Monday, October 25, 2010

Result Update: Dr. Reddy's Lab; Bajaj Auto; Ashok Leyland; TVS Motor; Torrent Pharma; Hindustan Unilever

Dr. Reddy's Lab

Reco: ACCUMULATE

CMP: Rs1,616

Target Price: Rs1,763

Higher traction from FY12 onwards

·      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

·      Branded formulation markets of India and CIS reported strong traction

·      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

·      Revise base business earnings for FY11E, FY12E and introduce NPV for limited competition opportunities; Maintain Accumulate with a revised price target of Rs1,763

 

 

Bajaj Auto Ltd.

Reco: ACCUMULATE

CMP: Rs1,486

Target Price: Rs1,710

Volume upgrade continues, raise TP to Rs1,710

·      EBIDTA at Rs 9.1bn (5% above est.) due to higher than expected topline (Rs 43.4bn vs est. Rs 41.3bn). APAT at Rs 6.9bn (6.5% above est.)

·      FY11 export target raised to 1.15mn units (our est. 1.2mn units). 70% of FY12 current exports est. are hedged. Price hike in Oct'10 only for dom. market

·      Upgrade FY11E/FY12E vol. by 2.1% /3.2% to 3.9mn/ 4.7mn units. Upgrade FY11E/FY12E EPS by 4.0%/5.1% to Rs 87.1/Rs 110.3 . 20%+ margins are sustainable subject to product mix

·      Upgrade TP by 4.9% to Rs1,710 (15.5x FY12 EPS). Maintain ACCUMULATE rating.

 

 

Ashok Leyland

Reco: HOLD

CMP: Rs75

Target Price: Rs76

Mixed Bag, Maintain HOLD

·      EBIDTA at Rs 3.1bn was in line with our est. despite lower than expected net sales. Margins at 11.3% were above our est. of 10.8%. APAT at Rs 1.7bn marginally below est.

·      Hike prices by 3%/6% for BSII/BSIII vehicles over the 4% hike taken in H1FY11. Currently, it has inventory of ~9000 units

·      Raises FY11 volume guidance to 95000 units (our est. is 92692 units). Upgrade FY11E EPS by 4.2% to Rs 5.2, retain FY12E EPS at Rs 6.4.

·      Retain our TP of Rs 76 and our HOLD rating. M&HCV demand momentum to peak out, expect concerns with volume growth for FY12 from 3Q/4Q FY11

 

 

TVS Motor

Reco: REDUCE

CMP: Rs74

Target Price: Rs72

In line, lower rating to REDUCE

·      EBIDTA margin at 6.7 below est. of 6.9%, despite higher net sales (Rs 16.2 bn against est. of Rs15.8bn) due to higher staff cost and other exp. APAT at Rs 549mn against est. of 526mn.

·      Scooter/Mopeds/3-Wheelers continue to drive volumes, motorcycle sales continue to disappoint. Export traction to remain strong, expect average run rate of ~20k unit's pm.

·      Upgrade FY11E/FY12E volumes by 6.4%/8.5% to 2.0/2.3 units due to higher scooters/mopeds/exports sales. Upgrade FY11E/FY12E standalone EPS by 4.5%/7.4% to Rs 4.1/Rs6.0

·      Upgrade TP to Rs 72 (up 7.5%) - 12x FY12 standalone EPS. Downgrade rating to REDUCE

 

 

Torrent Pharma

Reco: BUY

CMP: Rs558

Target Price: Rs650

On Track; Maintain Buy

·      Revenue growth is above our estimates on account of 22% increase in domestic formulations and higher than expected growth in the international business

·      EBITDA margins declined (as estimated) on account of 468bps contraction in gross margins, higher employee cost and other expenses

·      Higher than expected rise in depreciation and interest impacted PAT (Rs762mn vs. est. of Rs817mn)

·      Maintain earnings and Buy rating with a target price of Rs650

 

 

Hindustan Unilever

Reco: REDUCE

CMP: Rs306

Target Price: Rs275

No Catalysts, Downgrade to REDUCE

·      HUL reported spectacular volume growth of 14% in Q211, back of 11% in Q111 and Q410

·      Q211 performance stood marginally ahead of expectation – revenue growth 9.7% yoy to Rs42.8 bn and APAT decline of 5.2% yoy to Rs5.2 bn

·      Q211 performance for key segments on expected lines, except personal products that recorded 330 bps yoy and 180 bps qoq reduction in EBIT margins

·      Absence of strong earnings upgrade catalysts and recent stock performance – downgrade HUL from 'HOLD' to 'REDUCE' with revised target price of Rs275/Share

 

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