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RoW drives the 3Q revenue while forex loss constrain PAT growth:
Seasonally weak 3Q also saw weak guidance. 3Q Revenue (INR 12.2bn,
+6% yoy, DBe - INR 12.5bn) was driven by RoW (+36% yoy, 43% of 3Q
revenue) and domestic market (+6% yoy, 27%) while constrained by Europe (-24% yoy, 16%) and North America (-4% yoy, 14%). Lower raw
material/ sales (340bp yoy and 220bp qoq) were neutralized by a similar
increase in other expenses/sales (240bp, 150bp). Hence EBITDA of INR
2.21bn (13% against 17% expected) was largely inline. Forex loss of INR
0.3bn boosted interest cost constraining PAT growth to 31% against expected 83%. Continual weather disturbances that had resulted in weak 3Q
interim guidance has resulted in management guiding for 5% revenue
growth in FY11e against ~10% earlier.
All set for a bounce-back in 4Q: 4Q is seasonally strong in Europe and US.
While volume variance has been 13%+ in last 2 quarters, negative exchange
variance in last 3Q and price variance for last 6Q constrained revenue
growth to 7% in 3Q. With input prices (that are largely crude oil driven) going
up, we expect positive price variance. Management expects the Europe
sales to pick up in 4QFY11 with improved weather conditions. Net working
capital days (77days in Dec'10) increased by 24 days in FY11 owing to significant increase of 39 days in inventory days (109 days) - in anticipation of
sharp uptick in demand.
Cut estimates and TP, Maintain Buy: Weak 3Q interims coupled with
lower guidance by management led to cut in estimates by 2-9% and DCF
based TP by ~9% to ~INR 210. Maintain Buy.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
RoW drives the 3Q revenue while forex loss constrain PAT growth:
Seasonally weak 3Q also saw weak guidance. 3Q Revenue (INR 12.2bn,
+6% yoy, DBe - INR 12.5bn) was driven by RoW (+36% yoy, 43% of 3Q
revenue) and domestic market (+6% yoy, 27%) while constrained by Europe (-24% yoy, 16%) and North America (-4% yoy, 14%). Lower raw
material/ sales (340bp yoy and 220bp qoq) were neutralized by a similar
increase in other expenses/sales (240bp, 150bp). Hence EBITDA of INR
2.21bn (13% against 17% expected) was largely inline. Forex loss of INR
0.3bn boosted interest cost constraining PAT growth to 31% against expected 83%. Continual weather disturbances that had resulted in weak 3Q
interim guidance has resulted in management guiding for 5% revenue
growth in FY11e against ~10% earlier.
All set for a bounce-back in 4Q: 4Q is seasonally strong in Europe and US.
While volume variance has been 13%+ in last 2 quarters, negative exchange
variance in last 3Q and price variance for last 6Q constrained revenue
growth to 7% in 3Q. With input prices (that are largely crude oil driven) going
up, we expect positive price variance. Management expects the Europe
sales to pick up in 4QFY11 with improved weather conditions. Net working
capital days (77days in Dec'10) increased by 24 days in FY11 owing to significant increase of 39 days in inventory days (109 days) - in anticipation of
sharp uptick in demand.
Cut estimates and TP, Maintain Buy: Weak 3Q interims coupled with
lower guidance by management led to cut in estimates by 2-9% and DCF
based TP by ~9% to ~INR 210. Maintain Buy.
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