United Bank of India
Reco: HOLD
CMP: Rs141
Target Price: Rs150
Results inline; slippages surprise positively
· UNTDB's Q2FY11 earnings were in line with our estimates with NII at Rs5.3bn and PAT at Rs1.1bn
· Other income growth strong at 26%qoq to Rs1.5bn; the bank has used robust other income for provisions
· The slippages have surprised positively at Rs2bn (Rs2.5bn in Q1FY11, our exp – Rs2.5bn). The NPAs have remained largely stable during the quarter. PCR at 50%, 71.8% as per RBI norm
· Valuations not unreasonable at 1.7x FY11E/1.3x FY12E ABV. We downgrade to HOLD with TP of Rs150, 1.4x FY12E ABV; 15% discount to our valuations for mid-tier PSU banks
Lakshmi Machine Works
Reco: HOLD
CMP: Rs2,766
Target Price: Rs2,660
Results beat estimate, growth priced in
· Q2FY11 PAT of Rs459mn ahead of estimates led by better than expected revenue growth and higher other income
· Strong demand for yarn continues to attract capex resulting in LMW's order book rising to Rs36bn
· Upgrade EPS estimates by 6% /12% to Rs122 /Rs142 for FY11E /12E respectively
· Valuations at 22.4x /19.2x EPS of Rs123.5 /143.9 for FY11/12E fully factor growth. Retain HOLD rating with target Rs2,660
Emco
Reco: REDUCE
CMP: Rs64
Target Price: Rs60
Cost overruns continue; Maintain negative view
· Emco reported yet another huge cost over-runs in its projects business – reieterate that cost over-runs are across the projects (including 765kv PGCIL order – 45% unexecuted)
· Though mgmt mentioned all the cost over-runs provision is over in this quarter, we do not rule out further negative surprises
· Transformer business also affected due to (1) rescheduling of deliveries from customer side, (2) competition impacting margins by 7-8%
· Give benefit of doubt once again to mgmt, assume positive numbers from Q3FY11E onwards; Reiterate negative view on the stock
Titan Industries
Reco: ACCUMULATE
CMP: Rs3,287
Target Price: Rs3,762
Earning Upgrade Continues, Maintain ACCUMULATE
· Titan reported good performance in 'Watches' and 'Jewellery' largely propelled by volume growth
· Q2FY11 headline numbers - revenue growth 33.9% yoy to Rs15.4 bn, Operating Profit growth 60% yoy to Rs1.7 bn and APAT growth of 64.6% yoy to Rs1.3 bn
· Key segments posted robust performance – 'Watches' grew 19.7% yoy to Rs3.6 bn and Jewellery grew 36.7% yoy to Rs11.2 bn
· 10% earnings upgrade to FY11E (Rs87/Share) and FY12E (Rs112/Share) – Maintain 'ACCUMULATE' rating with revised target price of Rs3,762/Share
Madras Cement
Reco: REDUCE
CMP: Rs113
Target Price: Rs113
Results marginally below estimates. Maintain REDUCE
· APAT at Rs185 mn (-89% yoy) below estimates (Rs210 mn). Revenues at Rs6.42bn (-24.3%yoy) – Cement volumes (2.07 mt) down 1.9%, realisation (Rs2780/t) down 24.7% yoy
· EBITDA at Rs1.06bn (-68.2% yoy), marginally below estimates on account of higher RM costs(Rs577/t, +10.6%yoy). EBITDA/t at Rs195 down 84.6%
· Downgrade earnings by 6.1% for FY11 & 9.3% for FY12 on account of partial divestment of wind mills (MCL sold 26.4 MW out of ~186 MW capacity) and lower volumes
· Though recent price hikes would mean that the worst is possibly over for MCL, valuations at PER 10.5X and EV/t of USD88 leaves little upside. Maintain REDUCE
Idea Cellular
Reco: SELL
CMP: Rs72
Target Price: Rs60
Results disappoint, retain SELL
· Q2FY11 PAT at Rs1.8bn (v/s our est. Rs22bn) and EBIDTA at Rs8.8bn (v/s our est. 9.2bn) misses our estimates due to absence of sequential revenue growth
· ARPU falls by sharp 8.3% QoQ to Rs167 as MOUs drop by 5.1% to 394 minutes. Traffic growth muted at just 3% QoQ
· Net debt reduces on lower capex in 1H due to lack of equipment imports. But 2H capex to compensate
· Valuations expensive at 9.4x & 7.8x EV/EBIDTA for FY11E & FY12E respectively. Prefer Bharti Airtel available at 6.9x FY12E EV/EBIDTA. Retain SELL rating with target Rs60
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