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Result Reviews – 3QFY2011
Cipla
For 3QFY2011, Cipla reported net sales grew by 11.7% yoy to `1,501.4cr (`1,344.2cr),
below our estimates of `1,552cr. The domestic formulations segment grew by 11.3% to `734cr
(`659cr). On the exports front, despite the 4% appreciation in the rupee, which impacted
realisations, overall exports increased by 12% to `782cr (`699cr); however, this was below our
estimates of `832cr. The formulations segment reported 11.7% yoy growth in export sales to
`643cr (`576cr) and API sales reported 12.8% growth to `139cr (`123cr). The OPM dropped to
17.7% (21.2%) during the quarter, on account of increased factory overheads at the Indore SEZ,
with employee costs increasing by 52% to `135cr (`92cr) as well as other expenses increasing by
17.3% to `405cr (`345cr). Cipla reported net profit of `233cr (`289cr), down 19.4% yoy, during
the quarter. This was on the back of lower-than-expected technical know-how fees, which
declined by 78.5% yoy to `15cr (`70.3cr). The stock is currently trading at 24.9x FY2011E and
18.4x FY2012E earnings. We maintain our Buy recommendation on the stock with a Target
Price of `388.
NCC
NCC posted disappointing set of numbers mainly on the top-line front and acknowledged
that revenue guidance (`5,750cr for parent) for the year will not be met. NCC’s top line for
the quarter stood at `1,336cr (`1,187cr), increasing by mere 12.5% yoy and below our
estimates. Operating margins for the quarter came in at 9.6% (9.9%), in line with our
estimates. However, earnings disappointed mainly on account of higher interest cost and tax
rate of 41.0%, which increased primarily to factor in potential penalty from the Income Tax
raid. Therefore, net profit came in at `40.5cr.
NCC is well placed to leverage the opportunity in the infrastructure space with one of the
most diversified order books and exposure to most of the growth sectors – transportation,
water and power. We believe the company’s BOT/BOOT project portfolio would also provide
sustainable revenue stream as it would have five operational projects by the end of FY2011.
At the CMP of `104, the stock is trading at attractive valuations – P/E of 5.3x and P/B of 0.5x
on FY2012 basis, adjusting for its investment in real estate and BOT. Hence, NCC remains
one of our top picks in the infra space. We maintain Buy on the stock with a revised SOTP
Target Price of `173, wherein the core construction business has been valued at a P/E of 13x
FY2012E EPS of `9.0 (`116.7/share), NCC International at a P/E of 10x FY2012E EPS of
`2.3 (`22.5/share), the real estate business (`7.0/share) and the road and power venture
(`26.8/share) have been valued at 1.5x the equity invested.
Subros
Subros reported a weak set of results for 3QFY2011 on the bottom-line front, despite the
healthy volume and top-line performance. For 3QFY2011, Subros reported healthy 19.7%
yoy growth in net sales to `273.3cr (`228.2cr). Growth was primarily driven by 18.1% yoy
growth in volumes and a marginal 1.4% increase in average net realisation. However, on a
sequential basis, revenue and volume declined by 1.8% and 4.6%, respectively. Operating
profit during the quarter was down significantly by 21.1% yoy, owing to contraction in
EBITDA margins, which declined by 384bp yoy to 7.4%. Further, increased other expenditure
(up 126bp yoy) and staff costs (up 35bp yoy) impacted the margins. Thus, net profit declined
by substantial 36.8% yoy to `5.5cr (`8.7cr).
We have revised our earnings estimates downwards to account for raw-material cost
pressures and estimate Subros to post EPS of `3.7 for FY2011E and `4.3 for FY2012E.
At `38, the stock is trading at 10.3x FY2011E and 8.9x FY2012E earnings. We recommend
Neutral on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Reviews – 3QFY2011
Cipla
For 3QFY2011, Cipla reported net sales grew by 11.7% yoy to `1,501.4cr (`1,344.2cr),
below our estimates of `1,552cr. The domestic formulations segment grew by 11.3% to `734cr
(`659cr). On the exports front, despite the 4% appreciation in the rupee, which impacted
realisations, overall exports increased by 12% to `782cr (`699cr); however, this was below our
estimates of `832cr. The formulations segment reported 11.7% yoy growth in export sales to
`643cr (`576cr) and API sales reported 12.8% growth to `139cr (`123cr). The OPM dropped to
17.7% (21.2%) during the quarter, on account of increased factory overheads at the Indore SEZ,
with employee costs increasing by 52% to `135cr (`92cr) as well as other expenses increasing by
17.3% to `405cr (`345cr). Cipla reported net profit of `233cr (`289cr), down 19.4% yoy, during
the quarter. This was on the back of lower-than-expected technical know-how fees, which
declined by 78.5% yoy to `15cr (`70.3cr). The stock is currently trading at 24.9x FY2011E and
18.4x FY2012E earnings. We maintain our Buy recommendation on the stock with a Target
Price of `388.
NCC
NCC posted disappointing set of numbers mainly on the top-line front and acknowledged
that revenue guidance (`5,750cr for parent) for the year will not be met. NCC’s top line for
the quarter stood at `1,336cr (`1,187cr), increasing by mere 12.5% yoy and below our
estimates. Operating margins for the quarter came in at 9.6% (9.9%), in line with our
estimates. However, earnings disappointed mainly on account of higher interest cost and tax
rate of 41.0%, which increased primarily to factor in potential penalty from the Income Tax
raid. Therefore, net profit came in at `40.5cr.
NCC is well placed to leverage the opportunity in the infrastructure space with one of the
most diversified order books and exposure to most of the growth sectors – transportation,
water and power. We believe the company’s BOT/BOOT project portfolio would also provide
sustainable revenue stream as it would have five operational projects by the end of FY2011.
At the CMP of `104, the stock is trading at attractive valuations – P/E of 5.3x and P/B of 0.5x
on FY2012 basis, adjusting for its investment in real estate and BOT. Hence, NCC remains
one of our top picks in the infra space. We maintain Buy on the stock with a revised SOTP
Target Price of `173, wherein the core construction business has been valued at a P/E of 13x
FY2012E EPS of `9.0 (`116.7/share), NCC International at a P/E of 10x FY2012E EPS of
`2.3 (`22.5/share), the real estate business (`7.0/share) and the road and power venture
(`26.8/share) have been valued at 1.5x the equity invested.
Subros
Subros reported a weak set of results for 3QFY2011 on the bottom-line front, despite the
healthy volume and top-line performance. For 3QFY2011, Subros reported healthy 19.7%
yoy growth in net sales to `273.3cr (`228.2cr). Growth was primarily driven by 18.1% yoy
growth in volumes and a marginal 1.4% increase in average net realisation. However, on a
sequential basis, revenue and volume declined by 1.8% and 4.6%, respectively. Operating
profit during the quarter was down significantly by 21.1% yoy, owing to contraction in
EBITDA margins, which declined by 384bp yoy to 7.4%. Further, increased other expenditure
(up 126bp yoy) and staff costs (up 35bp yoy) impacted the margins. Thus, net profit declined
by substantial 36.8% yoy to `5.5cr (`8.7cr).
We have revised our earnings estimates downwards to account for raw-material cost
pressures and estimate Subros to post EPS of `3.7 for FY2011E and `4.3 for FY2012E.
At `38, the stock is trading at 10.3x FY2011E and 8.9x FY2012E earnings. We recommend
Neutral on the stock.
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