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Result Update: HDFC Bank; Dr. Reddy's; Ipca; Sterlite Industries
n Research Views
TATA Chemicals Q3FY11 Results – Inline with estimates – Net Sales Rs 28.9 bn, APAT Rs 1.64 bn
TATA CHEMICALS (Consolidated)
Q3FY11 Results for Tata Chemicals remained inline with estimates as the company reported APAT of Rs 1.49 bn, as against estimates of Rs 1.55 bn. Results are adjusted for gain of Rs 167 mn – incurred on sale of investments and Rs 62 mn on account of forex gain.
TCL reported net revenues of Rs 28.9 (+9% yoy) – ahead of estimates of Rs 26.6 bn. EBITDA margins continued to remain weak at 15.3%, -570 bps yoy, below estimates of 16.9%. Resulting EBITDA however remained inline with at Rs 4.4 bn. Adjusting for gain of Rs 167 mn – incurred on sale of investments and Rs 62 mn on account of forex gain – the company reported APAT of Rs 1.49 bn, -34% yoy resulting in AEPS of Rs 6.1.
TATA CHEMICALS (Standalone)
Despite challenging environment – standalone performance bounced back as results were ahead of estimates – driven by better than expected performance of the chemical segment. Chemical EBIT margins stood at 20.1% (-380 bps yoy / +780 bps qoq). Overall, on standalone basis the company reported Net Sales of Rs 17.8 bn (+15% yoy), EBITDA of Rs 2.6 bn (-11% yoy) and APAT of Rs 1. bn (-7% yoy).
Subsidiaries Performance
n BMGL continued to report weak numbers with losses of Rs 130 mn – as against estimates of Rs 74 mn. BMGL performance was affected due to adverse monsoon conditions in the region resulting in to lower production of Soda ash. BMGL also witnessed cost pressure due to rising cost of fuel and coking coal.
n IMACID’s performance was also below estimates as it did not contribute anything to the bottomline – as against estimates of Rs 59 mn. IMACID had to take plant shut down for approximately 35 days adversely affecting its production.
n Results for the GCIP were encouraging as the company reported APAT of Rs 490 mn in line with estimates of Rs 468 mn.
Thermax Q3FY11 performance – First Cut
Strong Performance yet again
n Revenue at Rs12.4 bn(+66% yoy) – Vs estimate of Rs10.8 bn
n Revenue growth led by both Energy (+77% yoy to Rs9.9 bn) and Environment (+45% yoy to Rs2.9 bn)
n EBITDA at Rs1464 mn (+64% yoy) - Vs estimate of Rs1375 mn
n EBITDA margins at 11.8% (-10 bps yoy) – Vs estimate of 12.7%
n APAT of Rs1002 mn(+77% yoy) – above estimate of Rs880 mn
n Order book at Rs71.5 bn (-2% qoq & +27% yoy). Order Inflows at Rs12.3 bn (-8% yoy & -14% qoq). But, Q4FY11E implied growth at -28% yoy (Rs10.3 bn) is undemanding
We will upgrade our earnings estimates.
Blue Star Q3FY11 Results – First Cut
Dismal performance
n Revenue at Rs6134 mn(+3% yoy) – led by 6% yoy decline in EMPVs estimate of Rs6769mn &PAC division to Rs4.3 bn. Cooling products and PEIS division posted healthy growth of 34% yoy to Rs1.3 bn and 28% yoy to Rs0.5 bn respectively.
n EBITDA at Rs473 mn (-16% yoy) - Vs estimate of Rs678mn
n EBITDA margins at 7.7% (-180 bps led by highyoy) (lowest margin in past 15 quarters) – Vs estimate of 10.0% operating costs
n APAT of Rs224 mn(-33.5% yoy) (lowest net profit in past 13 quarters) – Vs estimate of Rs389 mn
n Order book at Rs20.9 bn (+5% yoy). Order Inflows at Rs7.1 bn (+6% yoy)
We will downgrade our earnings estimates.
