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Jagran Prakashan Ltd Reco: BUY CMP: Rs107 Target Price: Rs155 Inline with estimates JPL reported Q4FY10 results in line with our estimates. Net sales grew by 17.4% YoY to Rs 2.36bn (slightly ahead of our estimate of Rs 2.30bn) driven by 19.9% YoY growth in advertisement revenue to Rs 1.6bn. EBIDTA increased by 62.2% YoY to Rs 633mn (v/s our estimate of Rs 657mn) due to revenue delta on stable newsprint prices. EBIDTA margin improved by 740bps YoY to 26.8% v/s 19.4% in Q4FY09. PAT increased by 66.7% YoY to Rs364mn (v/s estimate of Rs383mn) led by healthy operating performance. The reported results are in-line with estimate even after adjusting for extraordinary operating expense of Rs40mn and bad debt provision of Rs50mn, without which the results would have been even better. While healthy recovery in advertisement market and pick-up in nationa l advertisements have resulted in strong revenue growth, the break-even of OOH and I-next contributed to profit growth. Considering the strong performance, healthy ad-revenue growth guidance of 17-18% for FY11E (in-line with our estimate) and EPS accretive acquisition of Midday, we retain our EPS estimates of Rs7 and Rs8.6 for FY11E and FY12E respectively. We retain our BUY rating on the stock with target price of Rs 155. At CMP of Rs 107 stock trades at 15.3x and 12.5x of our estimated EPS of Rs 7.0 for FY11 and Rs8.6 for FY12 respectively.
Apollo Tyres Ltd Reco: BUY CMP: Rs71 Target Price: Rs88 Positive surprises continue, Maintain BUY Apollo Tyre (ATL) Q4FY10 standalone operating performance was in line with our estimates, however net profit at Rs 1.2bn was ahead of our estimate of Rs 859mn. Dunlop and VBBV reported strong set of numbers driving the consolidated performance. We have upgraded our FY11E and FY12E consolidated earnings (ex VBBV), by 8% and 13% to Rs 7.6 and Rs 8.9 per share respectively due to higher average realization assumption. We expect VBBV to report an EPS of Rs 1.2 in FY11. We have not merged VBBV in our consolidated estimates due to limited availability of information. We have valued consolidated business (ex VBBV) at Rs 80 - 9x PER our FY12 EPS (earlier FY11E EPS) and VBBV at Rs 8 - 7x PER our FY11E EPS. We maintain our BUY on the stock with a target price of Rs 88. Key risks to our call emerges from the recent strike at its Cochin plant (33% capacity) as well as port strike in South Africa, which will affect its operations in 1QFY11 and sharp EPS decline in 1HFY11 due to base effect.
Indian Oil Corporation Ltd. Reco: BUY CMP: Rs340 Target Price: Rs392 Results above expectation, Maintain BUY IOCL reported results which were above our estimates, primarily due to budgetary support provided by the Government of India of Rs.106bn during the quarter. Revenue for the quarter was at Rs.785bn (against our expectation of Rs.671bn), decline of 16.9%. EBITDA during the quarter was at Rs.86.4bn, decline of 3% on a y-o-y basis. Interest cost declined by 48% to Rs. 4.3bn, as debt levels have reduced significantly as compared to last year. During the quarter the company reported net profit of Rs.5.5bn, decline of 16% on a y-o-y basis. The profit for the current quarter has achieved mainly due to Inventory Gain, Forex gain and budgetary support from GOI to Rs. 106bn, which has accounted for the current quarter. During the year the company received budgetary support of Rs.151bn from the GOI for the under-recovery of cooking fuel and same has been accounted for the year. Though there has been some clarity on sharing mechanism (upstream companies sharing entire auto-fuel under-recovery), more budgetary support from GOI is needed to keep IOCL in black. We expect GOI's budgetary support to increase only if it is able to garner larger funds from disinvestment or deregulation of auto fuel prices and prices hike in SKO and LPG, as suggested by Kirit Parekh committee.
DB Corp Ltd Reco: HOLD CMP: Rs240 Target Price: Rs284 Below estimates DBCL reported Q4FY10 results below our estimates led by higher than expected operating costs. Net sales grew by 9.1% YoY to Rs 2.6bn (v/s our estimate of Rs 2.5bn) driven by 10.8% YoY growth in advertisement revenue to Rs 1.9bn. EBIDTA increased by 22.1% YoY to Rs695mn (v/s our estimate of Rs814mn) with 288 bps YoY improvement in EBIDTA margin to 27.0%. While EBIDTA margin improved due to lower news print prices, the same was below estimates (of 32%) due to 17.9% increase in other expenses. PAT grew by 56.5% YoY to Rs 367 mn, below estimates (of Rs 502 mn) on account of lower than expected operating revenue and higher operating costs. Post below estimated Q4FY10 results, we retain our EPS estimate of Rs13.0 and Rs15.8 for FY11 and FY12E respectively. We however highlight that our earning estimates do not factor the impact of launch of Bihar and Jharkhand editions, which could impact our FY12E earnings by 8% on 3 lac copies of print (can be higher depending on higher print copies on launch). Retain HOLD rating on the stock with target price of Rs 284. At CMP of Rs 240 stock trades at 18.4x and 15.2x EPS of Rs13.0 & Rs15.8 for FY11E & FY12E, 20% premium to Jagran.
