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ABG Shipyard Q2FY11E Result Estimates
Expect strong operational performance by ABG Shipyard in Q2FY11E on the back of a healthy order backlog.
n Robust revenue growth at 38% YoY to Rs4.9 bn.
n EBITDA margins to improve by 270 bps YoY aided by lower input costs. Consequently, expect EBITDA growth to be strong at 59% YoY to Rs1.0 bn.
n However, APAT expected to decline marginally by 1% YoY to Rs456 mn - due to decline in subsidy income and high depreciation charges.
Key things to watch management comment on (1) revival in order inflows (2) receipt of payment on execution of rig order and (3) outlook on Western India Shipyard.
IIP growth drops to 4.4%; base effect at play along with production concerns
n Growth in Index of Industrial Production (IIP) for September 2010 stood at 4.4% compared to 8.2% for the same period the previous year, owing mostly to an unfavourable base effect.
n The IIP indices and the growth rates have been recompiled by the government and this shows IIP growth for the month of August FY11 at 6.9%, higher than the previously quoted figure of 5.6%.
n Sectorally, manufacturing growth dropped to 4.5% from 7.5% last month due to a high base, though growth stood at 1.4% MoM. Mining and quarrying saw a drop in growth to 5.3% with a decline of 3% MoM.
n On use-based classification, capital goods production dropped to -4.2% reflecting an unfavourable base from last year. MoM growth in capital goods stood at 20.8%.
n Concerns remain over production growth in the manufacturing sector. Though 14 out of 17 industry groups have shown positive growth on YoY basis, on a MoM basis, only 5 out of the 17 industry groups have shown positive growth momentum. Manufacturing growth does not seem broad based.
n The month of October would see IIP growth rates affected by a favourable base effect. Any small increment in industrial production MoM is likely to show an increase in YoY growth rates.
All figures are in %YoY, unless otherwise mentioned
McNally Bharat Engineering – Q2FY11 Result – First Cut Analysis
Below Estimates
McNally Bharat (MBE) reported subdued performance in Q2FY11 (standalone), below estimates – attributed to low EBITDA margins.
n Revenue growth for the quarter was healthy at 31.7% yoy to Rs4018 mn, marginally below estimates.
n Operating margins declined sharply by 150 bps yoy to 5.4%, against our estimates of stable margins – lowest in past 2 years. This is attributed to high employee costs & other expenses.
n Led by sharp decline in operating margins, operating profits growth was muted at 2.9% yoy to Rs219 mn – below estimates.
n Led by disappointing operational performance, net profit growth was below estimates at 9.6% yoy to Rs97 mn.
n Headline numbers of McNally Sayaji were below estimates – (1) Revenues decreased 10% yoy to Rs620 mn, (2) Operating margins declined 110 bps yoy to 16.1% (3) Operating profits declined 15% yoy to Rs100 mn and (4) net profits decline 66% yoy to Rs52 mn – below estimates.
n Consolidated order book stood at Rs45.2 bn – split as Standalone - Rs40 bn, McNally Sayaji – Rs2.8 bn and CMT (Germany) – Rs2.4 bn.
At CMP, the stock is trading at 10.2X FY11E and 8.1X FY12E consolidated earnings of Rs24.3 and Rs30.3 per share respectively.
