Bharat Bijlee
Reco: BUY
CMP: Rs1,088
Target Price: Rs1,350
Improvement accelerates, upgrade to Buy
· PAT grow by 22% yoy and 160% qoq to Rs151mn (our expectations – Rs129mn) - driven by increase in EBITDA margins to 13.8%
· Higher EBITDA margins driven by both transformers (better margins on low base) and motors (volumes growth of 20% drive operational leverage)
· Revenue growth at 8%, below expectations of 13% growth
· Maintain earnings; Valuations (EV) cheap on absolute basis at 3.9x FY12E EBITDA as well as relative basis at 20% discount to peers; Top pick in transformers pack; Upgrade to Buy
Deepak Fertilisers
Reco: BUY
CMP: Rs177
Target Price: Rs250
Upgrade price target
· Q2FY11 APAT at Rs 448 mn (+23.4%yoy) was in line while EBITDA margins at 19.3% were below estimates
· Lower margins in chemical segment at 26.2% due to higher gas cost and lower production affected EBITDA margins
· Production to start at new TAN plant by Nov '10, should start contributing to revenues and profits by Q4FY11
· Maintain BUY with revised price target of Rs 250 (from Rs 175) due to upgrade in valuation multiple from 7x to 10x
Piramal Glass
Reco: BUY
CMP: Rs137
Target Price: Rs160
Shift Continues, Maintain BUY
· Piramal Glass (PGL) Q2FY11 performance exceeds expectation – revenue growth at 2.6% yoy to Rs3.1 bn and APAT up 3700% yoy to Rs206 mn
· C&P contribution improves from 43% of revenues to 48% of revenues – C&P register revenue growth of 14.6% yoy to Rs1.4 bn
· Fine-tune assumptions on interest expenditure and material costs – upgrade FY11E earnings by 9.9% (Rs9.3/Share) and FY12E earnings by 3.0% (Rs18.7/Share)
· Maintain BUY with revised target price of Rs160/Share
HT Media
Reco: HOLD
CMP: Rs165
Target Price: Rs175
Slightly below estimates, retain HOLD
· Q2FY11 headline profit growth although strong at 61% yoy to Rs388mn, is slightly below our estimate of Rs431mn
· Cons. ad-revenues grew by 17% yoy with Hindi ad-revenue growth of 30% yoy and English at 13% yoy
· EBIDTA margins increased by 310bps yoy to 17.8% v/s our estimate of 21.8% due to higher revenue contribution from Burda, which registered EBIDTA loss
· Estimates maintained. Retain HOLD rating with revised target price of Rs175 (v/s Rs159 earlier)
Punjab National Bank
Reco: BUY
CMP: Rs1,310
Target Price: Rs1,500
Strong earnings; slippages trending down
· PNB's Q2FY11 NII at Rs29.8bn better than expectations driven by 6% qoq growth in advances and 12bps expansion in NIMs. Net profit at Rs10.7bn in line with expectations
· Slippages surprise positively at Rs9.1bn lower than Rs12.1bn reported in Q1FY11. However, gross NPAs rise due to lower recoveries. Provision cover strong at 77% (RBI norms)
· Other positives in the result – (1) CASA at 40.6% despite strong growth in balance sheet (2) provisions done at 65% on net incremental slippages and (3) robust fee income growth
· Valuations not unreasonable at 2.2x FY11E/1.7x FY12E ABV. Continue BUY rating with TP of Rs1,500
Bank of Baroda
Reco: BUY
CMP: Rs1,011
Target Price: Rs1,160
Robust performance in earnings and asset quality
· BOB's Q2FY11 net profit at Rs10.2bn was far ahead of our expectations driven by better than expected NII and lower than expected provisions
· The slippages were extremely positive surprise at just Rs2.9bn (0.6% annualised). Consequently, the provision requirement was also down
· No provision for pensions was the only negative surprise in the results. However, we believe that with strong revenue traction, BOB can easily provide upto Rs2bn/quarter for same
· Expect strong performance to continue on better NPA ratios, strong RoEs and inexpensive valuations at 2.4x FY11E/1.9x FY12E ABV. Maintain BUY with TP of Rs1,160
Cummins India
Reco: HOLD
CMP: Rs776
Target Price: Rs820
Domestic Business Traction, Maintain HOLD
· Cummins reported strong performance – revenue growth 76% yoy to Rs10.7 bn and APAT growth of 91% yoy to Rs1.7 bn
· All-round performance - Domestic business grew 45% yoy to Rs7.9 bn and Export business grew 280% yoy to Rs2.8 bn
· Management outlook comforting for capacity constraints, export business momentum and operating margins
