in near-to-medium term in view of (1) un-conducive business environment and (2) deteriorating financial health and (3) strained cash flows
n Retain ‘Reduce’ rating for BSL with target of Rs196/Share (Core shipbuilding: Rs117 + Great Offshore Stake: Rs79); Only caveat is meaningful subsidy disbursement
Regards,
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Pritesh Chheda |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
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Board No. : +91- 22- 6612 12 12 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
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Deepak Vaishnav
|
Cement Sector |
|
Top 5 players report dispatches decline of 3.2% yoy |
n Unseasonal rains, labor shortage due to festive season impact dispatches in November. Top 5 players report aggregate dispatch decline of 3.2%
n Cement prices see some softness across regions - cuts of Rs 2-10/bag; across North, central & south. Dealers expect prices to remain sluggish till mid December owing to poor demand
n Demand growth remains key to sustain prices hikes taken in October. Seasonal logistical bottlenecks (wagons supply to food grains & crop) could provide some support to prices
n Remain NEUTRAL on sector, positive on ACC, Grasim & Shree, negative on Ultratech, India Cement & Madras Cement
Regards,
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Ajit Motwani |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : ajit.m...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 255 | DID : 66121255 | Mob : +919820934229 |
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|
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Deepak Vaishnav
|
Mphasis Ltd |
|
Challenges persist |
HOLD
CMP: Rs 599 Target Price: Rs 600
n Post the expected bounce back in Mphasis’s stock price after ‘no negative surprises’ in Oct’10, we find little reason to turn more constructive on the stock
n Op mgns should head further lower driven by supply side pressures, US$/INR appreciation and need to increase S&M investments as co increases focus on non HP business
n Cut our Oct’11/Oct’12E EPS by 5%/0.5% to Rs 49.8/54.7 (primarily on reset in US$/INR at Rs 44/$) despite building in higher revenues (22%/21%YoY)
n Valuations appear inexpensive at 12/11x FY12/13E EPS, however need to be weighed against ~2.8% EPS CAGR over F11-13E with downside risks to revenue, mgn assumptions
Deepak Vaishnav
|
Tata Motors |
|
Positive surprises to continue, Retain BUY, prefer DVR |
BUY
CMP: Rs 1,144 Target Price: Rs 1,520
n Demand outlook remains strong across segments. Expect 10% to 15% growth in M&HCV trucks (our est is 9%), <10% growth in buses and 20% volume growth in LCVs in FY12
n LR continues to drive profits at JLR. However, Jaguar has also started contributing to profits. Profitability will improve with higher share of new models in sales
n Benefits of low hanging fruits almost exploited at JLR but there are adequate levers both short term and long term that should provide cushion to margins
n Retain our FY12 EPS of Rs 166, Maintain BUY with a TP of Rs1,520. Prefer DVR as it is at steep disc. of 45% to ordinary shares, trades at 1.3x FY12 P/B offers 4.8% div. yield (FY11E)
Regards,
|
Chirag Shah |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : chira...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 252 | DID : 66121252 | Mob : +919820580701 | |
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Deepak Vaishnav
|
Nestle India |
|
Strong performance continues… |
ACCUMULATE
CMP: Rs 3,829 Target Price: Rs 4,092
n Net sales growth at 22.3% yoy to Rs 18.1 bn is in line with our expectations. APAT growth at 33.3% yoy to Rs 2.6 bn is marginally higher than our estimate of Rs 2.5 bn
n Revenue growth is largely driven by 23.1% yoy growth in the domestic markets and 10.2% yoy increase in exports, as expected
n Proves its mettle - Better sales mix and lower promotional volumes offsetting higher input cost drives 75 bps expansion in EBITDA margins, a positive surprise
n No change in earnings – CY11E EPS at Rs 104.1/share and CY12E EPS at Rs 124.0/share – Maintain ‘ACCUMULATE’ rating with target price of Rs 4,092/share
Regards,
|
Pritesh Chheda |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Sweta Jain |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : sweta...@emkayglobal.com |
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Board No. : +91-22-6612 1212 | Extn. : 479 | DID : 6624 2479 | Mob : +9198923 17596 | |
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|
Deepak Vaishnav
|
Yes Bank |
|
Asset repricing helps NIMs |
ACCUMULATE
CMP: Rs 331 Target Price: Rs 390
n Yes Bank’s Q4FY11 results were inline with expectations with NII at Rs3.5bn (up 7.8% qoq) and PAT at Rs2.0bn (up 6.4% qoq)
n NIMs maintained qoq at 2.8% - 70bps helped by repricing of advances. Further repricing expected in Q1FY12. Alongwith little easing of wholesale rates, NIMs can be maintained
n NPAs up marginally to Rs805mn. Aggressive provisioning still helps keep provision cover at 88.6%
n Introducing FY13E estimates with Rs23bn of capital raising. Maintain ACCUMULATE rating with revised target price of Rs390
Regards,
|
Kashyap Jhaveri |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : kashyap...@emkayglobal.com |
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Board No. : +91-22-6612 1212 | Extn. : 249 | DID : +91-22-6612 1249 | Mob : +91-98202 41712 | Fax : +91-22-6624 2410 | |
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Deepak Vaishnav
|
Everonn Education |
|
JV with NSDC |
NOT RATED
CMP: Rs 681 Target Price: NA
Everonn Education has signed a Joint Venture Agreement with India’s National Skill Development Corporation (NSDC) to impart vocational training across the country over 12 years. We attended the Analyst meet and present our key takeaways:
n Everonn and NSDC have jointly launched ‘International Skills School’ to impart vocational training with respect to various technical courses. Everonn’s wholly owned Skill development subsidiary, Everonn SKILL development Ltd. has been mandated by NSDC to train 15 million people (10% of NSDC’s overall target of 150 million) by 2022. NSDC will invest 27% as equity in the wholly owned Skill development subsidiary of Everonn Education Ltd. i.e. Everonn Skill development Limited (ESDL).
n The NSDC was set up as part of a national skill development mission to fulfill the growing need in India for skilled manpower across sectors and narrow the existing gap between the demand and supply of skills. The NSDC is a public-private partnership, wherein 49% is owned by the finance ministry and the remaining 51% held by various industry bodies like the CII, NASSCOM, FICCI, Assocham, etc.
n The courses offered under the same will be for nine different industries like Textile and apparel, Retail, Hospitality, Automobile, Healthcare, Construction, IT and ITeS (IT-enabled Services), Basic engineering and Multimedia. Duration differs from course to course and ranges between 3 weeks to 6 months.
n Average fees for such technical courses works out to be Rs. 9000 (Ranges between Rs. 24,000 to Rs. 3,000 for different courses). Considering the estimated number of students at 15 mn, this turns out to be the revenues of Rs. 135-145 bn over next 12 years for Everonn. EBITDA margin to remain in the range of 23-25% initially and should improve going further, per management.
n Everonn is looking to set up 271 centers across India. Currently there are 9 operational centers and company is planning to roll out 70 more such centers in next three months.
n Capex requirement will be Rs. 3 bn in next 3 years. Of this, NSDC would provide Rs 0.142 bn as equity for 27% stake and Rs. 1.01 bn in the form of debt at a subsidized interest of 6%. The remaining Rs1.85bn will be funded by Everonn through internal accruals and external debt funding.
n Vocational training, unlike other educational segments, does not face regulatory hurdles and remains attractive, per management. There will be no government intervention in the business. Two board members on the Board of Everonn Skill will be represented by NSDC.
n We believe Government’s partnership, great demand for the vocational courses and lack of skilled manpower, seem to be favorable for Everonn. However, there are several challenges with respect to (a) student acquisition being responsibility of Everonn (either though B2B or B2C) (b) Execution & scalability of the venture (c) Affordability of students and (d) industry and market acceptance of courses offered.
n We do not have any rating on the stock. Company has done Revenue/EPS of Rs. 2908 mn (+54% YoY) & Rs. 25 (+33% YoY) for 9M FY11. At CMP of Rs. 681, the stock trades at 20x/14.8x/11x for FY11E/12E/13E consensus earnings of Rs.34/46/62.
Regards,
|
Priya Gajwani |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : priya....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 385 | DID : 66121385 | Mob : +919867710329 |
Deepak Vaishnav
|
HDFC Bank |
|
Slippage rate lowest since FY05 |
HOLD
CMP: Rs 2,052 Target Price: Rs 2,530
n HDFC bank results inline with expectations with NII at Rs28.4bn (up 20.8% yoy) and Net profit at Rs11.1bn (up 33.2% yoy)
n Other positive highlights of the quarter: (1) CASA maintained at 51% (52% in Q4FY10); (2) fee income growth of 7.6% qoq and (3) Slippage rate at <1% for FY11
n Slippage rate for FY11 at 0.9%, lowest since FY05. Asset quality remained robust with gross and net NPAs down by 5% and 10% qoq respectively with PCR of 82.5%
n Stability in parameters like NIMs, NII and asset quality as expected. Rolling over valuations to FY13E with strong earnings visibility. Maintain HOLD rating with TP of Rs2,530
Deepak Vaishnav
|
Reliance Power |
|
Guiding for aggressive coal production |
ACCUMULATE
CMP: Rs 128 Target Price: Rs 157
n Sasan coal mine to start prod. by June 2012, ahead of COD of 1st unit in Dec. 2012. Further, it expects to ramp up coal prod. to peak 25mn MT by FY15E - in line with COD of Sasan II & Chitrangi in Sep. 2013 - Mar. 2015
n Tilaiya coal mine is expected to start prod. by Sep. 2013 (ahead of Tilaiya’s commissioning in FY16E) and ramp up to peak prod. of 40mn MT by FY17E
n Captive coal mines (prod. capacity of 65mn MT) allotted with UMPPs has high quality cheap coal, which co. also plans to use at Chitrangi/Sasan-II (60% of NPV) projects to take advantage of low cost of generation
n RPL has one of the most sustainable pvt utility business model (fuel cost /unit - less than Rs0.42/unit) & also a coal play. Valuations imply Rs2.8/unit (relatively lower) tariffs. Relatively prefer RPL & Lanco in our private utility coverage
Regards,
|
Amit Golchha |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : amit.g...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 408 | DID : 66242408 | Mob : +919833357365 | |
|
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Deepak Vaishnav
|
Container Corporation of India |
|
Subdued FY11, Testing times ahead |
NOT RATED
CMP: Rs 1,263 Target Price: Not Rated
n Revenues of Rs 38.3bn for FY11, growth of 2.6% yoy with EXIM business contribution at 78% remains same as FY10
n Volume throughput for Exim business crossed 2mn TEUs mark with an increase of 7.2% yoy, while domestic volume grew merely by 0.9%
n PBIT Margins for domestic business drop to 10.8% for FY11, due to empty running costs (7.3% of revenue) and inability to pass freight rate hikes
n Capex for FY12E guided at Rs 7bn for Terminals, Rakes and land acquisition for Logistics Distriparks. Cash in the books at Rs 24bn, enough to fund capex
Regards,
|
Tejas Sheth |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : tejas...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn.: 482 : | DID : 66242482 | Mob : +919920314167 | |
|
|
Deepak Vaishnav
|
HCL Technologies |
|
Marginal beat, retain HOLD |
HOLD
CMP: Rs 523 Target Price: Rs 540
n HCLT reported revenues at US$ 914 mn (+5.8% QoQ), ahead of Emkay expectations driven by Apps business (+5.4% QoQ) and IMS business (+8.5% QoQ). BPO revenues were flat QoQ
n EBITDA margins at 16.7%, up ~100 bps QoQ a big relief after a long streak of disappointment in the past few quarters
n See downside risks to ~110 bps mgn expansion in FY12 as co faces stiffer supply side headwinds (lateral focused hiring) and aggressive client hunting strategy
n Retain FY12E/13E earnings of ~Rs 32/38.4 despite marginal increase in US$ revenue estimates. Maintain HOLD with an unchanged TP of Rs 540, based on 14xFY13E earnings
Regards,
|
Manik Taneja |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manik....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 253 | DID : 66121253 | Mob : +919833934924 | |
