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Contents
Result Preview: Thermax; Blue Star; Tata Chemicals; HDFC Bank; Result Update: Deepak Fertiliser
Thermax Q3FY11E Result Estimates
Expect yet another quarter of robust all-round performance by Thermax in Q3FY11E
n Expect revenues of Rs10.8 bn (+45% yoy) – led by Energy segment at Rs8.2 bn (+47% yoy). Expect Environment segment to witness healthy growth 27% yoy to Rs2.6 bn
n Expect strong EBITDA growth at 54% yoy to Rs1.4 bn – led by 80 bps yoy expansion in EBITDA margins to 12.7%.
n Led by strong operational performance, expect APAT growth at 57% yoy to Rs880 mn.
Ability to sustain order inflows momentum and progress in boilers venture will be watched keenly.
Blue Star Q3FY11E Result Estimates
After a disappointing in Q2FY11, we expect BLSR to report improved performance in Q3FY11.
n Expect healthy revenue growth at 14% yoy to Rs6.8 bn – led by EMP&PAC segment (up15% yoy to Rs5.3 bn). Expect Cooling Products to post muted lower growth at 9% yoy to Rs1.0 bn.
n Led by strong revenue growth and 60 bps yoy improvement in operating margins, expect EBITDA to grow by 20% yoy to Rs0.7 bn.
n However, APAT growth to be lower at 16% yoy to Rs389 mn – due to high interest costs.
Traction in order book and execution of ongoing projects will be tracked closely
Tata Chemicals (Conso) Q3FY11 Results Expectation : Net Sales Rs 26.6 bn, PAT Rs 1.6 bn
Tata Chemicals is expected to report their Q3FY11 results today i.e. January 27th, 2011.
n We estimate consolidated level revenues to remain flat yoy at Rs 26.6 bn. As problems continue to persist on the company’s domestic business and it faces rising raw material costs, we estimate EBITDA margins to contract by 410 bps yoy to 16.9%. Consequently we expect APAT to decline by 32% yoy to Rs 1.6 bn resulting in AEPS of Rs 6.4.
n On a standalone basis we expect revenues of Rs 14.4 bn, -7% yoy and APAT of Rs 697 mn.
n We expect decline in revenues for BMGL by 17% yoy to Rs 4.1 bn. IMACID is likely to report 30% yoy growth in revenues to Rs 1.1 bn while revenues for GCIP are likely to remain flat at Rs 4.6 bn.
JSW Steel Q3FY11 Result Expectations
n JSW Steel is expected to show modest improvement in the performance due to rise in realization both on QoQ and YoY basis.
n Comparatively lower raw material costs for Q3FY11 are likely to result into an EBITDA margin expansion by 340 bps on QoQ.
n On YoY basis however, there would be fall in margin by 190 bps.
n Adjusted PAT however is likely to grow by 38% YoY
n We are expecting sales volume of 1.59 mn tonne for this quarter
n Realizations are likely to improve on QoQ basis
Things to watch out for
n Volume growth in coming quarter and next year
n Update on raw material costs going forward in context of coking coal price rise
n Update on sourcing of its own US coking coal
n Update on sales of iron ore from Chile
HDFC Bank Q3FY11 result estimates
HDFC bank’s NII is expected to grow by 22.2%yoy to Rs27.2bn driven by strong growth in advances (40%yoy) and stable NIM’s at 4.2%. Fee income also likely to grow strong (25%yoy) in tandem with growth in advances. Key things to watch – provisioning and Cost ratios.
Deepak Fertiliser – Q3FY11 results – First Cut – Results in line with estimates
n Revenues Rs 3.7 bn, +2.2% yoy, is broadly in line with est. Revenues from chemical increased by 23% to Rs 2.6 bn while revenues from fertiliser declined by 24% to Rs 1.2 bn mainly on account lower trading.
n Chemical segment margins stood at 30.4% and Chemical EBIT increased by 25% to Rs 799 mn
n Fertiliser segment margins at 3.5% was broadly in line with estimates resulting EBIT from Fertiliser segment declined by 10% to 43 mn
n Performance from both the segments – fertiliser and chemicals remains satisfactory while Real estate continues with marginal losses of Rs 13 mn
n APAT of Rs 446 mn, +28% yoy is in line with estimates of Rs 456 mn. APAT adjusted for Rs 34 mn for asset restructure cost in Q3FY11 and previous year adjusted for Rs 257 mn on asset sale. AEPs for the quarter stood at Rs 5.1 as against Rs 4 in previous year.
n Company reported net profit of Rs 403 mn against Rs 529 mn previous year.