Mahindra & Mahindra Ltd Reco: ACCUMULATE CMP: Rs545 Target Price: Rs680 Strong show, remains top pick in 4 wheelers M&M's 4QFY10 standalone net profit at Rs 5.7bn was above our estimates of Rs 4.6bn driven by higher net sales (Rs 53bn vs estimate of Rs 51bn) and higher EBIDTA margins (15.9% vs estimate of 14.6%). Higher net sales are largely due to sharp increase in sales of FES (QoQ avg realization are up by 4%). Balance sheet surprised positively with strong cash balance Rs 17.5bn vs estimate of Rs 13bn). We upgrade our FY11 volume estimates by 2% to 468618 units but lower our EPS to Rs 33.9. We are factoring in EBIDTA margin compression of 130bps to 13.4% in FY11, the most in our auto universe, We introduce our FY12 estimates with volume growth of 7.4% and EPS of Rs 37.7. We have upgraded our SOTP based target to Rs 680 (from Rs 630). We have upgraded the standalone business value to Rs 540 (from Rs 470) and lowered value of subsidiaries to Rs 140 (from Rs 160). We maintain our ACCUMULATE rating. The continuous shortage of components (tyres, fuel injection equipments and castings) and the M&A activity can act as risks to our call.
Emco Ltd. Reco: REDUCE CMP: Rs78 Target Price: Rs82 Negative margin in projects, maintain 'REDUCE' Emco's net profit of Rs78mn (-67% yoy) was way below estimates mainly due to negative EBITDA margins (-2.5%) in the projects business. We believe Emco has bid aggressively in the projects business especially for 765KV order from PGCIL. This has led to dismal performance in Q4FY10, since part of the orders were executed in the quarter. The overall revenues were flat yoy to Rs3.8bn with transformers declining by 9% and projects segment reported growth of 26% yoy. The EBITDA margins stood at 8.6% (down 640 bps yoy) and absolute EBITDA declined by 42% yoy. We expect pressure on margins going forward for at least 3-4 quarters on the back of (1) low margin project orders still under execution, (2) high base of EBITDA margins (15.5% in FY10) in the transformer busin ess and (3) project business likely to garner higher share of revenues putting pressure on blended margins. For FY10, Emco has reported standalone adjusted earnings of Rs5.4/Share (loss of Rs58mn or 0.9/Share in subsidiaries in FY10). We reduce our FY11E standalone estimates by 34% to Rs7.3/Share & introduce FY12E earnings of Rs9.4/Share. We have not considered any contribution from coal trading in our numbers. At CMP of Rs78, the stock is trading at 10.7xFY11E earnings, 4.8xFY11E EBITDA and 0.8x FY11E Book Value (ROE of 8% in FY11E). On the back of (1) pressure on realizations and margins, (2) very high working capital cycle (175 days), (3) declining and low order book (Rs12bn) visibility of 1x and (4) low ROE - we maintain 'REDUCE' rating on the stock with target price unchanged of Rs82/Share.
Ipca laboratories Reco: BUY CMP: Rs263 Target Price: Rs336 In-line; Raising target price Ipca's Q4FY10 numbers were in-line with a) 16% growth in revenue to Rs3.67bn (est. of Rs3.65bn), b) 29% growth in EBIDTA to Rs686mn & c) 21% growth in APAT to Rs358mn (est. of Rs365mn). The growth in the revenue was mainly aided by a) 30% growth in domestic formulation business, & b) 25% growth in API segment. Export formulation business during the quarter remains flattish mainly because of poor performance in the CIS market. Despite 50 bps increase in raw material cost because of lower contribution of high margin CIS business, EBIDTAM expanded by 190 bps to 18.7% on the back of a) 120bps reduction in employee cost and b) 110bps reduction in other expenditures. Despite higher tax provision and lower other income (down by 106%), APAT was up by 21% to R s358mn. For FY10, a) Revenue was up by 21% to Rs15.6bn, b) EBIDTA was up by 22% to Rs3.23bn c) APAT was up by 21% to Rs2bn and d) EPS of Rs16.1. Owing to in-line performance, we retain our FY11E and FY12E earning estimates at Rs19.6 and Rs24 and re-iterate our Buy rating with a price target of Rs336 (14x FY12E). Despite 40% of outperformance to broader market in last six months, we continue to like Ipca as one of our preferred bet in mid-cap Pharma space.