|
Priya Gajwani |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : priya....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 385 | DID : 66121385 | Mob : +919867710329 |
|
|
Deepak Vaishnav
|
Tata Consultancy Services |
|
In line results confirm demand strength |
ACCUMULATE
CMP: Rs 1,192 Target Price: Rs 1,275
n In line rev at US$ 2,244 mn (+4.6% QoQ) however solid QoQ flat margin show despite ~100 bps sequential onsite shift, strong net hiring at ~12k and ~200 bps drop in utilization
n Continental Europe (+11.4% QoQ) , Manufacturing(+9% QoQ) post strong growth while BFSI(+3.3%QoQ) and Telecom (-3.3% QoQ) dragged revenue growth
n Decent results from TCS should soothe investor concerns after a near disaster at peer Infosys. Company lends confidence to demand visibility with a strong hiring outlook
n Tweak FY12/13E earnings marginally to Rs 51.3/61.7 (V/s Rs 51.3/61.5 earlier). Retain ACCUMULATE with an unchanged price target of Rs 1,275
Deepak Vaishnav
|
Jaiprakash Power |
|
FY12E PAT to be driven by Karcham commissioning |
HOLD
CMP: Rs 47 Target Price: Rs 47
n Below expectations – on lower VER sales. Q4FY11 PAT down 72% yoy due to lower VER sales and higher interest expenses which were partly neutralized by higher other income
n Karcham (key FY12E growth driver) unit 1 has synchronized on 13th May - COD by May end. Assumed Commissioning of whole project by August 2011 - any delay to impact PAT
n Reduce FY12E/13E earnings by -11%/-8% led by equity dilution (21% or 556 mn shares) including treasury stock of 371mn on account of amalgamation of JPVL, Karcham and Bina
n Assumed treasury stock sale in 12E to fund capex. Valuations imply LT merchant rate of Rs3.7 (our est. Rs2.7). Litigation on Karcham and funding gap to remain overhang. Maintain hold
Deepak Vaishnav
|
JSW Steel |
|
Robust performance |
BUY
CMP: Rs 921 Target Price: Rs 1,169
n JSW Steel posted robust performance for Q4FY11 with topline growing by 33% YoY and 21% QoQ to Rs 72.8 bn (cons) backed by sharp jump in sales volume to 1.733 mt
n Better product mix with lower sales of semis coupled with higher realizations (~Rs 41,000/ tonne) helped the company to post an EBITDA of Rs 16.6 bn, up 26% YoY and 64% QoQ
n Strong operating performance flowed into the bottomline too which rose 30% and 172% on YoY and QoQ respectively to Rs 7.94 bn. Ispat also contributed positively to the reported PAT
n Despite short- term challenges, volume growth and better integration should benefit FY13 performance. Upgrade to Buy with a target price of Rs 1,169 valuing at 6x FY13 EV/ EBITDA
Regards,
|
Goutam Chakraborty |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com| | Email : goutam.ch...@emkayglobal.com |
|
Board No. +91-22-66121212 | Extn. 275 | DID : 66121275 | Mob No. : +919867361765 | |
|
Jagdish Agarwal |
|
Senior Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : jagdish...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 381 | DID : 66121381 | Mob : +919820869499 | |
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Deepak Vaishnav
|
Great Offshore |
|
Profit sinks |
UNDER REVIEW
CMP: Rs 231 Target Price: NA
n APAT loss of Rs25mn - sharply below estimates led by lower revenues and higher costs and interest charges.
n Revenues at Rs2.07bn down 24.4% yoy dragged by lower spot rates of OSV , minimal revenues from marine construction and non utilization of marine construction assets
n EBITDA at Rs657 mn (-51.6% yoy). EBITDA margins down 1782 bps to 31.7% led by lower revenues & increase in repairs & maintenance and staff exp
n GOL to sell rig ‘Amarnath’. New rig V351 sees further delay in delivery (Dec11 vs June 11 earlier)- earnings to see sharp downward revision. Earnings, rating & target under review
Deepak Vaishnav
|
eClerx Services Ltd. |
|
Quality show yet again, retain ACCUMULATE |
Accumulate
CMP: Rs 737 Target Price: Rs 840
n eClerx’s March’11 results yet again exhibit the consistent and impressive execution with US$ revenues up by ~7.7% QoQ and margins improving by ~230 bps on a like to like basis
n Reported profits at Rs 295 mn(-18%QoQ) below expectations impacted by goodwill write-off of ~Rs 103 mn Adjusted profits at Rs 398, significantly beat expectations ( Rs 346 mn)
n Tweak estimates for higher US$ revenues (31.7%/28.4% YoY growth V/s 28.3%/26% earlier) driving a 0.4%/7.3% raise in FY12/13E earnings to Rs 51.4/61.9( refer section below)
n Retain ACCUMULATE with a revised DCF based March’12 TP of Rs 840(V/s Rs 740 earlier), implying ~13.5x March’13 earnings
Regards,
|
Manik Taneja |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manik....@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 253 | DID : 66121253 | Mob : +919833934924 | |
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Deepak Vaishnav
|
Unichem Labs |
|
Inventory rationalization drags Q4, Downgrade estimates |
ACCUMULATE
CMP: Rs 180 Target Price: Rs 215
n Unichem’s Q4FY11 results were below expectations with a) Revenues at Rs1.78bn (up 2% YoY) b) EBITDA at Rs236mn (down 43% YoY) and c) APAT at Rs150mn (down 55% YoY)
n Domestic formulation growth was sluggish due to rationalization of inventory at the distributor level, negatively impacting company-level sales
n EBITDA margins at 13% (down 1068bps) was on account of higher raw material cost, increase in sales & marketing cost and higher employee cost due to increase in sales force
n With inventory rationalization to hurt sales and pressurize margins, we revise FY12/FY13 earnings downwards; cut target price to Rs215 (earlier Rs243)
Regards,
|
Deepak Malik |
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Senior Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : deepak...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 257 | DID : 66121257 | Mob : +91 9769811227 | |
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Deepak Vaishnav
|
Power Sector |
|
CERC’s forward curve price can be misleading |
n In CERC’s Apr 11 report on power trading, it has predicted - July and Aug 11 (monsoon period), bilateral merchant tariffs of Rs4.56/unit, higher than Jun 11 prediction of Rs4.08/unit.
n +31% revision from last report in Mar11. We believe these predictions can be misleading as contracts in Apr11 are mostly 1 month delivery & at best representative of May11
n No reason for higher tariffs in Jul/Aug 11 vs. Jun11 as (1) it’s a period just after elections, (2) monsoon est. normal, (3) lots of MWs coming up in Q1/Q212E & (4) demand not encouraging (2% gr.) even in Mar-Apr11 (pre-election month).
n Foresee bilateral merchant prices heading towards avg. Rs3.5-3.7/unit in FY12E & Rs3.0-3.2/unit in FY13E from about Rs4.7/unit in FY11P; Use any upswings to reduce weights
Deepak Vaishnav
|
Jaiprakash Associates |
|
Cement & Construction performance remains muted |
ACCUMULATE
CMP: Rs 88 Target Price: Rs 96
n APAT at Rs 2.9bn (+17% yoy) inline with estimates (Rs 3.0bn), led by real estate EBIT +7.3x yoy to Rs 2.9bn. Const. EBIT was -46% yoy to Rs 2.2bn, Cement EBIT +57% yoy to Rs 2.2bn
n Revenues at Rs 40bn (+21.4% yoy) led by real estate revenue up 4.8x yoy to Rs 6bn - positive surprise, Cement realizations +8.7% restricts revenue growth to 27.2% yoy at Rs 15.7bn
n Massive expansion of cement capacity, continue to pose pressure on realizations, coupled with input cost pressures resulted in EBITA/ton falling 36% to Rs 529
n Upgrade FY12E earnings by 2.7% to Rs4.7/share. Reduce to an ACCUMULATE & revised target price to Rs96 factoring lower const. revenue, delay in cement capacity addition
Regards,
|
Ajit Motwani |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : ajit.m...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 255 | DID : 66121255 | Mob : +919820934229 | |
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Jitesh Bhanot |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : jitesh...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 491 | DID : 66242491 | Mob : +919221393422 | |
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Deepak Vaishnav
|
Bajaj Auto Ltd. |
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Strong show continues |
BUY
CMP: Rs 1,287 Target Price: Rs 1,650
n APAT at Rs 6.75bn was marginally ahead of our est. of Rs 6.6bn driven by higher margin of 20.5% (est 20%). Net sales at Rs 42bn was in line with our est. of Rs 42.3bn
n Believe that DEPB concerns are in the valuations (13.5x FY12 EPS ex DEPB). Expect FY12 EPS downgrade of ~10% due to DEPB. Declares DPS of Rs 40 per share (3.1% yield)
n Key concerns arise from subdued domestic volumes in last two months. Volumes should find support from additional 130 dealers (April 2011)
n Retain our EPS of Rs 106.8 for FY12 and BUY rating as of now. Shall revise post conference call scheduled tomorrow
Deepak Vaishnav
|
HT Media |
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Impressive English ad growth, Re-iterate BUY |
BUY
CMP: Rs 156 Target Price: Rs 183
n Q4FY11 revenues in line, growing 22.1% yoy at Rs 4.7bn. Print ad-rev grew by 20.5% yoy with Hindi ad-revenue growing 19.5% yoy and English by 21% yoy (higher than est. of 16%)
n EBIDTA margins at 18.6% (our est. of 18.9%) declined by 550bps yoy, led by 43.3% rise in raw material cost. However, Radio EBITDA improved to Rs67mn v/s -2mn in Q4FY10
n PAT at Rs529mn (our estimate of Rs470mn) was up 10.3% yoy, primarily on account of higher other income
n Valuations at 15.9x FY12E and 12.8x FY13E. Maintain BUY with revised target price of Rs183
Regards,
|
Naval Seth |
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Research Associate | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : naval...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 414 | DID : 66242414 | Mob : +919930468398 | |
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Deepak Vaishnav
|
State Bank of India |
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Balance sheet clean up hits profit |
HOLD
CMP: Rs 2,414 Target Price: Rs 2,480
n SBI’s results extremely disappointing with NII of Rs80.6bn (down 10% qoq) and net profit of just Rs209mn. Sharp drop of 56bps qoq in NIMs to 3.04%
n Lower NII with Rs8.8bn of pension expenses, Rs32bn of NPA provisions (100% qoq), high tax rate drag the net profit down
n Good thing – has cleaned up all liabilities like pensions, teaser rate loan provision, bad thing – low tier I of 7.77% and sharp rise in slippages to Rs56.4bn
n Early rights issue holds the key. Cutting loan growth estimate to 17% (from 20%) for FY12/13. Cutting earning estimates by 13%/14%. Maintain HOLD with TP of Rs2,480
Deepak Vaishnav
|
Indotech Transformers |
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Ambiguity persists |
HOLD
CMP: Rs 144 Target Price: Rs 141
n Q4FY11 results below estimate, revenues of Rs224mn, (est. Rs677mn) EBITDA loss of Rs70mn (est. loss of Rs11mn) and net loss of Rs76mn (est. loss of Rs9mn) - volumes key culprit
n Expect industry volumes to grow by minimum 15% in FY12E but not sure on Indotech’s volume growth - more number of players looking for that pie
n FY11 EBITDA margins dip led by fixed costs (36% of revenues vs 28% in FY10). Thus, scope of operating leverage (break even at 51% utilizations) but depends on volume growth
n Assuming 49/61% capacity utilizations in FY12E/13E & expect Indotech to get into green by H212E. Continuing losses to remain overhang; maintain Hold with PT of Rs141/share
Deepak Vaishnav
|
Coromandel International |
|
Acquisition of Sabero to drive synergies |
BUY
CMP: Rs 317 Target Price: Rs 435
n Coromandel announced acquisition of Gujarat based agro chemical player - Sabero Organics, with investment of Rs 4.7 bn for 73% stake (42% promoters’ and 31% via open offer)
n Valuations at EV / EBITDA of 14.6x, EV/Sales of 1.7x at deal price of Rs 160 / share (78% premium to yesterday’s close) do not mirror true potential due to poor FY11 results
n Sabero’s large portfolio of active ingredients (backward integrated) to support Coromandel’s strong presence in formulations and drive synergy benefits
n Acquisition to also give Coromandel an opportunity to enter into exports markets. We view this acquisition positive for Coromandel and maintain our BUY recommendation
Deepak Vaishnav
|
Reliance Communication |
|
PAT down 65% qoq, Maintain Reduce |
REDUCE
CMP: Rs 88 Target Price: Rs 85
n Change in accounting policy to include IRU sales of 25.5bn led to spike in revenues. Ex-IRU revenue, topline improved by just 1.3% qoq. Mobility revenue was up 3.3% qoq
n ARPU fell 3.5% QoQ to Rs107 purely on MOU decline as RPM remains stable. Wireless traffic improved 3.2% on the back of paid minutes coming on network
n Net profit slumps to Rs1.7bn declining 64.9% qoq, led by lower margins across the business segments. Capex guidance at 15bn for FY12E, positive for peers