In 9MFY11, company reported revenues of Rs 11.4 bn, +18% yoy, EBITDA of Rs 2.5 bn, +28% yoy, and APAT of Rs 1.4 bn, +28% yoy with an EPS of Rs 16.1. we maintain our FY11 / FY12 estimates of Rs 21.2 / Rs 25.2 and maintain BUY recommendation with price target of Rs 250.
Emco Q3FY11 Results First Cut
Results in line; turns profitable…
n Revenues increased by 46% yoy to Rs3bn versus expectations of Rs2.6bn.
n EBITDA stood at Rs242mn versus expectations of Rs211mn.
n EBITDA margins stood at 8% in line with our estimates.
n PAT of Rs55mn versus our estimates of Rs60mn mainly on account of higher interest costs (55% higher than our estimates).
n Emco reported an EPS of Rs0.8/share, 9mFY11 loss per share stands at Rs7.4/share. Our FY11E estimate is loss per share of Rs5.3 and EPS of Rs4.6 in FY12E. Implied Q4FY11E earnings of Rs2.2/share (y-o-y growth of 85%). Currently trades at 14.6xFY12E earnings ,0.8x FY12E book and 6.1xFY12E EV/EBITDA one of the most expensive stocks in the transformer sector
n We maintain our Negative (REDUCE rating) view on the stock. We shall come out with a detailed note shortly….
Power Sector Report; Too many ends to tie;
Our analysis of all the factors having a bearing on power tariffs - (1) demand, (2) supply and (3) health of state distribution companies (discoms) - point towards low merchant power prices. Even our most optimistic assumptions for power generators indicate unfavorable risk reward for investors. While demand supply dynamics (surplus situation by end FY13E) are bound to significantly bring down power prices, discoms’ financials otherwise would be a potential trigger. Our detailed scrutiny of discoms’ financials for the past 5 years reveals that higher power prices were responsible for almost 2/3rd of its increased losses (Rs342bn) during FY08-FY10. Should the discoms continue to buy upcoming merchant power at Rs4.5/unit (current bilateral merchant tariffs) or Rs3.6/unit (implied tariffs accounting for current stock valuations), its annual losses would rise to Rs1,143bn (1.4% of nominal GDP) or Rs1,006bn by FY13E respectively. Moreover, states are likely to feel the real pinch of losses going forward as large part of increased losses would be actual cash outflows (till now, 85% merchant volumes by state utilities, hence forth by private utilities).
No wonder, power stocks have already underperformed the Nifty by 24% in the last one year. We believe that the underperformance is likely to continue as our assessment where tariffs will stabilize is Rs2.7/unit, maximum leeway being till FY13E. In this context, our valuation matrix to choose stocks is largely driven by the nearness to this long term tariff (Rs2.7/unit) besides other factors like (1) fuel security at competitive rates, (2) off take tie ups at attractive IRRs, (3) early mover advantage and (4) relatively lower EVM (enterprise value per adjusted mw). We initiate coverage on Independent Power Producers (IPPs) with an ‘Underperform’ rating and within the IPPs, we prefer Lanco Infratech. Our stock specific rating is as follows:-
Buy - Lanco Infratech (Lanco) (lowest implied merchant rate of Rs2.9/unit).
Accumulate - Reliance Power (RPL) (implied tariff of Rs3.4/unit, however most sustainable business model), Nava Bharat Ventures Ltd (NBVL) (natural hedge, early mover advantage, relatively lower implied tariff of Rs3.3/unit).
Hold - Adani Power (APL) (balanced but valuations price in all the upsides and implied tariff of Rs3.9/unit), Jaiprakash Power Ventures (JPVL) (back ended capacity additions and implied tariff of Rs3.6/unit) and KSK Energy (attractive MOUs/contracts but materialization risk, implied tariff of Rs3.6/unit).
