Visit http://indiaer.blogspot.com/ for complete details �� ��
Aditya Birla Nuvo
2QF11: Continuing Strong
Growth Across All Business
Segments; Deep Value Here
Reiterate OW: Our SOTP analysis suggests that a
significant gap exists between the intrinsic value and
current market price of Aditya Birla Nuvo (ABNL). In our
view, investors are deterred by its conglomerate
structure – but we think 2QF11 results depict the true
potential of the ABNL business model. We recommend
accumulating the stock at current levels.
ABNL reported 2QF11 results: Revenue, EBITDA and
net profit were Rs57.5bn, Rs5.7bn and Rs1.97bn
respectively, vs. our estimates of Rs48bn, Rs5.8bn and
Rs1.7bn respectively. Revenue growth was driven by
stronger than expected growth across all business
segments. EBIT growth of 94% was driven by a
combination of 1) continuing profitability of the life
insurance business; 2) strong profitability in the
manufacturing businesses; 3) turnaround in the
garments business; and 4) better absorption of overall
fixed costs.
Life Insurance profitable for two quarters in a row:
Net premium income rose by 24% in 2QF11, driven by
63% growth in renewal premium and a 12% decline in
first-year premiums. New business premium grew by 7%
during April-August 2010, although business was
affected in September 2010 after new insurance
guidelines were issued. The insurance business
remained profitable with reported PAT of Rs200mn vs. a
loss of Rs1.3bn in 2QF10. Profits were driven by a
combination of relatively high persistency, profits arising
from in-force policies, lower new business strain and
better expense management, in our view. According to
management, AUM grew by 37% over the past year.
Adjusted PAT (Rs1.97bn) excludes one-time loss of
Rs1.03bn in Financial Services subsidiaries: Aditya
Birla Money Ltd (80mn) and Aditya Birla Money Mart Ltd
(950mn) booked a loss of Rs1.03bn, owing to certain
trades done for their clients.
Financial Services
Total average assets under management (AUM) increased by
8% YoY and around 8% QoQ to Rs711bn in 2QF11. The
proportion of equity assets to domestic AUM increased by 350
bps YoY and 10 bps QoQ. Revenues (fee income) for the
quarter increased by 54% YoY and 4% QoQ, driven by an
increase in AUM. Birla Sun Life asset management ranks 7th
with 6.1% market share in September 2010.
Telecom (excerpt from note published by Indian
Telecom team, dated October 22, 2010)
Key Positives
1) Passive division revenue and EBITDA grew 9% and 24%
QoQ, respectively. Margins increased 505bp to an
impressive 42.1%.
2) Capex guidance was revised to Rs40bn from Rs40-44bn
suggested last quarter. The company spent Rs4.8bn in
F2Q11 and Rs8bn in F1H11, largely due to security
restrictions imposed by the government.
Key Negatives
1) Operational parameters – Due to seasonality, overall
minutes on network grew only 3% vs. an average of 18%
the last three quarters. MOU/sub/month fell 5% to 394
minutes. ARPMs fell 3.4% to Rs0.42, but the rate of fall
was the lowest in six quarters. This led to an ARPU decline
of 8% QoQ, the greatest drop in four quarters and vs. our
expectations of a 2% decline to Rs167.
2) Wireless division – Existing circles EBITDA declined 3%
vs. our expectation of stable EBITDA. Margin fell 60bp to
27%. Overall losses from new circles increased from
Rs1.40bn to Rs1.43bn, after declining the previous quarter.
Wireless EBITDA on the whole declined 4% and margin
fell 86bp to 20.7%
Garments
Branded garments revenues grew by 40% YoY, driven by 18%
same store sales growth. The segment turned profitable driven
by a combination of improved consumer sentiment, lower
discounting and improved product mix.
Carbon Black
Revenue in the Hi-Tech Carbon business increased by 35%
YoY, driven primarily by a 23% increase in sales realization.
Management is planning to augment capacity further by 85,000
tons per annum each at Patalganaga and southern India as
well.
No comments:
Post a Comment