Dr. Reddy's Lab Q3FY11 Result Update; Long term outlook intact; Maintain Accumulate; Target: Rs 1,750
n Revenues at Rs19bn (up 10% YoY); EBITDA at Rs3bn (up 6% YoY) and APAT at Rs2.8bn (up 16% YoY; adjusted for write-back at Betapharm in Q3FY10) were below estimates
n Revenues were driven by a) 16% growth in Global Generics & b) 24% increase in Proprietary Products business. Decline in PSAI segment impacted top line performance
n 400 bps YoY expansion in gross margins was negated by US$9mn non-recurring SGA cost leading to 51 bps YoY contraction in EBITDA margins to16%
n Cut earnings by 21% for FY11E and 10% each for FY12/FY13E; Maintain Accumulate with a revised price target of Rs1750
Ipca Laboratories Q3FY11 Result Update; Cost overhang dents profitability; Accumulate; Target: Rs 336
n IPCA’s Q3FY11 results were below expectations with a) Revenues at Rs4.6bn (est. Rs4.8bn), b) EBITDA at Rs880mn (est. Rs1bn) and c) PAT at Rs640mn (est. Rs684mn)
n Revenue growth was driven by 12% growth in domestic formulations (est. 20% growth) and a robust 33% growth in the exports formulations (est. 32% growth)
n Addition to the field force has impacted short term profitability but long term growth visibility remains intact; pressure on margins to continue for two more quarters
n Downgrade to Accumulate; Maintain target price of Rs336
Corporation Bank Q3FY11 Result Update; Slippages rise on one-off; Buy; Target: Rs 700
n CRPBK’s Q3FY11 NII/PAT at Rs8.4bn/Rs3.8bn better than expected driven by 27% yoy growth in advances and 7bps qoq expansion in NIMs to 2.7%.
n Some of the NII driven by one-off opportunities as other interest has almost doubled. Also avg advances growth for quarter at 31.5% vs quarter end growth of 26.8%
n Slippages rate increased significantly to 1.6% (annualized) from 1.0% in preceding quarter, primarily led by Rs1.2bn slippage from crop loans. PCR as per RBI norms at 72.81%
n Valuations not unreasonable at 1.0x FY12E ABV. We maintain our BUY recommendation on stock with TP of Rs700
Sterlite Industries Q3FY11 Result Update; Topline zooms, bottomline falters; Accumulate; Target: Rs 205
n Sterlite Industry’s Q3FY11 numbers remain mixed with topline, exceeding expectations grew by 24% and 37% respectively on YoY and QoQ basis to Rs 83.3 bn
n EBITDA remained in line with expectations at Rs 19.8 bn growing by 12% and 29% on YoY and QoQ respectively, margin however contracted by 269 bps YoY to 23.9%
n Though, APAT grew by 10% and 7% YoY and QoQ respectively to Rs 11.05 bn, it remained lower than expectations against our and street estimates
n Factoring in higher base metals prices and uncertainties related to different businesses our EPS estimates stand at Rs 13.5 and Rs 20.3 respectively for FY11E and FY12E
Grasim Industries Q3FY11 Result Update; Results above estimates-Maintain ACCUMULATE; Target: Rs 2,730
n Grasims’s Q3FY11 net profit at Rs2.83bn (+7.9%yoy) ahead of estimates (led by high other income earned through dividends from subsidiaries)
n Revenue (Rs 12.1 bn) grew 17.8% yoy driven by better VSF volumes (+4.1% yoy) and improved realizations (+12.3 % yoy). EBITDA at Rs3.64bn declined 6.7%yoy but improved 38% qoq
n Higher pulp prices led to decline of 3.7% yoy in VSF EBIDTA (Rs 3.88bn). However improved realizations resulted in margin expansion of 252 bps qoq to 34.4%
n At CMP stock implying holdco discount of ~43%. Standalone biz significantly undervalued with implied multiples of 2.5x EV/EBITDA which are unwarranted. Maintain ACCUMULATE
eClerx Services Q3FY11 Result Update; Quality delivery stands out, retain ACCUMULATE; Target: Rs 740
n Marginal beat on revenues with operating margins performance coming as a major surprise with margins improving by ~330 bps sequentially (ex one off writebacks)
