Result Update: Mahindra Satyam; Deccan Chronicle; McNally Bharat; Orient Paper; Tulip Telecom

Mahindra Satyam

Reco: REDUCE

CMP: Rs85

Target Price: Rs70

'Growth+ cost' pangs= Margin pressures

·      Mahindra Satyam's result continue to indicate the 'Hard toil' faced by the company as Sep'10 qtr revenues decline by ~2% QoQ, margins falling by ~380 bps QoQ to 5.9%

·      Result vindicate our negative stance on the company as it faces stiff challenges from both weaker competitive positioning in erstwhile areas of strength

·      Cut our FY11E/12E/13E margins to 8.4%/14%/14.7% (V//s 15.2%/17.1%/17% earlier) driving a 48%/24%/19% in EPS to Rs 2.7/4.9/6(V/s Rs 5.1/6.4/7.5 earlier)

·      Maintain REDUCE rating with a revised March'12 DCF based TP of Rs 70(V/s Rs 81 earlier, implying ~12.5x 1 yr forward P/E)

 

 

Deccan Chronicle

Reco: BUY

CMP: Rs129

Target Price: Rs175

Results below estimates, Catalyst exist - BUY

·      Q2FY11 headline profit declined by 17% yoy to Rs826mn, below our estimate of Rs1.05bn affected by 5.7% yoy decline in revenues

·      Shift of festivities to Q3 and high base led to ad-revenue decline of 6% yoy

·      Cut EPS estimates by 6.5% and 5.5% to Rs12.1 and Rs15 for FY11E and FY12E respectively

·      Target price cut to Rs175. Retain BUY rating on attractive valuations. Buyback upto Rs180/share and IPL franchise stake sale are near term triggers

 

 

McNally Bharat Engineering

Reco: BUY

CMP: Rs239

Target Price: Rs418

Management holds guidance, Reiterate BUY

·      Q2FY11 performance remains below estimates - revenue growth was healthy at 32% yoy to Rs4 bn, but APAT growth at 10% yoy to Rs97 mn was below expectations

·      CMT springs positive surprise on qoq basis – revenues up 46% qoq and PBT up 425% qoq. MSE failed to deliver – revenues down 10% yoy and APAT down 24% yoy

·      Despite lower Ebidta margins in H1FY11 - reiterates consolidated revenue guidance for FY11E of Rs25 bn and EBITDA margins at 10%, lending much needed comfort

·      Valuations attractive at 8.1X FY12E - Reiterate 'BUY' rating with target price of Rs418/Share

 

 

Orient Paper & Industries

Reco: BUY

CMP: Rs65

Target Price: Rs77

Cement division hurts profitability

·      Net profit at Rs5mn (-98.8% yoy) below estimates, led by poor performance of cement division. Revenues at Rs4.25bn (+8%), electricals (+26%) & Paper division (+15%)

·      Though EBITDA declined by 74%, led by 91% decline in cement EBIT, paper division surprised positively, showing signs of turnaround. Electricals margins saw dip of 658 bps to 5.2%

·      Downgrade earnings by 11.9% for FY11 (EPS of Rs6.5) and 6.8% for FY12(EPS of Rs8.8) led by lower cement realizations and margin pressure in electricals segment

·      OPIL on the verge of earnings recovery led by recent cement price hikes in its key markets and turnaround of paper division. Upgrading TP to Rs77 by rolling over to FY12 nos

 

 

Tulip Telecom

Reco: BUY

CMP: Rs178

Target Price: Rs240

In-line results, Retain BUY

·      Q2FY11 EBIDTA grew 28.5% to Rs1.6bn and APAT grew 35.3% yoy to Rs781mn, in line with estimate

·      Better than expected revenue growth of 19% to Rs5.9bn along with EBIDTA margin expansion of 200bps yoy drives profit growth

·      Net-debt rises to Rs11.6bn v/s Rs9.6bn in Q1FY11 primarily due to Qualcomm investment (Rs1.4bn)

·      Retain estimates, BUY rating and target price Rs240. Valuations at FY12E EV/EBIDTA of 4.1x & P/E 6.9x, attractive

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