Result Updates with Emkay 31 January, 2011

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Contents: 

Result Update: IRB Infra; Tata Chemicals; Allahabad Bank; Bank of Baroda; JK Tyre; Lupin; JSW Steel; Marico; Thermax; & JK Paper

n        Research Views

Gujarat State Fertilizers & Chemicals Limited (GSFC) Q3FY11 Results – Inline with estimates

GSFC reported strong results for Q3FY11. Net revenues at Rs 12.3 bn, +8% yoy and APAT at Rs 1.9 bn, +67% yoy are inline with estimates. Results are adjusted for Rs 379.2 mn pertaining to subsidy received for FY10 which has been accounted for in Q3FY11. The company reported EBITDA margins at 25.7% (we estimated 24.7%) increased by 900 bps yoy. Chemical segment performance remained robust at 40% EBIT margins. Overall APAT increased by 67% yoy to Rs 1.9 bn as against our exp of Rs 1.8 bn. AEPS for Q3FY11 stood at Rs 23.9 (we est Rs 23.0) leading to a 9MFY11 AEPS at Rs 63.5. 

We maintain our BUY recommendation on the stock. 

Gujarat Narmada Valley Fertilisers Company (GNFC) Q3FY11 Results – ahead of estimates

GNFC reported net revenues of Rs 8.3 bn, +8.9% yoy, which was marginally ahead of our estimates of Rs 7.5 bn. Revenues were higher on account of higher than estimated fertiliser revenues. Fertiliser revenues increased by 13% to Rs 4.9 bn against our expectation of Rs 4 bn. EBITDA margins for the quarter expanded by 100 bps yoy to 18.5% and which was in line with our estimates of 18.7%. EBITDA increased by 1.8% to Rs 1.5 bn. Fertiliser segment positively surprised up with EBIT of Rs 366 mn resulting into EBIT margins of 7.5% (previous year 2.7%) as against our expectation of mere 1%. Chemical segment margins though improved by 170bps to 27.6%, were below our estimates of 31%. Driven by strong performance of fertiliser division, company reported PAT growth of 5.8% to Rs 884 mn which is higher than our estimates of 764 mn. EPS for the quarter stood at Rs 5.7 vs Rs 5.4 in previous year. For 9MFY11, company has achieved an EPs of Rs 8.3 while we estimates an FY11 EPS at Rs 11.6.

We are likely to upgrade our FY11 EPS by 10% and recommendation (BUY) on the stock.

Nava Bharat Ventures Ltd– Q3FY11 first cut

Below Expectations

NBVL reported numbers which were below estimates. Revenues down (-7%) yoy at Rs1.3bn. EBITDA margins are at 23.1%, decline of 3311bps yoy. NBVL reported PAT of Rs493mn down 63% y-o-y

At CMP of Rs306, NBVL is trading at 6.5xFY12E earnings and 0.9xFY12E Book Value. We have an ‘Accumulate’ rating on the stock

TRF Q3FY11 Results - Above estimates (Implied Rate For Q4FY11 Comes Down Significantly)

Above estimates

Standalone MHE Business

n    Standalone revenues declined 31% yoy to Rs1.5 bn (below estimates)

n    EBITDA margins at 15.4% à Vs estimate of 7.4%

n    EBITDA at Rs230 mn (down 40% yoy) à above estimate of Rs149 mn

n    Led by strong margin expansion, net profit stood at Rs174 mn (down 24% yoy) à above estimate of Rs80 mn

n    Better performance is driven by revenue mix -- which has rising share of product segment versus project segment... also there is large inter-segment with significant part of products segment being billed to projects segment

Automotive Business (Consolidated Minus Standalone) - The Automotive business posted revenues of Rs990 mn (up 50% yoy), EBITDA of Rs34 mn (up 71% yoy) and net loss of Rs7 mn à Vs estimate of net profit of Rs19 mn.

We maintain our consolidated earning estimates of Rs36.1 for FY11E and Rs58.6 for FY12E.

Transformers & Rectifiers – Q3FY11 first cut

Revenues miss estimates; margins decline

TRIL has reported a muted quarter. The revenues are almost flat (-1%) yoy at Rs1.3bn (Our estimate – Rs1.6bn).. EBITDA margins are at 9.3%, decline of 205bps yoy and lower than our expectations of 14.8%.

The reported PAT declined by 39% y-o-y, adjusted PAT (-Rs11mn adjustment in Q3FY10) declined by 33% yoy.

At CMP of Rs298, TRIL is trading at 5.6xFY12E earnings and 1xFY12E Book Value (ROE of 19%).

JK Paper Q3FY11 Results – Inline with estimates - First Cut

JK Paper’s Q3FY11 results were inline with estimates. The company reported revenue growth of 18% yoy to Rs 3.14 bn – inline with estimates of Rs 3.05 bn. Rising pulp costs affected the margins as the company reported y-o-y decline of 200 bps in EBITDA margins at 20.8%. Resultant EBITDA at Rs 654 mn (+8% yoy) remained inline with estimates of Rs 656 mn. The company reported APAT of Rs 251 mn (we estimated Rs 250 mn) – growth of 23% yoy and AEPS of Rs 3.2.