· Factoring 4-5% earnings upgrade for FY11E (Rs32/Share) and FY12E (Rs37.3/Share) – Maintain 'HOLD' rating with revised target price of Rs820/Share
Thermax
Reco: BUY
CMP: Rs796
Target Price: Rs943
Product Order Revives; Maintain BUY
· Stellar performance – (1) Revenues up 60% yoy to Rs10.9 bn, (2) EBITDA up 62% yoy to Rs1.3 bn with stable margins at 11.8% (3) PAT up 65% yoy to Rs895 mn
· Strong performance in both segments - Energy up 71% yoy and Environment up 51% yoy - driven by execution on orders received in last 6 quarters
· Continued order inflow momentum, driven by product orders which is encouraging sign- order inflows of Rs14.1 bn orders backlog of Rs72.8 bn
· Maintain earnings estimates and 'BUY' rating with target price of Rs943/Share – do not rule our upgrades in inflows and earnings
Elecon Engineering
Reco: BUY
CMP: Rs95
Target Price: Rs121
Strong performance; Retain BUY
· EEL performance ahead of estimates – revenue growth 10% yoy to Rs2.8 bn, EBITDA up 8% yoy to Rs400 mn and APAT growth of 32% yoy to Rs142 mn
· Order book declined marginally to Rs15.0 bn – led by lower order inflows at Rs2.1 bn (MHE – Rs0.7 bn and TE – RS1.3 bn)
· Acquired standardized gears & gearboxes business of David Brown Gear System for Rs1.3bn–earnings neutral in near-term
· Trading at attractive valuations of 13.8X FY11E and 10.1X FY12E earnings. Maintain our Buy rating
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Tech Mahindra
Reco: HOLD
CMP: Rs787
Target Price: Rs810
Marginal beat on estimates, retain HOLD
· Rev(ex H/W) at US$ 265 mn(+5.4% QoQ) beat exp marginally. Mgns (ex H/W) at 21.5%, were up by ~280 bps QoQ driven by favorable currency, higher utilization & lower employee count
· Top client rev were flat in constant currency terms at ~GBP 75 mn while revenues(ex BT, SI ) were up by 8.5% sequentially to US$ 150 mn
· Tweak FY11/12E conso EPS up by ~2.8%/0.3% to Rs 69.6/77.5 despite higher rev est. driven by higher currency reset helped by lower FY12 tax assumptions at 21%(V/s 23% earlier)
· Maintain HOLD with a revised TP of Rs 810 (based on 11.5x 1 yr fwd P/E). See near term upsides driven by possibility of a favorable merger ratio( for TechM) with Mah Satyam
Patni Computers
Reco: NOT RATED
CMP: Rs465
Target Price: N.A.
In line quarter, Disappointing Guidance for Q4CY10
· Rev at US$ 178.8 mn, marginally ahead of est. Mgns at 18.9%, were down by ~130 bps QoQ impacted by strong hiring (net adds of 1,663, +11% QoQ), impact of consolidation of CHCS
· Profits at Rs 1.3 bn ahead of est. driven by higher than expected forex gains. See margin pangs continuing driven by supply side pressures( attrition at near peak levels)
· Despite strong hiring, co's Dec'10 rev guidance is muted. Patni's rev growth continues to be anemic with strong margin defence until now getting threatened as expected by us
· Tweak CY11E EPS down by ~5.7% to Rs 35.3 driven primarily by lower margin assumptions (partly on a/c of higher currency reset). At Rs 465, Patni trades at 13.1x/11.7x CY11E/12E EPS
United Phosphorus
Reco: BUY
CMP: Rs202
Target Price: Rs230
Results below estimates
· Q2FY11 results were marginally lower than estimates due to weak margins with RPAT of Rs 1.15 bn, +12%yoy
· Implied H2FY11 revenue and EBITDA growth of 33% and 52% on higher side – may risk FY11 management guidance
· We have adjusted downward our FY11 revenue, EBITDA and APAT estimates by 5.8%, 2.9% and 1.5%, respectively
· Maintain BUY recommendation with target price of Rs 230 based on 12x FY12 estimates. Growing profit contribution from India is likely to drive valuations going forward
Ultratech Cement
Reco: REDUCE
CMP: Rs1,100
Target Price: Rs1,040
Numbers Disappoint. Maintain REDUCE
· PAT at Rs1.16 bn (-79.2% qoq) – below estimates led by lower realizations & higher P&F & staff costs. Revenues decline 19.4% qoq-volumes down 12.4%, realisations down 8%
· Lower realizations and cost pressure dragged EBIDTA down by 59% qoq. EBITDA/t at Rs448 down 53.4% qoq. Downgrade FY11 earnings by 16.2% (EPS Rs54.8)
· With recent cement prices hikes, expect the worst phase of profitability to be over for UTCL
