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TVS Motor Q3FY11 Result Update; Mixed bag, Upgrade to Accumulate; Target: Rs 72
n EBIDTA at Rs 1bn (est.-Rs 1.1bn) and margins at 6.1% (est.-6.9%) were below est., PAT at Rs 557mn (est- Rs 524mn) was above est. due to higher other income and lower interest cost
n Demand outlook remains strong across segments. ‘Wego’ run rate of ~12000 units p.m., expect to touch 20,000 units p.m in FY12. Exports to provide added momentum to 3 wheelers
n Retain our FY12 EPS of Rs 6 per share. Upgrade our rating from REDUCE to ACCUMULATE post the stock price correction
n Key concerns arise from continued support to various subsidiaries (amount invested in 9MFY11 at Rs 1.3bn). Key risks - sharp jump in metal price/demand slowdown
Orient Paper & Industries Q3FY11 Result Update; Results marginally below estimates; Buy; Target: Rs 77
n Net profit at Rs309mn (+2.2% yoy) slightly below estimates of Rs329mn. Revenues at Rs4.38bn (+18%), Cement (+7.4%), Electricals division (+40.6%) & Paper division (+22.6%)
n Cement revenues grew 7.4% yoy to Rs2.28 bn as realizations improved 13% yoy and 17% qoq led by price hikes in OPIL’s key markets of AP and Maharashtra
n Paper division witnessed sharp turnaround in profitability with positive EBIT (Rs24 mn) after 7 consecutive quarters of losses as the Amalai paper plant witnessed stabilization
n OPIL on the verge of earnings recovery led by recent cement price hikes in its key markets and turnaround of paper division. Maintain BUY with TP of Rs77
Piramal Glass Q3FY11 Result Update; Both Fire & Ice, Maintain BUY; Target: Rs 160
n Piramal Glass (PGL) Q3FY11 performance buoyed by product mix and operating leverage - revenue growth at 10.7% yoy to Rs3.2 bn and APAT doubles yoy to Rs231 mn
n Tweaked near-term business strategy – future cashflow earmarked for debt repayment would be diverted to capacity expansion – investing Rs1.0 bn for 160 tpd furnace
n Strong 9MFY11 performance- aligning FY11E estimates – FY11E earnings revised 7.7% to Rs9.9/Share and retained FY12E earnings of Rs18.8/Share
n Risk from leveraged balance sheet remains, But valuations attractive – FY12E EV/Ebidta at 4.2X - Maintain BUY with target price of Rs160/Share
Greaves Cotton Q2FY11 Result Update; Successfully Fights Base Effect; Reiterate BUY; Target: Rs 111
n Strong performance – (1) Revenues up 22% yoy to Rs4.2 bn (2) Stable EBITDA margins at 17% (despite high base) (3) Net profits up 36% yoy to Rs444 mn
n All-round performance – Engines (revenues +19% and EBIT +16% yoy), Infrastructure (revenues +36% yoy with EBIT of Rs3 mn – after 8 quarters of EBIT loss)
n Greaves Cotton (GCL) signs 10-year supply contract with Tata Motors for the new ½ ton truck – Ace Zip
n Upgrade earnings by 5% and 9% for FY11E and FY12E - Reiterate BUY with revised target price of Rs111/Share
Wipro Q3FY11 Result Update; Lack of ‘xing’ in results, retain REDUCE; Target: Rs 440
n Rev at US$ 1,344 mn (+5.6% QoQ), mgnally lower than est, IT services EBIT mgns flat QoQ at 22.2% (V/s +50 bps exp). Profits in line with est at RS 13.2 bn (+2.6%, +9.6% YoY)
n Vol growth at 1.5% QoQ trails peers, price realizations up by ~2.9% sequentially driven by ~230 bps increase in Fixed bid proportion of revenues to 46.3%
n Co announced a change at the top helm with a single CEO strategy now as it attempts to address underperformance V/s peers
n Increase FY12/13E earnings by ~6%/3% to Rs 24.5/26.8 driven primarily by lower currency reset. Maintain REDUCE with a revised TP of Rs 440(V/s Rs 420 earlier)
Punjab National Bank Q3FY11 Result Update; Higher provisions dent profits; Buy; Target: Rs1,500
n PNB’s Q3FY11 NII at Rs32bn in line with estimates driven by 6% qoq growth in advances and 7bps expansion in NIMs. PAT at Rs10.9bn lower than expected due to higher provisions
n NPAs inch up as the recoveries remain moderate during the quarter. Slippages remain in line with Q2FY11 at Rs9.7bn for the quarter. Provision cover strong at 77.8% (RBI norms)
