Monday, July 26, 2010

Result Update: Maruti Suzuki; IOCL; HPCL; Idea Cellular; Jaiprakash Associates; Eicher Motor; GlaxoSmithKline Pharma; Godrej Consumer Products; NTPC; United Phosphorus

Result Update

 

Maruti Suzuki India

Reco: REDUCE

CMP: Rs1,358

Target Price: Rs1,275

Royalty blues, Lower rating to  REDUCE

·      Increase in royalty charge (at ~5.2% of sales vs ~3.6% earlier, results in sharp drop in APAT at Rs 5.1bn (24% below our est.). Royalty is now payable in Yen.

·      The sudden change in royalty charge overshadows otherwise strong operating performance. 

·      Downgrade FY11E EPS by 16.6% to Rs 81.3 and FY12E EPS by 16.7% to Rs 88.9. Reduce TP to Rs 1,275 (down 23%) valuing at 7.5x EV/EBIDTA FY12 est (earlier 8.5x EV/EBIDTA).

·      Downgrade rating to REDUCE from ACCUMULATE. Key upsides arise from price hikes. Expect price hike in Sept/Oct.  1% change in domestic prices can impact our EPS by 9%.

 

 

Indian Oil Corporation

Reco: BUY

CMP: Rs372

Target Price: Rs392

Loss, But all is not lost

·      IOCL reported results which were below our estimates at EBIDTA and PAT Level, due to foreign exchange loss and non-issuance of oil bonds/Cash receivables during the quarter

·      Operating profit/ (loss) at (Rs.26.6bn), decline of 153.3% YoY, mainly due to forex loss of Rs.4.6bn and non issuance of oil bonds/cash receivables during the quarter

·      Average gross refining margin was at $3/bbl as compared to $7.4/bbl (decline of 59% YoY) below our expectation of $4.2/bbl

·      Valuations look attractive at 1.3x FY12E ABV, mainly due to recent change in reforms, Continue BUY rating with TP of Rs392

 

 

Hindustan Petroleum Corporation

Reco: BUY

CMP: Rs436

Target Price: Rs515

Times are getting better

·      HPCL reported results which were below our estimates at EBIDTA and PAT Level, primarily due to inventory loss and non-issuance of oil bonds/Cash receivables during the quarter

·      Operating profit/ (loss) at (Rs.15.3bn), (against our expectation of (Rs.5.7bn), decline of 215% YoY, mainly due to inventory loss of Rs13.9bn during the quarter

·      Average gross refining margin was at $3.72/bbl as compared to $5.7/bbl (decline of 34% YoY) in line with our expectation of $3.7/bbl.

·      Valuations look attractive at 1x FY12E ABV, mainly due to recent change in reforms, Continue BUY rating with TP of Rs515

 

 

Idea Cellular

Reco: SELL

CMP: Rs69

Target Price: Rs60

Traffic growth healthy, profits in-line, retain SELL

·      Q1FY11 EBIDTA at Rs8.9bn and PAT (after adjusting interest capitalization of Rs400mn) at Rs2bn, in line with estimates.

·      Comparable traffic growth of 13% QoQ and revenue growth of 5.4% healthy, and indicate reducing pricing pressure.

·      Increased capex guidance to Rs40-44bn and net-debt to Rs107bn push +ve FCF beyond FY12E.

·      Valuations expensive at 9.1x & 7.6x EV/EBIDTA for FY11E & FY12E respectively. Retain SELL with revised target Rs60.