n Maintain our REDUCE rating with target price of Rs85 Valuations at 5.6x and 4.7x EV/EBIDTA for FY12E and FY13E respectively
Deepak Vaishnav
|
Cummins India |
|
7% Earnings Cut; Retain BUY |
BUY
CMP: Rs 685 Target Price: Rs 800
n Cummins Q4FY11 results were below expectations – reports 23.0% yoy growth in APAT to Rs1.43 bn – led by lower revenue growth and consequent impact of operating leverage
n During FY11- Export business grew 140% and Domestic business grew 23% - which in turn had Power Cogen growing at 30% and Industrials growing 23%
n Gradual erosion of Ebidta margins from 23.3% in Q4FY10 to 18.2% in Q4FY11 – tone down in Ebidta margin assumptions for FY12E and FY13E
n Cut FY12E earnings by 7.5% to Rs34.5/Share and Introduce FY13E earnings of Rs40.0/Share – Retain BUY rating with target price of Rs800/Share
Regards,
|
Pritesh Chheda |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
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Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
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Prerna Jhavar |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : prerna...@emkayglobal.com |
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Board No. : +91-22-6612 1212 | Extn. : 337 | DID : 6612 1337 | Mob : +91981935 0593 | |
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Deepak Vaishnav
|
Sun Pharma |
|
Taro holds the key; Maintain Hold |
HOLD
CMP: Rs 465 Target Price: Rs 497
n Sun Pharma’s Q4’11 was above expectations with Revenues at Rs14.6bn (up 32% YoY), EBITDA at Rs4.44bn (up 6% YoY) and PAT at Rs4.43bn (up 12% YoY)
n Revenue growth was led by 20% growth in domestic branded business and 21% YoY growth in Taro. Ex-Taro, revenues declined by 13%
n Taro’s contribution of 34% to the top-line at US$108mn and PAT at US$25mn was above expectations
n Taro remains the key to future performance; Maintain Hold with a revised target price of Rs497 (22xFY13 Core EPS)
Deepak Vaishnav
|
GSFC |
|
Reiterate BUY on compelling valuations |
BUY
CMP: Rs 356 Target Price: Rs 530
n Q4FY11 results were in line with estimates- Revenues of Rs11.1bn,+43% yoy, APAT (adjusted for Rs 145 mn EO income) of Rs 1.95bn, +52% yoy
n Chemicals segment margins at 34.7% continues to remain strong (+320bps yoy) while fertiliser segment witnessed margins of 21.7% against losses in previous year
n Upgrade FY12E estimates by 11% to Rs 73.6 and introduce FY13E (EPS of Rs 78.8). Company holds cash in books and investments of Rs 150 / share (42% of cmp)
n Despite expected deceleration in earnings by 18% in FY12 due to softening chemical prices, valuations remain compelling with EV/EBITDA of 1.8x and 20% discount to BV
Deepak Vaishnav
|
Bharat Petroleum Corporation |
|
Results above estimates |
ACCUMULATE
CMP: Rs 627 Target Price: Rs 684
n BPCL reported results which were above our estimates with Revenue at Rs.452bn and PAT at Rs.9.3bn
n Crude throughput declined marginally by 1.9% to 5.58mmt, while market sales has grown by 6.3% to 7.76mmt
n Average gross refining margin for FY11 was at $4.47/bbl as compared to $2.97/bbl ( growth of 50% YoY)
n Valuations look reasonable at 1.2x FY13E ABV, maintain ACCUMULATE rating with revised TP of Rs.684
Regards,
|
Dhaval Joshi |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : dhaval...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 282 | DID : 66121282 | Mob : +919920871839 | |
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Deepak Vaishnav
|
GNFC |
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Chemical business continues to do well |
BUY
CMP: Rs 103 Target Price: Rs 157
n Q4FY11 APAT (adjusted for insurance claim of Rs 1 bn) of Rs 699 mn against loss of Rs 383 mn previous year were below estimates mainly due to lower than expected margins
n Chemical segment witnessed attractive results with EBIT margins of ~28% (+300 bps yoy). Fertiliser segment margins remain at meager level of ~2%
n Increase in Nitric Acid capacity (by ~70%) to support revenue growth in FY12E while commissioning of Ethyl Acetic and TDI plant to add revenues in FY13E
n Maintain FY12E estimates at Rs 22.4 and introduce FY13E estimates at Rs 26.5. However we maintain our TP of Rs 157 (7x FY12 EPS) due to volatility in earnings, maintain BUY
Deepak Vaishnav
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Jagran Prakashan |
|
Mixed bag, Maintain BUY |
BUY
CMP: Rs 120 Target Price: Rs 149
n Strong ad revenue growth of 19.7% yoy to Rs Rs1.9bn, on the back of improving yields. Circulation rev. up 6.3% to Rs558mn. Other business rev. grew 47.8% to Rs292mn
n EBITDA improved by 12.9% yoy, however, EBITDA margin declined by 150bps. Led by higher raw material cost & other expenses which escalated 34.8% yoy 13.7% yoy
n Mid-Day rev. grew 7.6% yoy to Rs1.1bn for FY11. EBITDA & PAT were lower at Rs145mn and Rs20mn, resp. Decline is attributed to change of accounting policies to same as JPL’s
n Given the escalation in costs, we cut EPS est. by 3.6/1.5% for FY12E/13E. Valuations at 15.3x/12.1 for FY12E 13E. Retain BUY rating with revised TP of Rs 149 (earlier Rs155)
Deepak Vaishnav
|
IVRCL Infrastructure & Project |
|
Execution challenges persist- valuation attractive |
BUY
CMP: Rs 70 Target Price: Rs 93
n IVRCL Q4FY11 APAT at Rs908 mn (+6.5% yoy) in line. RPAT at Rs642 mn, impacted by write offs & provisions. Execution remains sluggish, revenue growth of 8.7%, below estimates
n Adj. EBITDA at Rs2.16 bn (+11%yoy) came in line, even after a revenue miss as margins at 10.6%( +21 bps yoy) surprised positively
n Order backlog at Rs238 bn though stands at 4.2X FY11 revenue, 40% of the backlog faces execution challenges. We cut 12E EPS by -8.7% led by slower execution. Cut TP by 8% to Rs93
n Sharp underperformance (~37% over last 6 months) already factors in execution headwinds. Valuations at 10x (6X ex the value of subs) seem to factor in negatives. Maintain Buy
Deepak Vaishnav
|
Mahindra & Mahindra Ltd. |
|
Complexities increase, Retain BUY |
BUY
CMP: Rs 665 Target Price: Rs 810
n Results below est. EBIDTA at Rs 8.6bn (est. of Rs9.8bn) was affected due to higher staff cost (ESOP amortization), lower VAT set off and higher production in MVML (100% subsidiary)
n Ramp up in MVML visible with 4QFY11 EBIT account for 10% of standalone EBIT. However, value is not getting captured due to limited information and complex structure
n Lower FY12 EPS by 10% to Rs 42. Lower EBIDTA margins est. by 170 bps to 13% due to ESOP (40bps), VAT (70bps) and higher production at Chakan (40 bps)
n Introduce FY13 est. with an EPS of Rs 50, Retain BUY with a SOTP value of Rs 810 down 2.4%) based on FY13 estimates. Stock to underperform till clarity emerges on margins
Regards,
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Chirag Shah |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : chira...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 252 | DID : 66121252 | Mob : +919820580701 | |
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Deepak Vaishnav
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Shree Cement |
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Operating level performance in line-Maintain ACCUMULATE |
ACCUMULATE
CMP: Rs 1,836 Target Price: Rs 1,960
n EBITDA of Rs2.96bn (+88% qoq) - in line with estimates. However accelerated depreciation (on Jaipur grinding unit capitalised in Q4FY11), drags APAT to a meager Rs102mn
n Revenues of Rs10.7bn (+13.4% yoy) came in exactly in line, led by 6.8% revenue growth in cement revenues (Rs9.5bn) and impressive 121% yoy growth in power revenues (Rs1.2bn)
n Upgrade FY12 EBITDA by 3.8%, but cut FY12E EPS estimates by to EPS of Rs13.8 on account of revised depreciation guidance. Introduce FY13 estimates with EPS of Rs175
n Change in FY12 EPS does not affect our target as it’s driven by depreciation (non cash charge). Continue to value Shree on 6X FY12 EV/E. Maintain ACCUMULATE. Target - Rs1,960
Regards,
|
Ajit Motwani |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : ajit.m...@emkayglobal.com |
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Board No. : +91-22-66121212 | Extn. : 255 | DID : 66121255 | Mob : +919820934229 |
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Deepak Vaishnav
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Indraprastha Gas Ltd |
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Results inline with expectation; Maintain ACCUMULATE |
ACCUMULATE
CMP: Rs 330 Target Price: Rs 382
n Volume increased by 32% from 205.5mmscm in Q4FY10 to 271.7mmscm in Q4 FY11
n CNG and PNG volumes increased by 16% to 157.5mnKg and 136% to 59.1 mmscm respectively, YoY
n Blended unit realisation stood at 19.2/scm, growth of 34.3% YoY and 3.3% QoQ, mainly due to hike in prices of both CNG and PNG segment at the beginning of the quarter
n Given its monopoly in NCR region and easing of pricing pressure, maintain Accumulate with PT of Rs.382
Deepak Vaishnav
|
Indian Oil Corporation |
|
Results above estimates |
ACCUMULATE
CMP: Rs 320 Target Price: Rs 381
n IOCL reported results which were above our estimates with Revenue at Rs.987bn and PAT at Rs.86.4bn
n Crude throughput increased by 7.1% to 14.23mmt, while market sales has grown by 8.7% to 19.3mmt
n Average gross refining margin for FY11 was at $5.95/bbl as compared to $4.47/bbl (growth of 33.1% YoY)
n Valuations look reasonable at 1.2x FY13E ABV, maintain ACCUMULATE rating with revised TP of Rs.381
Deepak Vaishnav
|
India Cements |
|
Earnings Disappoint- Maintain HOLD |
HOLD
CMP: Rs 84 Target Price: Rs 93
n APAT at Rs545 mn (+29% yoy) below est (Rs875 mn). Revenues at Rs9.9 bn +3.5%yoy– sharp price hikes led by pricing discipline help realizations (+22%), volumes -14% yoy
n EBIDTA at Rs1.7 bn (+26% yoy) – below est (Rs2.06 bn) due to lower than est revenue & higher RM & P&F costs. However improved realization drive 75% increase in EBITDA/t to Rs696
n Demand growth in south remains muted- still remain key concern. Cut FY12E EPS by 7.3% led by lower volumes assumptions for FY12. Lower TP by 5.1% to Rs93
n ICL’s valuations of 7.5X EV/EBDITA & ~USD 81/t leaves little upside from current levels, considering FY12 RoCE at 6.4% is barely half the cost of capital - Maintain HOLD
Deepak Vaishnav
|
Tamilnadu Newsprint |
|
Downgrade estimates, maintain BUY |
BUY
CMP: Rs 127 Target Price: Rs 180
n Q4FY11 results disappointed due to lower margins. Revenues of Rs 3.5 bn, flat yoy, EBITDA of Rs 743mn, -18% yoy, APAT Rs 196 mn,-66% yoy
n EBITDA margins at 21.0% (-450 bps yoy / -510 bps qoq) were below estimates due to higher raw material, fuel and other expenses
n Margin pressure is likely to continue in near future despite increase in paper prices by ~4% in the quarter since pulp and coal prices remain at elevated level
n Downgrade FY12E estimates by 24% to Rs 18.9. Introduce FY13E estimates (Rs 25.6) and roll over valuations to FY13E with 7xFY13E EPS to Rs 180 (previous Rs 200)
Deepak Vaishnav
|
Colgate-Palmolive |
|
Volumes witness moderation… Maintain Hold |
HOLD
CMP: Rs 896 Target Price: Rs 826
n Lower volume growth in toothbrush restricts revenue growth at 12.6% to Rs 5.8 bn, marginally below our expectation. APAT at Rs 1.1 bn is above our forecasts
n Moderation in volume growth- Toothpaste market shares improved YoY, however declined sequentially - new launches likely to aid further market share improvement
n New launches, skewed towards premium/niche category, will result in higher A&P spends, which along with higher tax rates, will restrict PAT CAGR to 13% over FY11-13E
n Retain FY13E earnings of Rs37.6/Share- Valuations at 24X FY13E EPS appear fair - Maintain HOLD rating with target price of Rs826/Share
Regards,
|
Pritesh Chheda |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
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Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
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Sweta Jain |
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Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : sweta...@emkayglobal.com |
|
Board No. : +91-22-6612 1212 | Extn. : 479 | DID : 6624 2479 | Mob : +9198923 17596 | |
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Deepak Vaishnav
|
Q4FY11 Results Review |
|
Slowdown in earnings; ‘the funnel impact’ clearly visible |
Apparently the overall quarterly numbers were better than expected. We expected 20.3% and 17.2% growth in Net Sales, and EBITDA from Emkay Universe* (ex- Oil & Gas and Banking); the actual turned out to be a growth of 25.2% and 21.3%. We expected EBITDA margin to decline by 53 bps, the actual turned out to be a decline of 62 bps.