For 9MFY11 the company has reported revenues of Rs 9.18 bn (+13% yoy), EBITDA of Rs 2.03 bn (+10% yoy) and APAT of Rs 833 mn (+30% yoy). AEPS for 9MFY11 stood at Rs 10.7. As results remain inline with estimates, we are likely to maintain our FY11E and FY12E EPS of Rs 13.8 and Rs 14.0 respectively and subsequently our BUY reco with target price of Rs 84.

Notes:

n    The company board has approved interim dividend of Rs 2.25 per share (22.5%)

n    The board has also approved issue of further equity capital by way of Rights Issue upto Rs 2.5 bn for part funding of the company’s expansion project

We are hosting a conference call with the management to discuss Q3FY11 & 9MFY11 results on Monday, January 31st, 2011 at 11.00 AM.  Dial in numbers are : 022-3065 0020 / 6629 0048.

n        Research Update Included

IRB Infrastructure Developers Q3FY11 Result Update; Construction margins steels the limelight; Accumulate; Target: Rs 304

n    PAT at Rs1331mn (+45.5% yoy) ahead of our and street expectation – driven by better than expected construction margins (24.88% v/s est of 18.0%) and MAT credit of Rs147 mn

n    Revenues at Rs6.7bn (+54.4% yoy) - aided by +94.1% yoy growth in construction segment and 3.7%yoy growth in BOT segment

n    EBITDA at Rs2.93 bn (+29.2% yoy) higher than estimates (Rs2.7 bn),  driven by 129.8% growth in construction EBIDTA & 2.1% growth in BOT EBIDTA

n    Ramp up in collections at Bharuch Surat & Surat Dahisar finally visible for BOT. Upgrade FY11E earnings by 5.8%. Retain ACCUMULATE-Target Rs304 

JK Tyre & Industries Q3FY11 Result Update; Price hikes the key, lower rating to ACCUMULATE; Target: Rs 118

n    Results below est. due to lower tonnage off take and higher other expenditure and interest cost. Tonnage sales at 64350 MT (+25% YoY and 1% QoQ) vs est. of 66950 MT

n    EBIDTA per ton at Rs 9,619 (-49%/-17% YoY/QoQ) was below est of 11,251. High rubber prices (> Rs 220/kg) remains a concern.  Price hikes are necessity to protect margins

n    Capacity expansion plans on course with total capex of ~ Rs 11bn in FY11 and FY12. Tornel reported Sales of USD 250mn and PAT of USD 2.5mn in CY10

n    Lower our FY11E/FY12E standalone EPS by 44%/36% to Rs 14.7/22.1. Lower our rating to ACCUMULATE due to higher rubber prices and limited price hike

Lupin Q3FY11 Result Update; Steady Performance; Maintain Accumulate; Target: Rs 496

n    Lupin’s Q3FY11 results were in-line with a) Revenues at Rs15bn (up 19%YoY), b) EBITDA at Rs2.97bn (up 14% YoY), and c) PAT at Rs2.24bn (up 39% YoY)

n    Revenues were largely driven by robust growth momentum in US, Europe, Japan and India coupled with favorable product mix (gross margins expanded by 419bps to 64%)

n    New prescriptions seeing growth in Suprax; AllerNaze launch in CY11E; Oral Contraceptives (OCs) launches in US in Q3FY12 will aid long term revenue visibility

n    Maintain earning estimates and target price

JSW Steel Q3FY11 Result Update; Margin under pressure, should improve; Accumulate; Target: Rs 1,060

n    JSW Steel’s Q3FY11 consolidated performance remained broadly weak, despite topline growing by 25% YoY to Rs 60.03 bn, matching our expectations 

n    Higher raw material costs pulled the EBITDA down by 6% YoY to Rs 10.2 bn. EBITDA margin came dropped 544 bps YoY to 16.9%, while EBITDA/ tonne came at Rs 6280  

n    Along with pressure at the EBITDA level, higher depreciation costs due to capitalization, dragged the PAT to Rs 2.92 bn,  down 32% and 22% on YoY and QoQ respectively

n    Factoring in the concerns on raw material costs, better  volume and integration, we estimate FY11E and FY12E EPS at Rs 66.5 and Rs 106.5 respectively 

Marico Q3FY11 Result Update; Match-Making Done, Upgrade to ACCUMULATE; Target: Rs 142

n    Marico’s Q3FY11 marginally above expectation - APAT at Rs695 mn versus EMKAY expectation of Rs667 mn

n    Volume growth at 15% for Q3FY11 – Hair Oils (31%) and International Business (25%) offsets lower growth in Parachute (3%) and Saffola (13%)

n    Match-Making Done - 24% price increase in ‘Parachute’ and 12% price increase in ‘Saffola –For-- YTD rise in Copra prices @ 62%, Safflower @ 25% and Rice Bran @ 3%

n    Marico has adhered to unit price formula and not deviated from its focus on absolute Ebidta – Upgrade to ACCUMULATE with revised target price of Rs142/Share

