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Aurobindo Pharma: Dossier income drives 3Q profits, cut estimates & TP;
Buy [Abhay Shanbhag]
Revenue of INR 10.72bn (30% yoy, DBe – INR 10.82bn) driven by 53% growth in
formulations (72% in RoW & 48% in US), but constrained by API volumes and
prices. Despite better product and market-mix, inflationary pressures boost raw
materials/ revenue yoy & qoq. Operating leverage on new capacity is seen with fall
in other costs boosting sequential EBIDTA margin. New deals drive dossier
income to INR 1.2bn (INR 2.3bn ytd). But forex loss constrains PBT & PAT growth
to 19% & 11% respectively. Highest effective tax-rate in sector at ~30%
continues. PBT ex forex rises 20% yoy and 32% qoq.
Bhushan Steel Ltd: 3Q'FY11 - Improving integration underscores positive
view [Anuj Singla]
Bhushan Steel's 3Q'FY11 operating results came in above our estimates (+9% vs
DBe) and broadly in line with consensus. The variance is primarily attributed to
lower than expected cost of goods sold (COGS) (-11% vs DBe). We are enthused
by the improving level of backward integration at Bhushan Steel with a steady
rampup in production from the recently commissioned hot rolling mill (HRM).
Improvoment in the captive supply of hot rolled coils (HRC) during the quarter was
one of the key drivers of a 472bps YoY reduction in the COGS/Net sales ratio for
Bhushan Steel, thus, underscoring our positive view on the stock. Lower than
expected interest cost also helped the company to report a better than expected
bottomline (+18% vs DBe).
Lanco Infratech: Disappointing results, but sector outlook remains positive
[Manish Saxena]
We were disappointed with Lanco's Q3FY11 results due to the following: (1)
consolidated recurring net profit fell 71% YoY to INR 309mn, much lower than the
street as well as Deutsche Bank estimate; (2) the company changed accounting
policy of depreciation from written down value to straight line method, which
enhanced recurring profit to INR 1.64 bn, but this change in accounting policy also
caused additional tax outgo of INR 796 mn; and (3) start of new Udipi plant at tariff
rate--lower than CERC regulated rate--which meant a loss of INR 160 mn for the
quarter.
Jubilant Foodworks: 58% sales growth, 64% EBITDA growth, 66% PAT
growth [Harrish Zaveri]
Jubilant Foodworks reported strong 3QFY11 results with 58% YoY topline growth
and 119% YoY growth in PBT. A 74.5% gross margin was credible considering the
apprehensions of high food inflation during the quarter. EBITDA margins of 17.4%
(+57bps YoY, -80 bps QoQ) reflecting relatively higher staff costs (up 78% YoY)
and higher other expenditure (up 45% YoY). The company at its last conference
call had mentioned a hike in salaries that were done at the end of the last quarter
and these would reflect fully during the third quarter.
India Financials 2011: Time to catch the falling knife, it's not that sharp
[Dipankar Choudhury]
We do not concur with the prevailing pessimism on Indian financials on
apprehensions of a negative impact of rising rates; from a one-year perspective,
we believe this is a buying and not a reducing opportunity. Although the next few
months could be challenging, we do not see much valuation downside from here.
Our earnings estimate increases after the October-December 2010 results are a
reinforcement of fundamental strength and catalyst for a potential reversal in
sentiment, if the liquidity climate were to turn favorable even at the margin.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Aurobindo Pharma: Dossier income drives 3Q profits, cut estimates & TP;
Buy [Abhay Shanbhag]
Revenue of INR 10.72bn (30% yoy, DBe – INR 10.82bn) driven by 53% growth in
formulations (72% in RoW & 48% in US), but constrained by API volumes and
prices. Despite better product and market-mix, inflationary pressures boost raw
materials/ revenue yoy & qoq. Operating leverage on new capacity is seen with fall
in other costs boosting sequential EBIDTA margin. New deals drive dossier
income to INR 1.2bn (INR 2.3bn ytd). But forex loss constrains PBT & PAT growth
to 19% & 11% respectively. Highest effective tax-rate in sector at ~30%
continues. PBT ex forex rises 20% yoy and 32% qoq.
Bhushan Steel Ltd: 3Q'FY11 - Improving integration underscores positive
view [Anuj Singla]
Bhushan Steel's 3Q'FY11 operating results came in above our estimates (+9% vs
DBe) and broadly in line with consensus. The variance is primarily attributed to
lower than expected cost of goods sold (COGS) (-11% vs DBe). We are enthused
by the improving level of backward integration at Bhushan Steel with a steady
rampup in production from the recently commissioned hot rolling mill (HRM).
Improvoment in the captive supply of hot rolled coils (HRC) during the quarter was
one of the key drivers of a 472bps YoY reduction in the COGS/Net sales ratio for
Bhushan Steel, thus, underscoring our positive view on the stock. Lower than
expected interest cost also helped the company to report a better than expected
bottomline (+18% vs DBe).
Lanco Infratech: Disappointing results, but sector outlook remains positive
[Manish Saxena]
We were disappointed with Lanco's Q3FY11 results due to the following: (1)
consolidated recurring net profit fell 71% YoY to INR 309mn, much lower than the
street as well as Deutsche Bank estimate; (2) the company changed accounting
policy of depreciation from written down value to straight line method, which
enhanced recurring profit to INR 1.64 bn, but this change in accounting policy also
caused additional tax outgo of INR 796 mn; and (3) start of new Udipi plant at tariff
rate--lower than CERC regulated rate--which meant a loss of INR 160 mn for the
quarter.
Jubilant Foodworks: 58% sales growth, 64% EBITDA growth, 66% PAT
growth [Harrish Zaveri]
Jubilant Foodworks reported strong 3QFY11 results with 58% YoY topline growth
and 119% YoY growth in PBT. A 74.5% gross margin was credible considering the
apprehensions of high food inflation during the quarter. EBITDA margins of 17.4%
(+57bps YoY, -80 bps QoQ) reflecting relatively higher staff costs (up 78% YoY)
and higher other expenditure (up 45% YoY). The company at its last conference
call had mentioned a hike in salaries that were done at the end of the last quarter
and these would reflect fully during the third quarter.
India Financials 2011: Time to catch the falling knife, it's not that sharp
[Dipankar Choudhury]
We do not concur with the prevailing pessimism on Indian financials on
apprehensions of a negative impact of rising rates; from a one-year perspective,
we believe this is a buying and not a reducing opportunity. Although the next few
months could be challenging, we do not see much valuation downside from here.
Our earnings estimate increases after the October-December 2010 results are a
reinforcement of fundamental strength and catalyst for a potential reversal in
sentiment, if the liquidity climate were to turn favorable even at the margin.
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