· Upgrade target to Rs1,040 (valuing UTCL at EV/EBIDTA of 8X EV/Ton of USD130. However rich valuations at PER of 16.6X & EV/ton of USD135 leaves little upside. Maintain REDUCE
NTPC
Reco: HOLD
CMP: Rs198
Target Price: Rs190
MAT grossing to hit ROE by 4%; Downgrade to Hold
· Results disappoint (APAT down 2%) due to (1) grossing up ROE at MAT, (2) Kahalgaon/Farakka continue to report lower PAF (70%) on fuel constraints & (3) lower interest income
· Changed the grossing up to MAT rate frm earlier full tax rate; to hit profits by Rs10bn or 4% of core ROE from 28% to 24%
· Reduce earnings by 11-13% in FY11E/12E
· Valuations at 2.3xFY12E Book value, not attractive on core ROE of 24% (Earlier 28%); Lower target price to Rs190/Share; Downgrade to 'Hold'
DB Corp
Reco: HOLD
CMP: Rs284
Target Price: Rs284
Results miss est., Cut rating to HOLD
· Q2FY11 PAT grew by 20.8% yoy to Rs550mn, below our estimate of Rs770mn impacted by sharp rise in opex towards new launches
· Advertisement revenues grew by 16% yoy to Rs3bn equally led by volume and price growth
· Cut EPS estimate by 10% /2% to Rs13.6 /14.6 for FY11E/12E due to higher than expected opex on new launches
· Downgrade rating from ACCUMULATE to HOLD with target price Rs284
Union Bank of India
Reco: HOLD
CMP: Rs393
Target Price: Rs400
Provisioning hits bottom-line; downgrade to HOLD
· UBI's Q2FY11 net profit at Rs3.0bn (-40%yoy), significantly below expectation led by higher provisioning and opex
· The NII at 15.4bn inline with expectation, led by 30bps expansion in NIMs, albeit advances remaining flat qoq
· The slippages during the quarter were higher at Rs11.3bn (3.6% annualised) including Rs4.2bn from agriculture NPAs, Rs760mn from restructured pool & Rs2.2bn from one big a/c
· Valuations expensive at 1.7x FY12E looking at sharp slippages and provision requirements. Downgrade to HOLD rating with TP of Rs400
Asian Paints
Reco: HOLD
CMP: Rs2,503
Target Price: Rs2,510
Volume Allude, Maintain HOLD
· Asian Paints (APL) reported mixed performance – revenue growth at 5% yoy missed expectation and APAT growth at 4.4% yoy meets expectation
· Volume growth alluded in the quarter- on back of high volume growth in Q1FY11 leading to pipeline filling and higher dealer inventory
· Maintain earnings for FY11E (Rs92.2/Share) and FY12E (Rs104.6/Share) – Maintain 'HOLD' rating with target price of Rs2,510/Share
Marico
Reco: HOLD
CMP: Rs135
Target Price: Rs128
Price Hike Initiated, Maintain HOLD
· Marico's Q2FY11 performance meets expectation - revenue growth of 12.5% yoy to Rs7.8 bn and APAT growth of 14.8% yoy to Rs715 mn
· Implemented price hike to offset material price inflation - 13% in 'Parachute' and '10%' in 'Saffola' rice bran oil
· Satisfactory volume growth at 15% yoy - 'Parachute' grew by 10%, 'Saffola' grew by 18% and 'Hair oil' grew by 27%
· Maintain earnings estimates of Rs4.9/Share and Rs5.8/Share for FY11E and FY12E – Maintain 'HOLD' rating with price target of Rs128/Share
Voltas
Reco: BUY
CMP: Rs246
Target Price: Rs275
H2FY11 Promise; Retain BUY
· Results marginally below estimates with (1) 3% yoy decline in revenues to Rs10.7 bn (2) 140 bps yoy drop in EBITDA margins and (3) 17% yoy decline in PAT to Rs746 mn
· EMP division performance negatively impacted due to slower execution on international orders & one-off expenditure
· Order inflows up 76% yoy to Rs8.5 bn – YTD secured 44% of FY11E target order flows. Order book at Rs49.7 bn – equivalent to 1.4X standalone FY10 revenues
· Maintain earnings estimates and Maintain 'BUY' with target price of Rs275/Share
TRF
Reco: ACCUMULATE
CMP: Rs689
Target Price: Rs754
Negative Surprise Galore, Downgrade to Accumulate
· Q2FY11 results is loaded with negative surprise due to (1) one-offs provision of Rs0.3 bn and (2) dismal revenue booking in Projects division
· Fires another salvo – revised Ebidta margins guidance from 10% to 7% - for reasons less understood and unexplainable
· Downgrade in earning estimates for FY11E (down 43% to Rs36.1/Share) and FY12E (down 34% to Rs58.4/Share)
· 20% drop in market capitalization partly discounts earnings revision - Downgrade from 'BUY' to 'ACCUMULATE' with revised target price of Rs754/Share
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