n Profits at Rs 360 mn(+30%QoQ, +68.6% YoY) ahead of Emkay est( Rs 296 mn) driven by better than expected operational performance,higher forex hedge gains and lower taxes
n Increase FY11/12/13E earnings by 6.2/6.5/8.8% to Rs 42.9/52.1/57.7 driven by marginal increase in revenues growth assumptions and currency resets to Rs 45/$ ( V/s Rs 44/$)
n Retain ACCUMULATE with a revised DCF based March’12 TP of Rs 740(V/s Rs 670 earlier), implying ~14.2x/12.8x March’12/March’13 earnings
Emco Q3FY11 Result Update; Turns profitable, Maintain ‘Reduce’ ratings; Target: Rs 60
n Emco reported PAT of Rs55mn, 9% lower than our estimate but more important is that it turned profitable in the quarter – some assurance of cost overruns provisions being over
n Revenues were significantly ahead of estimates at Rs3bn led by projects even though EBITDA margins remained muted at 4.7% in the segment
n Guides for 0.15mn MT of coal sales in FY11E from Indonesian coal mine (37% stake); the ramp up in this business remains important for FY12E performance as the margin pressures in the core business remain
n Reduce FY11E/12E earnings by 5%/10% to Rs.(5.6/Share) and Rs4.1/Share;Trading at 16.1x FY12E earnings and 6.1xFY12E EBITDA - expensive; Maintain Reduce
Deepak Fertilisers Q3FY11 Result Update; Strong performance of chemical segment continues; Buy; Target: Rs 250
n Q3FY11 APAT at Rs 446 mn (+28%yoy) was in line with estimates. APAT is adjusted for asset restructuring cost
n Chemical EBIT margins at 30% were driven by higher chemical prices - Methanol prices up 40% qoq, IPA and TAN also remain strong
n Fertiliser margins at 3% were adversely affected due to lower raw material availability
n Maintain healthy outlook on chemical segment margins in the near future. New TAN plant to drive revenues / profits in FY12. Reiterate BUY
Hindustan Unilever Q3FY11 Result Update; Entering D-eciding Zone, Upgrade to HOLD; Target: Rs 275
n Hindustan Unilever (HUL) Q3FY11 performance below expectation – price changes eludes and cost pressure witnessed – 2.8% yoy decline in APAT to Rs5.7 bn
n Ebidta margins fall 310 bps yoy, both higher and earlier then expectation – led by Soaps N Detergents and Processed Foods segments
n Volume growth at 13% yoy, highest in last 4 quarters – but now enters tough N testing zone – Q4FY11 would be D-eciding zone as benefits from base-effect and portfolio re-launch subside
n Revised earnings by -6.9% for FY11E and FY12E to Rs9.7/Share and Rs10.5/Share respectively- with sharp correction and reasonable valuations upgrade from ‘REDUCE’ to ‘HOLD’
Essel Propack Q3FY11 Result Update; Only Hiccups, Target Intact, Maintain BUY; Target: Rs 72
n Essel Propack (EPL) achieves revenue (Rs3.6 bn, up 19.2% yoy) and APAT (Rs156 mn, up 152% yoy) estimates, but misses Ebidta expectations – records 210 bps qoq decline
n Capacity constraints in China and India resulting in outsourcing, whereas Europe and Americas remain impacted by low utilization translating into lower growth and Ebit loss
n Outlook for FY12E- (1) 12-13% revenue growth (2) 20% Ebidta margin and (3) higher utilization in Europe and Americas
n Revise earnings by -12.3% for FY11E and -2.3% for FY12E - Maintain BUY with revised target price of Rs72/Share
HDFC Bank Q3FY11 Result Update; Results inline; No surprises; Hold; Target: Rs 2,100
n HDFC bank results inline with expectation with NII at Rs27.8bn and Net profit at Rs10.9bn
n The NII has grown by strong 9.9% qoq driven by stable NIM’s at 4.2% and moderate growth in advances (1.3%qoq), albeit core advance growth strong at 5-6%qoq
n Other positive highlights were (1) CASA maintained at 50.5% and (2) improvement in asset quality
n Stability in parameters like NIMs, NII and asset quality as expected. But, the valuations at 3.8x/3.2x FY11E/FY12E ABV still not reasonable. Upgrade to HOLD; upside very limited
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