Reduce - JSW Energy (fuel and off-take both open - a risky strategy, highest implied tariff of Rs4.0/unit)
Bharat Bijlee Q3FY11 Result Update; In line; Reiterate Buy; Target: Rs 1,350
n PAT grows by 92% yoy to Rs142mn (our expectations -Rs137mn) - driven by 28% revenue growth (mainly volume growth) and increase in EBITDA margins to 11.8% (+320bps)
n 9mFY11 EPS stands at Rs62.2/Share (up 47% yoy), maintain earnings of Rs96.1 and Rs116.4 in FY11E and FY12E with upward bias going into Q4FY11E
n Valuations (3xFY12E EBITDA and 5.8xFY12E earnings) not pricing in value of inv. in Siemens (at 40% discount to CMP of Siemens, the value is Rs265/Share or 28% of BBL’s CMP);
n Top pick in transformers pack; Reiterate Buy
DB Corp Q3FY11 Result Update; Cost pressure to remain, maintain Hold; Target: Rs284
n Q2FY11 PAT grew by 30.4% yoy to Rs659mn, slightly below our estimate of Rs684mn impacted by sharp rise in opex towards newsprint cost and new launches
n Robust advertisement revenue of Rs2.8bn grew by 29% yoy led by volume and price growth
n Significant yoy increase of 26% and 34% in raw material and other operating cost dents EBITDA and profitability
n Robust revenue ad growth to continue but margin pressure to remain in short term. Maintain HOLD rating with target price Rs284
Sesa Goa Q3FY11 Result Update; Short of expectations, opportunities ahead; Hold; Target: Rs 354
n Despite improvement on both YoY and QoQ basis Sesa Goa reported lower than expected numbers for Q3FY11 with revenue came at Rs 22.5 bn up 19% YoY
n EBITDA remained at Rs 12.3 bn up by 19% YoY while EBITDA margin remained flat YoY at 54.8%. Higher export duty and logistics costs partly offset YoY rise in realizations
n APAT grew by 29% YoY and 177% QoQ to Rs 10.65 bn, this is due to YoY reduction in depreciation and interest cost by 8% and 47% respectively
n Revising our earnings estimates for FY11E and FY12E to Rs 48.6 and Rs 44.3 respectively. Recommend HOLD
Idea Cellular Q3FY11 Result Update; Festive cheers but no upgrades; Sell; Target: Rs60
n Q3FY11 PAT at Rs2.4bn (v/s our est. Rs1.8bn) and EBIDTA at Rs9.5bn (v/s our est. 9.1bn), festive season drives volume growth but higher opex keeps the EBITDA margin flat qoq
n Strong revenue growth of 8.1% qoq to Rs39.6 bn v/s our estimate of Rs38.1bn
n Robust 10.2% rise in traffic on network. ARPU improves to Rs168 v/s Rs 167 in Q2FY11. MOUs rise to 401 v/s 394 in Q2FY11
n Valuations expensive at 9.7x & 8.2x EV/EBIDTA for FY11E & FY12E respectively. Prefer Bharti Airtel available at 6.9x FY12E EV/EBIDTA. Retain SELL rating with target Rs60
Ultratech Cement Q3FY11 Result Update; Numbers in Line - Maintain REDUCE; Target: Rs 1,040
n PAT at Rs3.19 bn (175.5% qoq) – in line. Revenues up15.6% qoq- volumes up 5.7% qoq, realisations jump up 9.3% qoq
n EBITDA grew 73.6%qoq to Rs7.07 bn- in line-margins expand 640 bps qoq to 19.1%. EBITDA/t at Rs736 improves 64.2% qoq
n Cement offtake improves in January – prices hiked Rs10-15/bag. Sustainability of cement price over medium term remains uncertain, as demand yet to see significant pick up
n Stock trades at PER of 15.3X & EV/ton of USD125 on FY12E- Do not see valuation comfort, considering uncertainty on sustainability of cement prices & sharp jump in coal prices
Asian Paints Q3FY11 Result Update; Cost Pressure Circling, Maintain HOLD; Target: Rs 2,510
n Asian Paints (APL) Q3FY11 APAT at Rs2.2 bn meets expectation, but Ebidta margin contraction at 320 bps yoy was higher then expectation
n Bounces back with volume growth of 17-19% at company level and 27%yoy in standalone operations
n APL implemented another price increase of 2.9% w.e.f December 2010, total price increase in YTD 2011 is 11.4%
n No significant change in earnings – FY11E at Rs91.5/Share and FY12E at Rs106.1/Share) – Maintain ‘HOLD’ rating with target price of Rs2510/Share
United Phosphorus Q3FY11 Result Update; Results in line, Downgrade earnings and price target; Buy; Target: Rs 210
n Q3FY11 results in line with estimates with APAT growth of 14% yoy to Rs 1.1 bn, adjusted for Rs 355 mn on forex loss
n Revenue grew by 6% to Rs 12.2 bn on account of 37% growth in RoW markets followed by 6% in India while growth in Europe (-24%) and North America (-4%) remains subdued
n Growth in India and RoW to remain buoyant while normalcy in Europe and Northern America along with partial benefit of Cerexagri integration and price increase to drive margins
n Downgrade FY11 / FY12 estimates by 2.5% / 8.5% to Rs 15.4 / 17.5. Subsequently downgrade price target by 8.5% to Rs 210 however maintain BUY with 35% upside
Banking Sector Update; Quarterly Review of Monetary Policy
n RBI raises repo and reverse repo rate by 25bps, leaving the CRR unchanged
n Inflation would be the predominant focus of near-term monetary policies
n Rate calibrations to continue in light of growth momentum and building demand pressures
n Improved global growth prospects pose concerns over the current account and fiscal deficit
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