Cipla Q2FY11 Result Update; Improved outlook; Upgrade to Accumulate; Target: Rs350
n Cipla’s Q2FY11 revenues were driven by good traction in domestic and export formulation business; however, lower licensing income dragged the overall profitability
n Revenues were in-line at Rs16.1bn (estd. Rs16bn). EBITDA at Rs3.7bn (estd. Rs3.9bn) and APAT at Rs2.6bn (estd. Rs2.8bn) were below expectations
n Inhalers approval in Europe, commencement of Zyprexa supplies to Teva and tie-up with Dr. Reddy’s to drive earnings momentum in the longer term
n Tweaking FY11E EPS marginally by 3% to Rs14.4 (earlier Rs14.7), raise target price upwards to Rs350 (earlier Rs318); Upgrade to Accumulate
Jubilant Life Sciences Q2FY11 Result Update; Below estimates; Downgrade earnings; BUY; Target: Rs390
n Jubilant’s numbers are below expectations with a) Revenue growth of 6% (est of 11%), b) OPM at 16.1% (est. of 18.5%) & APAT at Rs826mn (est. of Rs1.1bn)
n High cost inventory in Life Sciences, currency fluctuations (-ve impact of 3%) & lower realization in Pyridine (-ve impact of 4.4%) impacted the operating performance of the company
n Expect gradual recovery in 2HFY11; High cost inventory has been exhausted and price hike in PP has been taken
n Cut earning estimates by 27% and 17%; Maintain Buy with a revised price target of Rs390 (Rs455 earlier)
Dishman Pharma Q2FY11 Result Update; Dismal performance; Cut earnings and target price; HOLD; Target: Rs181
n Q2FY11 was significantly below our expectations with a) Revenues at Rs2.1bn (est. Rs2.2bn), EBIDTA at Rs369mn (est. Rs492mn) and APAT at Rs85mn (est. Rs205mn)
n Performance was largely impacted because of continued underperformance in the high margin CRAMS segment and de-growth in the Marketable Molecules business
n This is 12th consecutive quarter of dismal performance; management has revised revenue guidance downward from 15% to 10%
n Delay in business recovery remains an overhang; poor H1FY11 leads to downgrade of earnings by 26% each for FY11E/FY12E; revise target to Rs181 and maintain hold
Bharati Shipyard Q2FY11 Result Update; Performance below estimates; Retain Reduce; Target: Rs 196
n In Q2FY11, BSL’s net profits declined 11% yoy to Rs292 mn – below estimate (1) Sales up 9% yoy to Rs3.4 bn (2) EBITDA margin down 40 bps yoy (3) Interest costs up 169% yoy
n Unexecuted order book continued to decline on back of no order inflows – down 18% qoq to Rs15.8 bn (equivalent to mere 1.25X FY10 revenues)
n Retain our negative bias on core shipbuilding business amidst no revival of order inflows for BSL. There also exist downside risk to our earning estimates
n Retain ‘Reduce’ rating with SOTP target price of Rs196/Share (Core shipbuilding @ Rs117/Share, Great Offshore Stake @ Rs79/Share). Only caveat is meaningful subsidy disbursement
Money Matters Management Meet Update; Diversification to help quintuple profits; NOT RATED
n Established in 1997, Money Matters (MMFS) is amongst India’s leading provider of loan/debt syndication services
n MMFS is planning to deploy the strong cash flows of loan/debt syndication business in financing business
n The leads generated through loan/debt syndication business alongwith recently raised Rs4.5bn of equity should help MMFS to sustain future RoEs at 30%
n The stock is currently trading at 17.1x/10.0x FY11E/FY12E earnings. P/BV at 2.8x/2.2x with RoEs of 25% over FY11E/FY12E. We find valuations attractive
India Cement Q2FY11 Result Update; Earnings continue to disappoint - Maintain SELL; Target: Rs114
n Adjusted loss at Rs449 mn (-132.5% yoy) below estimates (-Rs364 mn). Cement revenues (Rs7.9bn) decline 17.7% yoy – realisation down 15.4% yoy 9.6% qoq
n EBIDTA at Rs286mn down 90.4% yoy – below estimates (Rs435mn) – led by higher than estimated other expenses. EBIDTA/t atRs63 don 94% yoy and 84% qoq
n Downgrade FY11 earnings by 20.2% - maintain FY12 earnings as prices in southern India have bounced back sharply and are now closer to FY12 estimates
n Though we raise or TP to Rs114, ICL’s valuations of 8.2X EV/EBDITA & ~USD 78/t leaves little upside, considering FY12 RoCE at 6.3% is barely half the cost of capital - SELL
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