n Other positives in the result – (1) CASA at 39.1% despite strong growth in balance sheet (2) provisions at 71% of net new slippages and (3) accelerated provisions for pension
n PAT growth lower this year on higher provisions. To bounce back as (1) staff provisions and (2) slippages come done in FY12E Valuations reasonable at 2.0x FY11E/1.6x FY12E ABV
BHEL Q3FY11 Result Update; Case Strengthens; Retain BUY; Target: Rs 3,030
n Adjusting for One-Offs, BHEL performance meets expectations – APAT growth at 25% yoy to Rs13.4 bn
n Subdued order inflows in Q3FY11 (down 21% yoy to Rs122 bn) – but not concerning as Q4FY11E asking rate is undemanding at Rs241 bn (-1% yoy). Order backlog at Rs1576 bn
n Bursting all popular myths and notions, BHEL hinted at substantial operating leverage in business operations, which could fructify beginning FY12E
n Maintain earnings estimates of FY11E (Rs110.6/Share) and FY12E (Rs129.0/Share). Reiterate BUY with target price of Rs3,030/Share
Bank of India Q3FY11 Result Update; Strong results; Asset quality concerns recedes; Accumulate; Target: Rs510
n BOI’s results for Q3FY11 were in line with street estimates with NII at Rs20bn (32.9%yoy) and earnings at Rs6.5bn (61.1%yoy)
n Key positives in the results – 1) 20bps expansion in NIMs 2) lower slippage rate at 0.8% annualised and 3) stable CASA despite deposit rates going up
n Added by strong recoveries and lower slippages, the NPAs for the first time showed dramatic reduction at gross as well as net level
n Valuations attractive at 1.8x FY11E/1.4x FY12E ABV. Asset quality and provisions show improving trend. Expect RoAs to reach back 1%. Upgrade to ACCUMULATE with TP of Rs510
Tech Mahindra Q3FY11 Result Update; Where’s the growth? retain HOLD; Target: Rs 730
n Rev gwth at 1.6% (like to like basis) missed est. of +4.8% QoQ, pales in comparison to strengthening growth at peers. Mgns declined by ~110 bps QoQ(V/s exp of -50 bps QoQ)
n Standalone Profits at ~Rs2.1 bn, +29%QoQ driven by forex gains of ~Rs 520 mn. Net adds tepid at ~200 with attrition continuing to be high at 30% on a qtrly annualized basis
n Raise FY11/12/13 adjusted EPS by ~8.8/4.2/2% to Rs 51.4/61.3/66.4 driven by lower currency resets, higher fx gains in FY11 despite marginal cut in US$ revenue estimates
n Valuations inexpensive at ~11.2/10.4x FY12/13E EPS, however fair given sober growth vis-a-vis improving growth at peers. HOLD with a revised TP of Rs 730(V/s Rs 810 earlier)
State Bank of India Q3FY11 Result Update; Upgrade to ACCUMULATE on valuations; Accumulate; Target: Rs 3,000
n SBI’s NII at Rs90.5bn and net profit at Rs28.3bn were better than consensus estimates although the slippages continued to remain high at Rs39bn (Rs32bn in Q2FY11 excl SBIndore)
n Key positive of operating performance (1) CASA continued to expand to 48% (2) NIMs maintained at 3.0% and (3) continued lower repricing of legacy deposits
n SBI’s PCR at 64%. Guided no need for teaser rate loan provisions. Also guided reduction in slippages driven by lower NPAs from restructured asset and agri
n Operating performance likely to remain strong. Slippages may come down in coming quarters. Valuations now reasonable at 1.6x FY12E conso banking ABV. Upgrade to ACCUMULATE
United Bank of India Q3FY11 Result Update; Reaping benefits of improving efficiencies; Buy; Target: Rs 130
n UNTDB’s Q3FY11 NII at Rs5.6bn and net profit at Rs1.6bn much ahead of our estimates. Robust NII driven by improved yields (up 32bps qoq) and improving CDR (up 230bps qoq)
n Fee income continues to be strong from repricing of products; expansion of reach. The other income excl treasury up 41% yoy
n The slippages have surprised positively at Rs2bn, flat qoq. PCR at 71.2% as per RBI norm. Provided at 100%+ for the net incremental slippages for M9FY11
n The turnaround story panning out exactly as estimated. Valns near stress case of 10% discount to book, absolutely unwarranted. Upgrade to BUY with strong conviction
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