PAT growth for Emkay Universe* was better at 11.3% as against expectation of 4.1% growth.
However, the PAT growth number is skewed in favour of a few companies. Excluding the top 3 / top 5 contributors to the incremental PAT, the PAT growth is significantly lower at 3.2%/-1.4%.
Sales growth for Emkay Universe excluding top 3/5 contributors to the incremental PAT was 25%/24.4%. The EBITDA growth for the same was lower at 15.9%/12.8%. PAT was lowest at 3.2%/-1.4%. The ‘Funnel impact’ is clearly visible if the top contributors to incremental PAT are excluded. A sign of worry going forward…
Post Q4 results; we have revised earnings of 100 companies (30 upwards, 70 downwards). We have also changed recommendation for 28 companies (12 upgraded, 16 downgraded) and changed target prices of 87 companies (44 upwards, 43 downwards).
Emkay Universe companies are estimated to show 17%, 20% and 16% growth in sales, EBITDA and PAT respectively for FY12E.
Emkay Universe is currently trading at 13.9xFY12E earnings which is at a 6% discount to consensus Sensex PE of 14.8x FY12E consensus EPS of Rs 1238.
Surprises
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Positive |
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Negative |
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Aban Offshore |
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BHEL |
KSK Energy |
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Divi's Lab |
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Adani Power |
Lanco Infratech |
|
Godawari Power |
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Allahabad Bank |
Reliance Communications |
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Gujarat Industries Power |
|
Bank of India |
State Bank of India |
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HPCL |
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Bharat Bijlee |
Sterlite Tech |
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Indian Oil |
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Blue Star |
Tamilnadu Newsprint |
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JK Tyre |
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Chambal Fertilisers |
Torrent Pharma |
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JSW Energy |
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Coromandel International |
TRF |
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JSW Steel |
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EMCO |
Unichem Labs |
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Mahindra Satyam |
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Essel Propack |
Voltas |
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Orient Paper |
|
Great Offshore |
|
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Reliance Power |
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India Cements |
|
|
Sterlite Industries |
|
Jaiprakash Power Ventures |
|
Regards,
|
Ajay Parmar |
|
Head - Institutional Research | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : ajay....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 258 | DID : 66121258 | Mob : +919820102726 | |
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Deepak Vaishnav
|
Unichem Labs |
|
In Restructuring Phase – Downgrade to Hold |
HOLD
CMP: Rs 161 Target Price: Rs 167
n Unichem is restructuring its distribution model in domestic market and moving from distributors to C&F agents which will result in loss of one months domestic sales in FY12
n Higher attrition rate & recruitment of new MR’s will take a toll on domestic business resulting in 8-10% growth in FY12
n Outsourcing contract with MNC generic company will commence in H2FY12E; potential revenues of Rs600mn & Rs1.2bn in FY12/13E respectively
n Inventory rationalization and addition of new MR’s will continue to pressurize margins, cut earnings by 17%/ 15% to Rs11.2/ Rs15.2 for FY12/FY13E; re-rate the stock to hold
Deepak Vaishnav
|
Idea Cellular |
|
Beat estimates, Upgrade to HOLD |
HOLD
CMP: Rs 73 Target Price: Rs 72
n Strong revenue growth of 7.1% qoq to Rs42.3bn v/s our estimate of Rs41.7bn. Higher other operating rev. & flat network opex qoq aided healthy EBITDA margin at 25.4%
n EBIDTA at Rs10.7bn (our est. 9.9bn) and Q4FY11 PAT at Rs2.7bn (our est. Rs2.5bn). On-off reversal in network opex was to the tune of Rs380mn v/s 150mn in Q3FY11
n Robust 8.7% rise in traffic on network. ARPU declined to Rs161 v/s Rs 168 in Q3FY11. MOUs declined marginally to 397 v/s 401, while ARPM was down 2.9% qoq
n Valuations at 8.0x & 6.6x EV/EBIDTA for FY12E & FY13E respectively. Upgrade to HOLD from SELL rating with revised target Rs72 (earlier Rs60)
Regards,
|
Naval Seth |
|
Research Associate | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : naval...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 414 | DID : 66242414 | Mob : +919930468398 | |
|
|
Deepak Vaishnav
|
Hindustan Zinc |
|
It’s got the silver lining |
BUY
CMP: Rs 136 Target Price: Rs 173
n World’s largest integrated zinc producer with mines, smelters and captive power. High grade reserve - resource base with 25 years mine-life assures sustainable growth
n First quartile unit cost of production at US$808/ tonne in FY11 (which is about 50% of the global marginal cost of production) to help EBITDA margins remain well above 50%
n Current expansions to lead to significant contribution by the silver business to bottomline. Cash per share to increase to Rs 57 in FY13E
n We like its stable business with strong potential and attractive valuations, which should outplay short- term concerns; Initiate coverage with a target price of Rs 173; Buy
Regards,
|
Jagdish Agarwal |
|
Senior Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : jagdish...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 381 | DID : 66121381 | Mob : +919820869499 | |
|
Goutam Chakraborty |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com| | Email : goutam.ch...@emkayglobal.com |
|
Board No. +91-22-66121212 | Extn. 275 | DID : 66121275 | Mob No. : +919867361765 | |
|
|
Deepak Vaishnav
|
DLF |
|
Concerns linger |
REDUCE
CMP: Rs 211 Target Price: Rs 203
n Exit to PE investor, post-merger structure and blockage of capital in assets with low visibility have stretched DLF’s balance sheet
n Core-business cash generation will go towards debt servicing; only divestment of non-core assets will lead to meaningful reduction in company’s debt
n DLF’s plotted-development focused strategy plays low on value economics, but is a smart respite given the current economic environment and company’s financial health
n Valuing the company on SOTP-basis with NAV at Rs 203 with Reduce rating. Post-crisis, the stock trades at lowest P/BV justified by lowest ROE and highest D/E ratio
Regards,
|
Tejas Sheth |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : tejas...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn.: 482 : | DID : 66242482 | Mob : +919920314167 | |
|
|
Deepak Vaishnav
|
Perplexity continues to prevail |
View: Perplexity
continues to prevail over the direction of the index. F&O indicators
suggest a cautious view while continued buying from FIIs in the cash segment
favors bulls. The Nifty has a strong support placed at around the
5580-5630 levels. A close below 5580 levels might indicate a reversal to the
current rally.
The Nifty
witnessed strong resistance at its 200-day moving average placed at around the
5740 levels. Selling pressure prevailed for most part of the session, forcing
the index to close in the red. NSE cash volumes stood at Rs122.69 billion as
against Rs120.23 billion seen in the penultimate session.
Nifty July futures witnessed closure of 0.14 million shares in open interest to
22.45 million shares from 22.59 million shares. Interestingly, open interest in
FIIs index futures segment increased marginally to 0.45 million contracts from
0.44 million contracts. FIIs remained net sellers to the tune of Rs5620 million
suggesting build up of short positions.
The Nifty put-call of open interest declined to 1.25 levels last Friday,
reversing from 1.34 levels. Historically since January, 2011, reversals in the
ratio are seen from levels of 1.35 -1.40 followed by a decline in the index.
The ratio has a direct correlation with the index. Any further decline in the
ratio will indicate weakness creeping into the trades.
FIIs continued to buy in the cash segment. A massive inflow of Rs57.54 billion
has been observed in the current month. Inflows from mutual funds stand at
Rs2.52 billion.
Click here to read report: Emkay Alternate Intelligence
Regards,
|
Neeraj Agarwal |
|
Derivatives Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : neeraj....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 344 | DID : 66121344 | Mob : +919004089401 | |
|
|
Deepak Vaishnav
|
Power Sector |
|
Forward curve; buyers shying away from bilateral |
n In CERC's May 2011 report, more than price what’s important to note is 50%+ contracts are 'less than a week' and contract volumes are at just 18% of April month contract volumes
n This means buyers are shying away from entering into '1 week +' contracts. This we believe is after-effect of exchange prices being lower than bilateral prices for past one year
n Other observations – 1) 65% of volumes signed in May11 are at Rs3.58/unit, 5% volumes at Rs4/unit + and 2) Aug11 price prediction is Rs3.84/unit and Sep11 even lower at Rs3.58/unit.
n Foresee bilateral merchant prices heading towards avg. Rs3.5-3.7/unit in FY12E & Rs3.0-3.2/unit in FY13E (Rs4.7/unit in FY11); Use any upswings to reduce weights
Deepak Vaishnav
|
Metals & Mining |
|
Australia - Carbon Tax |
Australia carbon tax- a green initiative;
Australia announced yesterday its carbon tax plan in an effort to help fight climate change. Under the scheme to begin on July 1, 2012, about 500 of Australia's top polluters will pay a fixed price, starting at A$23 (~US$25) per tonne of their carbon dioxide emissions for the first three years which will rise by 2.5 per cent annually until it is replaced by an emissions trading scheme in 2015.
