Tuesday, August 17, 2010

Result Update: Himadri Chemicals; Shree Cement; ABG Shipyard; McNally Bharat Engineering

Result Update

 

Himadri Chemicals

Reco: NOT RATED

CMP: Rs507

Target Price: NR

Strong Near-Term Catalysts, Positive Bias

·      Himadri reported 81.5% yoy growth in revenues to Rs1.5 bn and RPAT declined 19.3% yoy to Rs183 mn - performance was below estimates

·      Key reasons for lacklustre performance (1) 45 days shut down at the Naphthalene facility and (2) marginal contribution from expanded distillation capacity

·      Changes in expansion of distillation capacity – implementing 150,000 MTPA greenfield capacity instead of brownfield earlier

·      Downgrade FY11E and FY12E earnings by 7-8% - Maintain positive bias amidst strong near term catalysts and attractive valuations

 

 

Shree Cement

Reco: ACCUMULATE

CMP: Rs1,805

Target Price: Rs2,200

Earnings disappoint. Valuations remain attractive

·      Shree Cement (Shree) Q1FY11 net profit at Rs1.05 bn below estimates led by lower than expected realisations & higher than expected P&F cost

·      Revenues at Rs9.4 bn up 2.4% yoy, driven by 2.5 X increase in power revenues - led by addition of 100 MW of power capacity in Q4FY10. Cement revenues declined 8.1% yoy 

·      EBITDA at Rs 2.9 bn (our est Rs3.4 bn) decline by 32% led by lower realisations and higher P&F cost. Cut FY11E EBITDA by 4.1% on higher cost, EPS by 15% on higher depreciation

·      Stock price correction provides opportunity to play Shree's superior strategy of utilizing cement cash flows for lucrative /high growth power business. ACCUMULATE – Target Rs2,200

 

 

ABG Shipyard

Reco: SELL

CMP: Rs244

Target Price: Rs228

Yet to sail… Maintain 'Sell'

·      ABG Shipyard Q1FY11 performance was mixed – (1) Revenue up 16% yoy – below estimates (2) EBITDA margins up 120 bps – positive surprise (3) APAT up 9% - marginally lower

·      Bagged an order worth Rs3.8 bn after a gap of six quarters from Associated Bulk Carriers – a group company

·      Maintain negative bias on core shipbuilding business.  Order inflow revival crucial for investor interest revival and valuations upgrade for the sector

·      Maintain FY11E and FY12E earning estimates of Rs44.4 and Rs47.5 per share respectively. Retain SELL rating with price target of Rs228

 

 

McNally Bharat Engineering

Reco: BUY

CMP: Rs285

Target Price: Rs400

Order inflows offset weak performance, Maintain BUY

·      McNally Bharat Q1FY11 performance below estimates – Revenue up 12% yoy to Rs2.8 bn, EBITDA margin down 130 bps yoy, EBITDA -9% yoy and APAT up 16% yoy to Rs62 mn

·      McNally Sayaji headline numbers also disappoint – (1) Revenue up 17% yoy to Rs0.5 bn (2) EBITDA margin down 560 bps to Rs13.9% and (3) APAT declined 66% yoy to Rs15 mn

·      Healthy order book of Rs48 bn – equivalent to 2.3X revenues and Order inflows of Rs10 bn in Q1FY11, offsets weak performance

·      Weak performance not cause for concern – Retain earnings estimates of Rs24.3/Share and Rs30.3/Share for FY11E and FY12E respectively - Retain BUY

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