Thursday, October 28, 2010

Result Update: Bharat Bijlee; Deepak Fertilisers; Piramal Glass; HT Media; PNB; Bank of Baroda; Cummins India; Thermax; Elecon Engineering

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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