IVRCL Infrastructure & Projects Reco: BUY CMP: Rs156 Target Price: Rs199 Results in line- Maintain Buy IVRCL Q4FY10 numbers are in line with our estimates. Though execution continues to be lackluster (topline growth of just 16.7% is still reeling under execution pressure in the state of AP) IVRCL has benefited from better project mix and lower material expenses. Helped by a 660 lower Raw material & construction expenses ( 55.2% of sale as compared to 61.8% in Q4FY09) EBIDTA margins for the quarter expanded 161 bps to 10.3%. We note that last time the company reported 10%+ EBIDTA margins in Q4FY08. EBIDTA for the quarter stood at Rs1.95 bn (our Est-Rs1.96 bn), registering a growth of 47.4% yoy. Higher tax rate (36.3% as compared to 18.5% in Q4FY09) owing to amendment in Finance Bill 2009, restricted PAT growth to just 6.7% (Rs852.5 mn). PBT grew by a handsome 36.5% yoy to Rs1.34 bn in line with EBIDTA growth. The quarter saw increasing working capital needs for the company as interest charges increase (+34% yoy) ,more than double the rate of company's topline growth (+16.7%). Though IVRCL is currently facing headwind in term of execution, we believe that the situation is likely to change with AP turning back to political stability. We believe that eventually strong fundamentals like robust order back log of Rs233.7 bn (~4 X FY210 E topline) and strong earnings traction (CAGR of 29% over FY10E-2012E period) would fuel stock performance. Given this backdrop, current valuations of 14.9x FY2011 earnings are attractive. Maintain BUY, with a target of Rs199.
Punj Lloyd Reco: HOLD CMP: Rs120 Target Price: Rs132 Penultimate Leg, Upgrade to 'HOLD' Punj Lloyd (PLL) reported disastrous performance in Q4FY10, beyond estimation. The key highlights are (1) 45% yoy decline in revenues to Rs17.8 bn, Libya order does not reach revenue booking in Q4FY10 and (2) adjusted net loss of Rs6.2 bn – loaded with cost overruns and provisions on multiple projects. Further, PLL has reported Ebidta loss of Rs5.2 bn, adjusting for cost over-runs, normalised Ebidta margins were 10% and Ebidta of Rs1.7 bn. PLL booked extra-ordinary income of Rs3.2 bn on sale of equity holding in Pipavav Shipyards. Considering the extra-ordinary gain, reported net loss reduces to Rs3.0 bn in the quarter. We attended the analyst meet in Delhi , where new management chaired by Mr. Atul Punj gave firm commitment for no negative surprise in ensuing quarters. Management expects to start on clean slate with Q2FY11E – addressing the pending issues if any, in Q1FY11E. Considering (1) firm commitment given by management in the analyst meet for no room for negative surprises (2) ratifying the quality of outstanding order backlog and (3) recent price correction, PLL being valued on P/BV against PER earlier – we are upgrading our rating by one notch from 'REDUCE' to 'HOLD' with price target of Rs132/Share. Further, we shall review our valuation and ratings methodology on profitable execution of order backlog in ensuing quarters, up on gaining further confidence.
Voltas Reco: BUY CMP: Rs180 Target Price: Rs234 Earnings upgrade by 13%, Maintain 'BUY' Voltas has reported strong and all-round performance in Q4FY10- way ahead of EMKAY and consensus estimates. The key highlights are (1) revenues grew by 49% yoy to Rs14.8 bn (2) operating profit grew by 66% yoy to Rs1.5 bn (3) operating margin expanded by 340 bps to 10.1%, maintaining the trend set in previous quarters and (4) APAT doubled to Rs1.2 bn – infact Q4FY10 performance was ahead of estimates on all counts. Considering traction reported in Q4FY10 – Voltas reported strong numbers for FY10 with revenues of Rs48.3 bn (up 11.5%), op erating profit (up 63.9%) and APAT of Rs3.6 bn (up 63%). Further, Voltas reported earnings of Rs10.8/Share (adjusted for extra-ordinary) higher then FY11E estimates. Voltas is play on twin developments (1) revival in ME projects and (2) domestic HVAC industry progression towards integrated MEP play. Further, Voltas being a serious player in room air-conditioners – will benefit from +25% growth expected in FY11E and FY12E. With upgrades in FY11E (Rs11.3/Share) and FY12E (Rs13.3/Share) earnings, the revised earnings CAGR for FY10-12E is 14%. Voltas is trading at attractive valuations of 15.8X FY11E earnings and 13.4X FY12E earnings. With targeted FY11E order inflows already under fold, we ex pect Voltas to progressively discount FY12E earnings. We maintain our 'BUY' rating with price target of Rs234/Share.
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