Under the scheme, it would affect the coal miners and large power consuming companies (eg aluminium smelting) the most. The carbon tax of A$23 per tonne of carbon dioxide equivalent emission would translate to about A$2 per tonne of coal output and this number could be very different for smelting companies depending on how energy efficient (or inefficient) their operations are.
Businesses in the agriculture, fisheries and forestry industries will initially be exempt from fuel cost increases. Heavy transport is being excluded for two years. The package will seek to close Australia's dirtiest power stations by 2020;
Deepak Vaishnav
|
Mid-cap banking stocks likely to under-perform |
Nifty July futures added close to 0.22 million shares in open interest to 22.67 million shares from 22.45 million shares. The cost of carry declined to 0.36% from 3.76% on a daily basis suggesting build up of short positions. Nifty July futures accumulated maximum open interest of 22.67 million shares in the current series, significantly lower than the past 3 series average of 26.62 million shares. With selling pressure continue to prevail, any significant increase in open interest in Nifty July futures will confirm the trend reversals.
Maximum open interest among Nifty July call options is seen at 5800 strike with an open interest of 8.56 million shares. Among Nifty July put options, the maximum open interest is concentrated at 5500 strike with an open interest of 7.68 million shares. With increased accumulation observed in lower strikes, we expect a shift down in the accumulation pattern.
Selling pressure is likely to prevail in mid-cap banking stocks. Most of the stock futures have seen an increase in open interest along with a decline in cost of carry suggesting build up of short positions. Open interest in Bank of India increased to 3.22 million shares from 3.10 million shares along with a decline in cost of carry to -15.26% from -9.28%. IOB added 2.27% shares in open interest to 1.53 million shares on back a decline in cost of carry to -10.58% from -1.27%. We expect the sector to under perform in the near term.
Deepak Vaishnav
|
Nifty expected to trade in a range |
View: Overall data indicates the Nifty has an immediate support placed at around the 5500 levels. With most of the Asian indices trading in positive territory today, Nifty is expected to exhibit a similar kind of move. Resistance is likely to prevail at the 200-day EMA placed at around the 5585 levels.
Despite the sell-off observed in the index yesterday, Nifty July futures failed to register any significant accumulation in open interest. The open interest increased marginally by 0.04 million shares to 22.71 million shares. FIIs continued to remain net sellers in index futures segment to the tune of Rs6450 million along with an increase in open interest to 0.48 million contracts from 0.47 million contracts.
Among Nifty July options, Nifty July call strike of 5500 and Nifty July put strike of 5300 added around 2.16 million shares each yesterday. Maximum open interest continues to remain at 5800 call strike (8.51 million shares) and 5500 put strike (8.45 million shares). Nifty July 5400 put strike witnessed closure of 0.50 million shares to 6.57 million shares. Data indicates the index has an immediate support placed at around the 5500 levels. Any slide below 5500 levels will induce selling pressure in the Nifty targeting levels of 5250-5300.
Deepak Vaishnav
|
Infosys Limited |
|
In line show marred by heightened expectations |
ACCUMULATE
CMP: Rs2,794 Target Price: Rs3,250
n Infy reported marginally lower than expected operating performance (4.3% QoQ US$ rev growth with a 300 bps QoQ decline) with profit beat driven by higher other income
n Opmetrics performance mixed with top 5/10 clients growing by ~7.7/5.6% QoQ while Europe up by ~0.5% QoQ despite cross currency aid as Telecom continues to drag(-7% QoQ)
n FY12 rev guidance unchanged at 18-20% YoY while INR EPS outlook raised to ~Rs 128-130 along expected lines. Sep’11 outlook disappointing at +3.5-5% QoQ given historical record
n Tweak FY12/13E EPS down by 0.7/0.6% to ~ Rs 138/164, ACCUMULATE with an unchanged TP of Rs 3,250. Macro uncertainty plus INR appreciation remain downside risks
Regards,
|
Manik Taneja |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manik....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 253 | DID : 66121253 | Mob : +919833934924 | |
|
Priya Gajwani |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : priya....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 385 | DID : 66121385 | Mob : +919867710329 |
|
|
Deepak Vaishnav
|
Tata Consultancy Services |
|
Continues to be on a song |
ACCUMULATE
CMP: Rs 1,125 Target Price: Rs 1,300
n Inline op performance with rev at US$ 2,412 mn(+7.5% QoQ, est +6.2% QoQ) while mgns slipping by ~230 bps QoQ (V/s exp of ~200 bps). Profit beat driven by higher other income
n Broad based growth across verticals/services and geographies. 10 deal wins during the qtr and remains confident of growth citing large deal pipeline ahead.
n Op metrics performance rock solid yet again. Co remains confident of improving margins ahead and sees no significant supply side headwinds
n Raise FY12/13E EPS by ~2.4/1.5% respectively to Rs 52.5/62.6 driven primarily by higher other income assumptions. Retain ACCUMULATE with a revised March’12 TP of Rs 1,300
Regards,
|
Manik Taneja |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manik....@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 253 | DID : 66121253 | Mob : +919833934924 | |
|
|
Deepak Vaishnav
|
Bajaj Auto Ltd. |
|
Weak start to FY12, Maintain BUY |
BUY
CMP: Rs1,421 Target Price: Rs1,700
n APAT at Rs 7.1bn is below est. (Rs 7.8bn) due to lower sales (Rs 47.8bn vs est-Rs.49.3bn) and other inc. (Rs 731mn vs est.-Rs 1bn). Margins at 19.1% was below est of 20.4%
n 2.2% QoQ decline in domestic ASP to Rs 43,563 is the key reason for disappointment in sales. Exports ASP at Rs 39,498 was in line with est.
n Outlook remains positive driven by strong momentum in two wheelers, launch of Boxer and exports
n Currently, retain our FY13E EPS of Rs 113 and BUY rating. Shall further update post conference call scheduled on 18th July
Regards,
|
Chirag Shah |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : chira...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 252 | DID : 66121252 | Mob : +919820580701 | |
|
|
Deepak Vaishnav
|
Southwest Monsoon |
|
Continued sign of weakness |
Continued sign of weakness
The advancement of the rainfall weakened further as the cumulative rainfall for the season till July 13, 2011 stood 3.3% below normal as against 1.2% above Normal in the preceding week. This is for the first time in this season that the cumulative rainfall has gone down below normal.
Though number of divisions with Excess rainfall reduced to 6 from 12 in the preceding week, the number of divisions with normal rainfall increased to 22 from 15 in the preceding week. Moreover the number of deficient/ scanty divisions also came down to 8 from 9 in the preceding week. The total rainfall till date is about 30.4% of the normal (see table VI) rainfall for the full season compared with 28.6% for the corresponding period last year.
…however rainfall picks up in key agri states
For the week ended July 13, 2011, though cumulative rainfall in rain dependent areas declined to 2.7% above normal from 6.9% above normal in preceding week, rainfall in certain key agri states like Gujarat and Maharashtra has shown significant improvement during the week with 10-80% above normal rains.
Reservoir levels at 30% of their FRL’s
The reservoir levels stand at 30% of their full reservoir level (FRL) as against 24% Long Period Average (LPA) .
Forecast rainfall for parts of central, eastern and north eastern regions
As the advancement of the monsoon continues, parts of central, eastern and north eastern regions in India are likely to receive a good amount of rainfall with rest of India expected to receive lesser rainfall.
Major crop acreage at ~30mn hectares down 3.7%yoy
Acreage under major crops decreased to ~30mn hectares from 31.1mn hectares last year; decrease of 3.7%. Sown area under Cotton and Coarse cereals decreased by ~32.5% and 10.7% respectively as compared to the same period last year whereas area under rice, pulses and sugarcane saw an increase.
Regards,
|
Kashyap Jhaveri |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : kashyap...@emkayglobal.com |
|
Board No. : +91-22-6612 1212 | Extn. : 249 | DID : +91-22-6612 1249 | Mob : +91-98202 41712 | Fax : +91-22-6624 2410 | |
|
|
Deepak Vaishnav
|
Motherson Sumi Systems Ltd. |
|
US 5bn@2015-on track, Retain Accumulate |
ACCUMULATE
CMP: Rs231 Target Price: Rs260
n Peguform’s (PF) acquisition appears a strategic fit in terms of product, clients and geography
n SWS’ (25% equity in MSSL) resistance for 100% exposure in PF (non core business) could be the reason for 51:49 JV between MSSL and SMFL (parent of MSSL) to acquire PF
n Expect acquisition price to be ~Euro 235mn (3.5x CY10 EV/EVIDTA or 0.18x EV/Sales). SMR was acquired at 0.12x EV/Sales. Expect debt attributable to PF ~Euro150 to 200mn
n Acquisition can be EPS accretive from first year. Retain Accumulate rating
Deepak Vaishnav
|
Range bound trade to prevail |
View: Overall data indicates the Nifty to trade in a range. Lack of certainty is prevailing on the direction of the index. Strong support is placed at around the 5500 levels while resistance is placed at around the 5670-5700 levels.
Nifty July futures accumulated maximum open interest of 22.71 million shares. The figures stand lowest in last 5 series. A similar kind of accumulation was seen in the January series wherein the maximum open interest stood at 22.62 million shares. Below-average accumulation indicates lack of certainty prevailing on the direction of the index.
Among Nifty July put options, maximum open interest is concentrated at 5500 strike with an open interest of 9.96 million shares. It is followed by an accumulation in 5400 strike with an open interest of 7.33 million shares. With a big difference prevailing among the top two strikes, we believe the index has a strong support placed at around the 5500 levels. Fresh selling is likely to prevail if the Nifty breaks below 5500 levels.
Among Nifty July call options, maximum open interest is concentrated at 5800 strike with an open interest of 8.66 million shares. Accumulation in 5700 strike stands tad below at 8.23 million shares. We expect maximum open interest among Nifty call options to shift downward to 5700 strike from 5800 strike suggesting strong resistance to prevail at around the 5670-5700 levels.
Deepak Vaishnav
|
South Indian Bank |
|
Balance sheet growth drives profit |
ACCUMULATE
CMP: Rs25 Target Price: Rs30
n SIB’s Q1FY12 results inline with expectations with NII of Rs2.1bn and net profit of Rs825mn
n The NII grew by 22.5% to Rs2.1bn led by strong 8.1%qoq growth in advances, albeit NIM’s contracted by 42bps qoq to 2.4% higher than expected
n The asset quality remained stable with GNPA and NNPA at 1.1% and 0.3%. The provision cover also remained higher at 72.7%
n We remain positive with 30% CAGR in PAT over FY11-13E, robust Tier I and clean asset quality. Maintain ACCUMULATE with TP of Rs30. High gold loan portfolio a key risk
Deepak Vaishnav
|
Southwest Monsoon |
|
The progress slows down |
Advancement of the monsoon falters
The advancement of the rainfall faltered sharply as the rainfall for the week ended July 06, 2011 stood at 25.1% below normal as against 10% above normal rains in the preceding week. However cumulative rainfall for the season till July 06, 2011 stood 1.2% above normal.
The number of divisions with Excess/ Norman rainfall continued to stand at ~27 (out of 36) for the week ended July 06, 2011. The total rainfall till date is about 24.5% of the normal (see table VI) rainfall for the full season compared with 22.9% for the corresponding period last year.