 

 

Jaiprakash Associates

Reco: ACCUMULATE

CMP: Rs129

Target Price: Rs150

Margins  nosedive - Downgrade earnings & rating

·      JPA's Q1FY11 net profit at Rs1.05 bn (-52% yoy) sharply below estimates (Rs2.57 bn). Revenues at Rs 31.7 bn , up 54% yoy, better than estimates of Rs29.15 bn

·      EBIT margins in the construction business at 7.3%, declined 992 bps on account of cost overruns at Srisailam & slower ramp up at Baglihar project

·      Cement EBIT margins at 19.9% nosedive (down 1194 bps) as increasing cost and 5.2% decline in cement realisation negates benefits of 60% growth in volumes

·      We downgrade our estimates for FY11E EPS  by 16.5% (FY11 EPS - Rs 4.4 ) and FY12E EPS by 19.4% (FY12 EPS - Rs 5.3) – Lower target to Rs150 –rating to ACCUMULATE

 

 

Eicher Motor

Reco: NOT RATED

CMP: Rs966

Target Price: NR

Strong results to support stock performance

·      Improving product mix and price hikes results in sales growth  (66.7% YoY and -0.2% QoQ) higher than volume growth (19.1% YoY and -3.5% QoQ)

·      Higher staff cost and other expenses overshadow benefit of better product mix (flat RM to sales QoQ). EBIDTA margins decline 52 bps QoQ but improve 164 bps YoY to 8.2%

·      Net profit at Rs 522mn grows 178% YoY (38%QoQ) due to higher tax free treasury income of Rs 165mn on maturity of FMPs

·      Engine business with Volvo to commence in CY13. Upgrade CY11 EPS to by 6.1 % to Rs 89.1. Stock to outperform due to strong business outlook and surplus cash (~Rs 600 per share)

 

 

GlaxoSmithKline Pharma

Reco: HOLD

CMP: Rs2,054

Target Price: Rs2,020

Below expectations; Downgrade to Hold

·      Revenue growth of 10% is below our estimate of 16% mainly because of supply constraints in vaccine segment

·      Operating margins expanded by 144bps to 37.7% driven by favorable product mix

·      46% decline in other income restricted APAT growth at 6%

·      Maintain our earning estimates of Rs70.3 and Rs80.8 for FY11E and FY12E respectively; Downgrade to Hold

 

 

Godrej Consumer Products

Reco: ACCUMULATE

CMP: Rs341

Target Price: Rs371

Below Expectation, Maintain 'ACCUMULATE'

·      Godrej Consumer Products (GCPL) consolidated performance was marginally below expectation, adjusted net profit of Rs894 mn versus expectation of Rs959 mn

·      Standalone performance below expectation, reported revenue decline of 5.4% yoy to Rs3.2 bn and adjusted net profit decline of 9.2% yoy to Rs548 mn

·      GCPL completed QIP of 15.4 mn shares at Rs345/Share and raised Rs5.3 bn. Resultant debt-equity at 1.4X

·      FY12E earnings fine-tuned - Rs18.7/Share to Rs19.0/Share. Maintain 'ACCUMULATE' with price target of Rs371/Share

 

 

NTPC

Reco: ACCUMULATE

CMP: Rs202

Target Price: Rs220

Profit Decline; Under-recovery at Kahalgaon & Farakka

·      Revenues grew by 8% yoy driven by flat volumes and 7.5% realization growth. Volumes flat due to Kahalgaon (2340MW) and Farakka (1600MW) operating at 61.5% and 73.7% PLF

·      EBITDA/PAT declined by 8%/16% yoy mainly due to under-recovery of capacity charges of Kahalgaon & Farakka led by lower than target (85%) utilizations (might be forced outages)

·      Forced outages most likely one time; more clarity in the analyst meet on 2nd august; to review earnings (Rs11.2/12.8 in FY11E/12E) post analyst meet

·      Valuations reasonable at 2.2xFY12E Book Value with core ROE of 28%, Maintain 'Accumulate' and price target of Rs220

 

 

United Phosphorus

Reco: BUY

CMP: Rs179

Target Price: Rs230

Results ahead of Estimates

·      UPL's Q1FY11 results were better than est. Despite 10% decline in revenues APAT grew by 17%

·      Results are adjusted for Rs 510 mn of M-T-M forex loss which is on account re-pricing of foreign liabilities

·      Management maintained its guidance for 8-10% topline growth and EBITDA margin expansion of 200 bps to 21%

·      We rollover our price target to FY12 est and reiterate BUY with price target of Rs 230

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