Tata Chemicals Q3FY11 Result Update; Downgrade earnings on weak results; Accumulate; Target: Rs 393

n    TCL reported weak results with 34% yoy decline in APAT to Rs 1.5 bn driven by 570 bps drop in EBITDA margin, however the same was in line with our estimates

n    Weak results of subsidiary BMGL due to adverse climatic conditions in Europe and of IMACID due to plant shut down affected Q3FY11 results

n    Price increase of 7-12% taken in soda ash in various regions should help in margin expansion in the near future, however management outlook on fertiliser business remains cautious 

n    Downgrade FY11E / FY12E estimates by 17% / 7% to Rs 28.7 / Rs 33.2 on account of margin pressure in its soda ash business, however maintain ACCUMULATE rating

Allahabad Bank Q3FY11 Result Update; Robust performance; maintain strong BUY; Target: Rs 250

n    ALBK results inline with expectation with NII at Rs10.5bn and net profit at Rs4.2bn

n    The NII for Q3FY11 has grown by 55.7%yoy to Rs10.5bn driven by 31% yoy (4.6% qoq) growth in advances and 14bps expansion in NIMs to 3.4%

n    The asset quality remained largely stable with GNPA and NNPA at 1.8% and 0.6%. Slippages controlled at Rs3.5bn (Rs4.5bn in Q2FY11) including few one-offs

n    Valuations attractive at 1.4x FY11E/1.1x FY12E ABV. We maintain our BUY rating with price target of Rs250 (at 1.3x FY12E ABV). Remains our top pick in mid-sized PSU banks

Bank of Baroda Q3FY11 Result Update; Superb performance; Buy; Target: Rs 1,160

n    BOB’s Q3FY11 net profit at Rs10.7bn was ahead of our/street expectations driven by better than expected NII and lower than expected provisions for pension liability

n    The slippages were extremely positive surprise at just Rs2.4bn (0.5% annualised). The management has guided that the slippages will not show any sharp movement in future

n    The bank’s second pension liability came in at Rs20.6bn to be amortised over five years. The bank provided Rs3.1bn over 9MFY11 (Rs1.8bn in Q3FY11)

n    Building in 20bps contraction in NIMs but lower provisions and cost ratios will mitigate the negative impact. Valn at 1.7x/1.4x FY11/FY12E ABV not unreasonable. Maintain BUY

Thermax Q3FY11 Result Update; No Speed Breakers; Maintain BUY; Target: Rs 943

n    Thermax reports strong performance – (1) Revenues up 60% yoy to Rs10.9 bn, (2) EBITDA up 62% yoy to Rs1.3 bn with stable margins at 11.8% (3) PAT up 65% yoy to Rs895 mn

n    Order inflows at Rs12.3 bn in Q3FY11 – implicit order inflows requirement for Q4FY11E at Rs10.3 bn or -28% yoy – which can be achieved

n    Maintain earnings estimates of Rs32.4/Share and Rs39.0/Share for FY11E and FY12E – Maintain ‘BUY’ rating with target price of Rs943/Share

Titan Industries Q3FY11 Result Update; Glitterati, Maintain ACCUMULATE; Target: Rs 3,876

n    Titan Q3FY11 performance surpasses expectations – APAT at Rs1.37 bn versus expectation of Rs1.18 bn

n    Jewellery continues to glitter (+49.7% yoy to Rs15.8 bn), Watches continue to tick (+34.9% yoy to Rs3.2 bn) and Eyewear saw pick-up in sales (+37.3% yoy to Rs553 mn)

n    High sensitivity to gold prices – 10% decline in gold price triggers 8-10% decline in earnings

n    Revised earnings by +10% and +2% for FY11E (Rs96.5/Share) and FY12E (Rs118.7/Share)  – Maintain ‘ACCUMULATE’ rating with revised target price of Rs3,876/Share

Maruti Suzuki Q3FY11 Result Update; In line, Upgrade to Accumulate; Target: Rs 1,470

n    Results in line. EBIDTA was in line with est. at Rs 9.4bn. Margins at 9.9% (est. of 9.6%) was above est. Net profit at Rs 6bn (est. Rs 5.8bn) was above est. due to lower tax rate

n    Demand outlook remains strong. Currency risks increase as company has not hedged its Yen position as it expects currency to depreciate

n    Lowered FY11E/FY12E EPS by 6.6%/5.2 to Rs. 80.1/93.1due to adverse product mix assumption. Upgrade rating to ACCUMULATE post price correction with a TP of Rs 1470

n    At our TP of Rs 1,470 the stock trades at 8x our FY12 EV/EBIDTA (on the lower side of our auto universe) due to lack of intent to raise prices