Lower rains in important agricultural states
For the week ended July 06, 2011, rainfall in rain dependent areas came down to 29.9% below normal from 15.9% above normal in preceding week. However rainfall for the season still stood at 6.9% above normal in rain dependent areas. However certain key agri states like Gujarat, Maharashtra and Andhra Pradesh received 22-80% below normal rainfall for the season till date.
Reservoir levels at 27% of their FRL’s
The reservoir levels stand at 27% of their full reservoir level (FRL) and at twice of their LPA.
Forecast rainfall for parts of central, eastern and north eastern regions
As the advancement of the monsoon continues, parts of central, eastern and north eastern regions in India are likely to receive a good amount of rainfall with rest of India expected to receive lesser rainfall.
Major crop acreage at ~30mn hectares down 3.7%yoy
Acreage under major crops increased decreased to ~30mn hectares from 31.1mn hectares last year; decrease of 3.7%. Sown area under Cotton and Coarse cereals decreased by ~32.5% and 10.7% respectively as compared to the same period last year whereas area under rice, pulses and sugarcane saw an increase.
Deepak Vaishnav
|
BHEL |
|
No catalysts; Retain HOLD |
HOLD
CMP: Rs 1,909 Target Price: Rs 2,150
n Q1FY12 performance below estimates – (1) Revenue up 10% yoy to Rs73 bn (2) EBITDA margins up 70 bps yoy to 15.3% (3) APAT up 22% yoy to Rs8.2 bn
n Dismal order inflows – Secures orders worth Rs25 bn or 4% of target FY12E order inflows. Order Book declines 2% qoq to Rs1596 bn
n Typically first quarter earnings contribution lowest – hence not deterred by lower than expected performance. Maintain earning estimates of Rs131.9 for FY12E & Rs139.4 for FY13E
n Undemanding valuations at 13.7X FY13E earnings. There is lack of earnings or re-rating catalyst. Retain our HOLD rating with target price of Rs2150/Share
Regards,
|
Pritesh Chheda |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Prerna Jhavar |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : prerna...@emkayglobal.com |
|
Board No. : +91-22-6612 1212 | Extn. : 337 | DID : 6612 1337 | Mob : +91981935 0593 | |
|
|
Deepak Vaishnav
|
Banking |
|
First-Quarter Monetary Policy Review |
n RBI hikes the Repo rate by 50bps to 8.0% and accordingly the reverse repo stand adjusted at 7.0% and MSF (Marginal Standing Facility) at 9.0%
n RBI even more hawkish than last time as it sees strong demand side pressure still persisting with inflation remaining higher than expected
n Silver linings - Moves inflation target to 7% which looks more realistic, GDP growth target still at 8%. Shows that RBI’s reluctantly willing to bear higher inflation with growth
n We expect the banks to hike lending and borrowing rates by 25-50bps. Bond yields have already fallen in line. Expect more hikes if inflation doesn’t fall below 9% by Oct-11
Deepak Vaishnav
|
Patni Computer |
|
Watershed along expected lines |
NOT RATED
CMP: Rs322 Target Price: N.A.
n June’11 rev fell short of est with a 3.4% QoQ decline to ~US$ 184 mn. Mgns declined ~ 640 bps QoQ to 11.4% driven by lower top line, wage increments and higher SG&A expenses
n Metrics performance poor with the only bright spot being growth within top 5/10 clients at ~2.6/2.3% with performance weak across verticals and outside top 10 clients (-8.2% QoQ)
n Cut our ‘lower than street’ CY11/12E EPS by ~18%/12% to Rs 25/30.4 as we incorporate lower op performance, higher amortization and taxes. Expect sharper cuts from street
n Valuations at ~10x CY12E EPS are modest ( after a 30%+ fall in past 3M’s), upsides hinged on potential delisting and op improvement( more likely a late CY12/early CY13 case)
Deepak Vaishnav
|
GAIL Ltd |
|
Lower subsidy sharing drives profitability |
ACCUMULATE
CMP: Rs458 Target Price: Rs510
n Revenue from natural gas transmission and trading business grew by 4.7% to Rs.8.7bn and 32.2% to 64.1bn YoY respectively due higher spot volume during the quarter
n Natural Gas transmission and trading volume declined by 2.8% to 117mmscmd and 2.6% to 82.6mmscmd respectively
n Subsidy payout for Q1FY12 grew by 53% YoY to Rs.6.8bn however, we expect lower subsidy burden for coming quarters due to recent price hike in LPG, Kerosene and reduction in duties
n Accumulate with TP of Rs.510, given its dominant market share in transmission business and expected volume growth. Subsidy sharing remains a key overhang on the stock
Deepak Vaishnav
|
Marico |
|
Impressive volumes, Maintain ACCUMULATE |
ACCUMULATE
CMP: Rs167 Target Price: Rs172
n Impressive volume growth drives a positive surprise in revenue, which grew 32.7% to Rs10.5bn. Higher copra prices restricts PAT growth to 15.3% to Rs850mn, in line
n Volume growth of 10% in Parachute and 15% in Saffola, post the sharp price increases – 32% in Parachute and 12% in Saffola, comes as a positive surprise
n Improvement in volume growth versus Q4FY11 and copra prices softening of 10% from recent peak boosts future earnings
n Upgrade our FY13E EBITDA and APAT estimates by 9% and 11% respectively. Maintain our ACCUMULATE rating with target price of Rs172/Share
Regards,
|
Pritesh Chheda |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Sweta Jain |
Deepak Vaishnav
|
Greaves Cotton |
|
Delivers despite odds; Reiterate BUY |
BUY
CMP: Rs88 Target Price: Rs124
n Q1FY12 performance meets expectations (1) Revenue growth at 16% yoy to Rs4.0 bn (2) EBITDA margins up 110 bps yoy to 14.2% (3) APAT up 26% yoy to Rs350 mn
n Continued traction in both division (1) Engines – Revenues up 14% yoy with EBIT margins at 17.6% (2) Infrastructure – Revenues up 29% yoy with EBIT of Rs2 mn
n Reiterate that GCL is in a sweet-spot with strong growth drivers in Engines (automotive) and Infrastructure segment (turned profitable)
n Trading attractively at 9.3X FY13E earnings with healthy cash flow generation, +30% ROE. Retain BUY rating with price target of Rs124
Regards,
|
Pritesh Chheda |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Prerna Jhavar |
Deepak Vaishnav
|
Asian Paints |
|
Peaking out… Downgrade to HOLD |
HOLD
CMP: Rs3,140 Target Price: Rs3,026
n Asian Paints’ (APL) sales growth of 23.5% to Rs 22.6bn is in line with our expectations. Ebidta margins at 17.3% and APAT up at Rs 2.6 bn, up 18.7% yoy, are above estimates
n Domestic volume growth in decorative paints remains strong at 14%. However, industrial coatings witness a weak quarter with muted performance
n Implemented 4.4% price hike in May, 2.5% in June and 1.3% in July - corresponding increase in raw material index is 14% - expect continued pressure on margins
n Revise FY12/13E EPS by +5% to Rs103.2 and Rs121. But, with our dislike for discretionary spends and moderation in volume growth, downgrade to HOLD with TP of Rs 3,026
Regards,
|
Pritesh Chheda |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Sweta Jain |
Deepak Vaishnav
|
Maruti Suzuki India Ltd. |
|
Currency the key driver, Maintain Accumulate |
ACCUMULATE
CMP: Rs 1,178 Target Price: Rs 1,400
n Strong operational performance (EBIDTA at Rs 8.1bn vs est. of Rs 7.4bn) results in PAT of Rs 5.5bn (est. Rs 4.1bn). Key highlight was higher ASP (up 4% YoY vs est. of 1% decline)
n Demand outlook to remain subdued for sometime given another rate increase. Expect demand to pick from festive season. Inventory in the system at ~4 to 5 weeks
n Lower our FY12/FY13 volumes by 6.3%6.7%. Factoring in prevailing forex rates as Yen exposure is hedged only for 2QFY12
n Lower FY12/FY13 EPS est. by 13.5%/18% to Rs 88.6/100. Lower our TP to Rs 1,400 (down 20%), retain ACCUMULATE rating. Key upside risk arises from favorable forex movement
Deepak Vaishnav
|
Ultratech Cement Ltd. |
|
Realizations surprise positively |
REDUCE
CMP: Rs1,028 Target Price: Rs1,050
n APAT at Rs6.83 bn – above estimates due to higher cement realizations & lower employee & other expenses. Higher exit prices of FY11 sustained in April & push quarter average realizations to Rs4427/t higher that estimates of Rs4283/t
n Better prices & lower costs drive EBITDA/t to Rs1205 highest in last 8 quarters (+27% qoq) helping EBITDA growth of 16% qoq. Though effect of coal price hike visible (P&F/t +17.6% qoq), we believe it is yet to reflect fully
n Sluggish cement demand (-0.5% ytd) starts impacting cement prices- down ~Rs20/bag from Aprill-11 peaks. New mining tax could be another blow- could increase limestone & coal cost
n Stock trades at PER of 14.5X & EV/ton of USD125 on FY12E- Valuation still not in comfort zone, considering prices & cost headwind making current profitability unsustainable-REDUCE
Regards,
|
Ajit Motwani |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : ajit.m...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 255 | DID : 66121255 | Mob : +919820934229 |
|
|
|
Deepak Vaishnav
|
United Phosphorus |
|
Another acquisition in Brazil |
BUY
CMP: Rs 157 Target Price: Rs 215
n UPL announced acquisition of 51% stake in DVA Agro Brazil for $150mn from its parent DVA Agro
n DVA Agro Brazil operates in Brazilian agrochemical market across the segments with revenues of $130mn in CY2010
n We understand that DVA margins are slightly lower than UPL’s (19%) however with debt free (only working capital) status it expected to be EPS accretive for UPL
n Acquisition (2nd in last six months) to strengthen UPL’s foothold in fast growing Brazilian agchem market. We believe this to be favourable for UPL and reiterate BUY
Regards,
|
Rohan Gupta |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : rohan...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 248 | DID : 66121248 | Mob : +919619321479 | |
|
|
Deepak Vaishnav
|
Canara Bank |
|
Slippages may have peaked out |
HOLD
CMP: Rs496 Target Price: Rs535
n CBK results below expectations with NII at Rs17.9bn and net profit at Rs7.3bn. Slippages at Rs13.6bn, though remain high were lower than Rs19bn in previous quarter
n NII lower driven by interest income reversal of Rs2bn. Adjusted for the same NII growth was at 15.4% (in line). NIMs down by 40bps as expected
n One positive in the results – one of very few banks to have system classified NPAs upto as low as Rs2 lakh loan. We do not expect any –ve surprises on NPAs going forward
n Lowering earnings by 10.2%/4% for FY12E/FY13E for higher provisions (one-time). Large infra book and low NIMs remain key -ves. Maintain HOLD with TP of Rs535 (1.1x FY13E ABV)
Deepak Vaishnav
|
HCL Technologies |
|
In line results, retain HOLD |
HOLD
CMP: Rs503 Target Price: Rs540
n HCLT reported rev at US$ 963 mn (+5.3% QoQ) in line with est with growth yet again led by IMS (+10.5%QoQ) and Apps (+4.3%QoQ) while BPO struggles continue(-4.2%QoQ)
n Op mgns at 18% (+130 bps QoQ) , in line with est driven largely by SG&A leverage (down ~90 bps QoQ). Marginal profit beat aided by higher other income
n Growth well spread across geographies with non top 20 clients continuing to grow faster than co. Manufacturing leads the growth with a 8% QoQ revenue increase
n Tweak FY12E/13E EPS lower by 0.6/1.7 to ~Rs 31.8/37.7 driven by lower mgn assumptions (17.4/16.8% V/s 17.6/17.3% earlier). HOLD , unchanged TP of Rs 540, on 14xFY13E EPS
Deepak Vaishnav
|
Orient Paper & Industries Ltd |
|
Demerger to trigger value unlocking process |
BUY
CMP: Rs62 Target Price: Rs82
n Q1 APAT at Rs584mn (+70% yoy) above est (Rs457mn) led Revenues at Rs5.33bn (+21%), Cement (+11.4%), Electricals (+22.3%) & Paper (+137%)
n Cement revenues +11.4% yoy to Rs3.34 bn as realizations improved 29% yoy and 5.6% qoq –driven by elevated levels of FY11 exit cement prices resulting in higher quarter averages
n Board approves de-merger of cement business into a new wholly owned sub- Orient Cement Ltd (OCL) - triggers the much awaited value unlocking process
n Stock trades at undemanding valuation of 6.6x FY12 PER & EV/EBIDTA of 4X. We maintain our BUY rating on the stock with revised target price of Rs82
Deepak Vaishnav
|
Bank of Baroda |
|
Lower provisions drive profits |
HOLD
CMP: Rs875 Target Price: Rs950
n BOB’s NII below our/street estimates at Rs22.9bn, PAT at Rs10.3bn in line driven by lower provisions . But, lower provisions jacked up net NPAs by 30% qoq
n Balance sheet grew 3.2% sequentially; Deposits / loans were up 2.5%/1.6% qoq respectively. Margin compression came in at 58bps qoq to 2.9%
n Asset quality deteriorates, albeit superior vis-à-vis peers; Slippages came in at Rs5.7bn (1% annualized). The bank has moved all its accounts to system based NPA recognition
n Valuation at 1.4x/1.2x FY12E/FY13E ABV commensurate with 1.2% RoAs. Maintain HOLD rating on the stock with price target of Rs950
Deepak Vaishnav
|
Hexaware Technologies |
|
On a song, raise TP further to Rs 95 |
ACCUMULATE
CMP: Rs82 Target Price: Rs95
n June’11 results vindicate our positive thesis with revenues at US$ 75 mn(+6.2% QoQ) and op mgns improving by ~100 bps QoQ to 15.3% despite wage increments and strong net hiring
n Profits at Rs 603 mn (+12% QoQ) beat estimates driven by better margins aided further by higher than expected hedging gains and lower taxes
n CY11 revenue outlook raised to 30% YoY growth to US$ 302 mn( V/s US$ 295 mn earlier). Sep’11 quarter revenue guidance is strong at 4.3-5.6% QoQ increase
n Raise CY11/12E earnings by ~14%/11% to Rs 7.5/8.2 driven by higher margin assumptions (refer section below). Retain ACCUMULATE with a revised TP of Rs 95 (V/s Rs 80 earlier)
Deepak Vaishnav
|
Sterlite Industries |
|
Performance in line; cost pressure to be challenging |
ACCUMULATE
CMP: Rs172 Target Price: Rs203
n Q1FY12 performance in line with estimates. Topline grew by 65% YoY but fell 2% QoQ to Rs 98.6 bn. Strong LME has been the key driver for higher revenue
n EBITDA came at Rs 27.6 bn showing a YoY growth of 84%. On QoQ however it fell by 10% on account of higher cost of production in Aluminium and power business
n Higher depreciation and interest costs during the quarter restricted the PAT at Rs 16.4 bn, up by 63% YoY however down by 15% QoQ
n Despite better performance by the HZL, uncertainty remains on the other businesses coupled with rising costs. We revise our SOTP target price to Rs 203/ share; Maintain Accumulate
Regards,
|
Jagdish Agarwal |
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Senior Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : jagdish...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 381 | DID : 66121381 | Mob : +919820869499 | |
|
Goutam Chakraborty |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com| | Email : goutam.ch...@emkayglobal.com |
|
Board No. +91-22-66121212 | Extn. 275 | DID : 66121275 | Mob No. : +919867361765 | |
|
|
Deepak Vaishnav
|
TRF |
|
Mixed Bag, Retain Hold |
HOLD
CMP: Rs409 Target Price: Rs390
n Improved performance – Standalone Revenue up 4% yoy to Rs1.5 bn & Net profit of Rs32 nm – in line. Product delivers with 23% margins, Project disappoint with Rs60 mn EBIT loss
n Auto components posts strong operational performance (1) Revenue up 29% (2) EBITDA margins up 110 bps yoy to 3.3%. But APAT low at Rs5 mn due to low other income & high tax
n TRF shares optimistic outlook for FY12E (1) Order inflows at Rs10 bn (2) MHE revenue growth at 25% (3) Auto to drive growth – Sales Rs6 bn at 5% margin
n Downgrade consolidated earnings by 9% yoy to Rs34.1 for FY12E and Rs39.0 for FY13E. Retain HOLD with revised price target of Rs390 per share (@10X FY13E)
Regards,
|
Pritesh Chheda |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Prerna Jhavar |
Deepak Vaishnav
|
Lupin Ltd. |
|
Results in-line, Maintain Buy |
BUY
CMP: Rs449 Target Price: Rs501
n Lupin’s Q1FY12 results were in-line with expectations. Revenues at Rs15.7bn (up 17%YoY), b) EBITDA at Rs2.9bn (up 4% YoY), and c) APAT at Rs2.1bn (up 7% YoY)
n Revenues were largely driven by robust growth momentum in India, Japan and other emerging markets. US business grew at a lower rate of 7% due to pricing pressure in Lotrel
n Going forward, launch of 10 ANDA’s including 3-4 OCs and 2 FTFs in US, 40 new launches in India and 7 new launches in Japan imparts good revenue visibility
n Maintain Buy recommendation with a target price of Rs501
Regards,
|
Deepak Malik |
|
Senior Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : deepak...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 257 | DID : 66121257 | Mob : +91 9769811227 | |
|
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Deepak Vaishnav
|
JSW Steel |
|
Satisfactory performance; challenges ahead |
ACCUMULATE
CMP: Rs870 Target Price: Rs1,016
n Q1FY12 performance came slightly better than our estimates. Topline rose 53% YoY and 2% QoQ to Rs 74.4 bn, backed by strong sales volume of 1.714 mt including 0.16 mt from Ispat
n Focus on value added products and change in raw material mix helped EBITDA to grow by 33% YoY and restricted QoQ fall to 14% to Rs 14.3 bn. EBITDA/ tonne came at US$181
n Higher depreciation and interest costs on QoQ basis restricted the PAT at Rs 4.85 bn, up 64% YoY but down 39% QOQ. Consolidated PAT does not include Ispat’s performance
n Margin pressure to be prominent going forward. Including Ispat’s contribution we revise our EPS to Rs 75 and Rs 99 for FY12E and FY13E respectively; Accumulate
Regards,
|
Goutam Chakraborty |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com| | Email : goutam.ch...@emkayglobal.com |
|
Board No. +91-22-66121212 | Extn. 275 | DID : 66121275 | Mob No. : +919867361765 | |
|
Jagdish Agarwal |
|
Senior Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : jagdish...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 381 | DID : 66121381 | Mob : +919820869499 | |
|
|
Deepak Vaishnav
|
Glenmark Pharma |
|
Robust Growth Outlook – Upgrade to Buy |
BUY
CMP: Rs 338 Target Price: Rs 401
n Q1FY12 revenues were above our expectations. Revenues at Rs8.6bn (up 27%YoY), b) Adj. EBITDA at Rs1.8bn (up 30% YoY), and c) APAT at Rs1.1bn (up 30% YoY)
n Revenue growth was driven by a) 28% growth in Speciality business (60% contribution to top-line) and b) 28% growth in Generics business (40% contribution to top-line)
n Licensing income from Sanofi was Rs. 1.1 bn for GBR 500 compared to Rs. 895 mn from Sanofi last year for GRC 15300
n On account of good momentum in key business verticals, we upgrade our rating on the stock to Buy with a target price of Rs401 (18x FY12 Base Business EPS + Adjusted NPV of Rs45)
Deepak Vaishnav
From: Emkay Global Research <emkayglob...@emkay.co.in>
Date: Thu, Jul 28, 2011 at 10:00 AM
Subject: HCL Tech Q4FY11 Result Update; In line results, retain HOLD; Target: Rs540
To: emk_r...@emkay.co.in
|
HCL Technologies |
|
In line results, retain HOLD |
HOLD
CMP: Rs503 Target Price: Rs540
n HCLT reported rev at US$ 963 mn (+5.3% QoQ) in line with est with growth yet again led by IMS (+10.5%QoQ) and Apps (+4.3%QoQ) while BPO struggles continue(-4.2%QoQ)
n Op mgns at 18% (+130 bps QoQ) , in line with est driven largely by SG&A leverage (down ~90 bps QoQ). Marginal profit beat aided by higher other income
n Growth well spread across geographies with non top 20 clients continuing to grow faster than co. Manufacturing leads the growth with a 8% QoQ revenue increase
n Tweak FY12E/13E EPS lower by 0.6/1.7 to ~Rs 31.8/37.7 driven by lower mgn assumptions (17.4/16.8% V/s 17.6/17.3% earlier). HOLD , unchanged TP of Rs 540, on 14xFY13E EPS
Regards,
|
Manik Taneja |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : manik....@emkayglobal.com |
Deepak Vaishnav
|
Nava Bharat Ventures Ltd. |
|
Lower MAT credit impacted PAT, Maintain Accumulate |
ACCUMULATE
CMP: Rs237 Target Price: Rs290
n Q112 APAT of Rs528mn (down 51% yoy) is below est. on lower MAT credit. Highlights - merchant tariff Rs4.0/unit, PLF 84% (lower demand), cost of generation Rs2.3/unit
n Contract with TISCO to start in 2Q. Under the deal (1) NBVL to supply 35000MT ferro chrome for 3 yrs, (2) 17MW captive power supply at Rs3.9/unit & (3) fixed margin of Rs1000/MT
n Zambia coal trading to start from Sep11 - 1mnMT in FY14E. 64MW COD still pending - expected in 2Q. Indonesian investment safe, NBVL to get 20% offtake also.
n Review earnings post concall. Reiterate NBVL is better placed in terms of fuel security (washery rejects and Zambia hedge) and offtake (natural hedge - ferro alloys). Accumulate
Regards,
|
Amit Golchha |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email : amit.g...@emkayglobal.com |
|
Board No. : +91-22-66121212 | Extn. : 408 | DID : 66242408 | Mob : +919833357365 | |
|
|
Deepak Vaishnav
|
eClerx Services Ltd. |
|
Another strong show, raise TP to Rs 885 |
ACCUMULATE
CMP: Rs819 Target Price: Rs885
n eClerx ‘s June’11 operating performance in line with expectations with revenues at US$ 22.3 mn(+5.7% QoQ) and margins down by ~280 bps QoQ to 39.2%
n Profits at Rs 351 mn (+19% QoQ) , marginally higher than expectations driven largely by higher other income. Net addition strong at 357(+10% QoQ) taking total HC to 4,015
n Top 5 clients drive growth with ~8% QoQ growth. Co remains confident of deal pipeline ( 2-3 opportunities within top clients) along with intent to reduce client concentration
n Retain ACCUMULATE with a revised DCF based March’12 TP of Rs 885(V/s Rs 840 earlier) as we tweak our FY12/13E EPS up by 1.6%/3.2% to Rs 52.2/63.9
Deepak Vaishnav
|
Punjab National Bank |
|
Strong core performance; slippages come down |
ACCUMULATE
CMP: Rs1,103 Target Price: Rs1,270
n PNB reports excellent results with NII of Rs31.2bn (19% yoy), core OP of Rs29bn (31% yoy) and slippages at Rs11.8bn (vs Rs12.5bn in Q4FY11). Still net NPAs commendably remain flat
n NIMs maintained at 3.84%, down just 7bps qoq. CASA maintained at 37%, down 100bps qoq. Overall fees grew by 19% yoy (6% qoq).
n Slippages lower at Rs11.8bn driven by lower slippages from restr. assets. Total slippages from restr. assets at 12.6%. Strong profits used for raising PCR to 74.3% (73% in Q4FY11)
n With NPAs coming under control, strong topline growth to also reflected in bottomline growth. Valns not unreasonable at 1.5x FY12E/1.2x FY13E ABV with average RoAs of 1.3%
Deepak Vaishnav
|
Hindustan Unilever |
|
Margin levers to play-out, Maintain Accumulate |
ACCUMULATE
CMP: Rs323 Target Price: Rs328
n Results are in line with expectations - Sales growth at 14.7% to Rs 55.8 bn is driven by 8.3% volume growth and APAT growth of 10.5% to Rs 5.7 bn
n Soaps and detergents grew 12.8% and PBIT margins witnessed qoq improvement of 170 bps to 9.2%. Personal products grew 19.4% with 50 bps PBIT margin expansion yoy
n Though implied price-led growth of 6.4% is the highest in last 8 quarters, pricing actions are yet to play out. We foresee improvement in EBITDA margins on qoq basis
n Raise our FY12E/13E EPS by 2% to Rs 11.1 and by 5% to Rs 12.6, respectively. We maintain our ACCUMULATE rating with target price of Rs 328/share
Regards,
|
Pritesh Chheda |
|
Research Analyst | Emkay Global Financial Services Ltd. | www.emkayglobal.com | Email: pritesh...@emkayglobal.com |
|
Board No. : +91- 22- 6612 1212 | Extn. : 273 | DID : +91-22- 6612 1273 | Mob : +91 98208 07241 |
|
Sweta Jain |
Deepak Vaishnav
|
Corporation Bank |
|
Core profitability under pressure |
ACCUMULATE
CMP: Rs515 Target Price: Rs570
n CRPBK’s Q1FY12 NII below expectation at Rs7.1bn, however PAT at Rs3.5bn inline with market expectation led by lower tax and provisioning during the quarter
n The NII grew by just 1.4% yoy to Rs7.1bn, led by 9.1%qoq decline in advances and more than expected contraction of 42bps in NIM’s. NIM’s stood abysmally low at 2.1%
n Though gross NPA increased by 7.3%qoq to Rs8.5bn, fresh slippages remain under control at Rs~1.7bn for the quarter with slippage rate under <1% (annualised).
n Bank faces headwinds on NIMs due to its low CASA but valuations unreasonable at 1.0x/0.9x FY12E/FY13 ABV with 18% RoEs. Maintain ACCUMULATE with TP of Rs570
Deepak Vaishnav
|
Andhra Bank |
|
Strong profit but slippages may haven risen |
ACCUMULATE
CMP: Rs137 Target Price: Rs150
n Andhra Bank’s NII well above our estimates at Rs9.1bn; PAT at Rs3.9bn was up 20% yoy on back of lower provisions. However, gross NPAs saw sharp increase of 18% qoq
n Adjusted NII at Rs9.3bn was up 27% yoy. NII growth aided by strong 6% sequential growth in loan book. The reported NIMs were up 8bps qoq!!!
n Asset quality deteriorated further; credit costs at 0.15% appear low. Large exposure to problemtic sector of MFI and power remains area of concern
n Though concerns remain on asset quality valuations at 0.9x FY13ABV and div yield of 5% will work as support. Maintain ACCUMULATE with target price of Rs150
Deepak Vaishnav
|
Motherson Sumi Systems Ltd. |
|
SMR disappoints, Retain ACCUMULATE |
ACCUMULATE
CMP: Rs230 Target Price: Rs260
n Consolidated performance below est. with EBIDTA/PAT being 25%/50% below est. at Rs 1.9bn/653mn. Sharp drop in SMR margins to 5.1% and high tax rate (48%) are the key reasons
n Drop in SMR margins due to start up cost of two new plants at Hungary/Brazil. As the ramp in production happens margins should return to normalized levels (from 3QFY12)
n Expect benefits of cross leveraging to start from 2HFY12. Lower our FY12 EPS by 11% to Rs 11.6 to factor in poor 1QFY12. Retain FY12 EPS at Rs 15.7 per share
n Retain ACCUMULATE rating with a price of Rs 260 per share valuing the company at PER/EV-EBIDTA of 16.6x/8.4x on FY13E. Expect Peguform consolidation from 3QFY12/4QFY12
Deepak Vaishnav
|
United Phosphorus |
|
Topline growth returns |
BUY
CMP: Rs166 Target Price: Rs215
n Q1FY12 results were in line at the EBITDA level however higher interest costs squeezed APAT. UPL reported revenues of Rs 18.6bn, +27% yoy , APAT of Rs 1.68bn, -13% yoy
n RoW & India remain strong. North American markets improved. Europe returned to positive growth after 7 consecutive quarters of degrowth
n Management upped revenue guidance to 25-30% (previous 12-14%) post DVA acquisition. EBITDA margin guidance maintained at 20-21%
n Revise estimates to factor in DVA acquisition. Maintain margins at previous level of 20.2%. However, higher interest costs lead to EPS decline of 6% in FY12E.
Deepak Vaishnav
|
Dishman Pharma |
|
High on Hopes – Maintain Accumulate |
ACCUMULATE
CMP: Rs89 Target Price: Rs125
n Q1FY12 was below our expectations with a) Revenues at Rs2.4 bn (up 18% YoY), EBIDTA at Rs448 mn (up 1% YoY) and APAT at Rs107mn (down 37% YoY)
n Revenue growth was mainly driven by 33% growth in MM business & profit decline was due to increase in interest and depreciation
n Going forward, commencement of supplies of CVS intermediate to US market, increased sale from Benzathine & commissioning of new Vit-D plant will propel growth & improve EBITDA margins
n Maintain accumulate rating with target price of Rs125 (13xFY13 earnings of Rs9.6)
Deepak Vaishnav
|
Tata Motors Ltd. |
|
Focus shifts to 2HFY12, Retain BUY |
BUY
CMP: Rs951 Target Price: Rs1,450
n Evoque’s order book stands at ~20,000 units. Wholesale billings to start from August and retail from Sep. Maintain volume guidance based on Evoque and recovery in XF
n Discounts in line with industry standards. No significant increase in discounts from company. Higher discounts limited to specific models/dealers
n 1QFY12 to be impacted by adverse forex and Evoque related costs. We est. JLR EBITDA margin to be 13.4% in 1QFY12 (-160bps YoY) resulting in conso PAT of Rs 20.9bn (3%YoY)
n Maintain BUY rating with a TP of Rs 1,450 based on SOTP. Key concerns arise from higher capex (GBP 1.5bn) and lack of clarity w.r.t. new emission norms
Deepak Vaishnav
|
TVS Motor Ltd. |
|
In line, Maintain Accumulate |
ACCUMULATE
CMP: Rs49 Target Price: Rs62
n APAT at Rs 588mn in line with our est. Strong top line of Rs 17.5bn (~4% above est.) was offset by weaker margins of 6.7%(est. 6.9%) leading to inline EBITDA (Rs 1.1bn)
n Exports/mopeds/scooters continue to see momentum. However, concerned with sharp drop in domestic 3-wh (down 56%YoY in 1QFY12)
n Lower our FY12/13 by 0.4%/3% due to lower dom. 3 wh sales. Concerns with conso BS continues. Net DE/PBV/RONW at 1.16x/3.4x/ 18.7% vs 0.56x/2.33x/19.5% for standalone (FY11)
n Further invested Rs 225/349 mn in Indonesian/European sub. Retain ACCUMULATE rating with a revised TP of Rs 62 due to downgrade in multiple (balance sheet concerns)
Deepak Vaishnav
|
ACC |
|
Better realizations drive numbers |
HOLD
CMP: Rs1,020 Target Price: Rs1,100
n Q2CY11 EBIDTA at Rs5.5 bn, better than est (Rs5.2) led by higher realizations- Higher exit prices for Q1CY11 sustained in April & pushed quarter avg realizations to Rs4052/t (+5.7% yoy,4.1% qoq) v/s est of Rs3956
n EBITDA/t at Rs928 (+3% qoq). Effect of domestic coal price hikes visible -P&F cost at Rs959/t +24% qoq. Total cost increase 4.4% qoq to Rs3124/t, negatively surprised us
n Cement demand remain sluggish –prices down ~Rs20/bag from Aprill-11 peaks. New mining tax could be another blow- could increase limestone & coal cost. However ACC’s healthy volumes (+12.5% yoy for Q2) to help contain margin decline
n Downgrade CY11E/12E earnings by 6%/4.2% to factor high cost pressures. Valuation at PER of 14.7X & EV/ton of USD113 on CY12E- Maintain HOLD with revised TP of Rs1100
Deepak Vaishnav
|
Ambuja Cement |
|
Results marginally below estimates- Maintain REDUCE |
REDUCE
CMP: Rs133 Target Price: Rs140
n Q2CY11 EBIDTA at Rs5.8 bn (-3.4% yoy) marginally higher than est, APAT at Rs3.47 bn – marginally below due to higher tax rate. Effect of Coal price hikes visible -P&F cost increase 25% qoq. EBITDA/t at RS1101 (+1.6% qoq) slightly above est
n Rev at Rs21.7bn in line-effect of lower volumes (-2.2% yoy) offset by higher realizations- Higher exit prices for FY11 sustained in April & pushed quarter avg realizations to Rs4108/t (v/s est of Rs4031/t)
n Sluggish cement demand (-0.5% ytd) starts impacting cement prices- down ~Rs20/bag from Aprill-11 peaks. New mining tax could be another blow- could increase limestone & coal cost
n Downgrade CY11/12 earnings by 5.2%/ 4.2% factoring in for lower volume growth & higher costs. Stock trades at PER of 16.8X & EV/ton of USD143 on CY11E- Valuation leaves little upside- Maintain REDUCE TP-Rs140
Deepak Vaishnav
|
GNFC |
|
Chemical business disappoints |
BUY
CMP: Rs100 Target Price: Rs135
n Q1FY12 APAT of Rs 417mn (against loss of Rs Rs 227mn due to ammonia plant shutdown previous year) disappointed us on back of dismal performance of chemical segment
n Chemical segment reported lower margins of 17.0% (+380bps yoy/-1070bps qoq) against expectation of 27.0%. Fertilizer segment margins stood at 3.6%
n WNA- II plant commenced operations in July. Increase in Nitric Acid capacity and commissioning of Ethyl Acetic and TDI plant to boost topline over the next 2 years
n Reduce FY12E/FY13E estimates by 13.6% / 3.1% to Rs 19.3/Rs 25.7. Subsequently reduce price target by 13.6% to Rs 135, maintain BUY with 35% upside
Deepak Vaishnav
|
Transformers & Rectifiers |
|
Good show despite pressures in transformer sector |
BUY
CMP: Rs253 Target Price: Rs352
n TRIL’s Q1 performance (rev - Rs1.4bn, PAT - Rs77mn) is better than est due to (1) significantly higher volumes (98% gr.) and (2) high margin export revenues of Rs322mn vs Rs27mn yoy
n Positives not yet factored (1) JV with ZTG & L1 in eight 765kv transformers (Rs1.2bn), (2) almost on schedule delivery of 1200kv in Q211E & (3) successful deliveries & performance of 400kv and exp. qualification in PGCIL/NTPC orders
n We reiterate that TRIL is quickly entering into big league of transformer mfrs (CG, ABB, Areva and Siemens) with a capacity to deliver across ranges though only transformers
n Some pain left on lower entry prices and ambiguity on sector fundamentals but TRIL better placed with exports and specialized transformers. Expect gradual re-rating; Buy
