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Result Reviews – 3QFY2011
Cairn India
Cairn India (CIL) announced strong 3QFY2011 results, driven by the volume ramp-up at the
Rajasthan block. The company’s top line during the quarter registered growth of 525% yoy to
`3,096cr (`495cr), which was marginally higher than our expectation of `3,019cr. Growth
was driven by higher volumes and realisations on the back of higher sales from the Mangala
fields. Working interest production during the quarter grew 307.6% yoy to 100,270boepd
(24,599boepd) on account of production ramp-up from the Rajasthan field. Gross
production at the Rajasthan’s Mangala fields stood at an average 124,861bpd in
3QFY2011 compared to 116,058bpd in 2QFY2011. Current production from the field is
hovering around 125,000bopd pending approval to ramp up to potential 150,000bpd.
During the quarter, blended realisations registered an increase of 15.2% yoy to US
$74.3/boe (US $64.5/boe), led by higher contribution of crude oil in the revenue mix on
account of increased production from Mangala fields. Oil realisations from the Mangala
field stood at US $74.8/bbl, at a higher discount of around 13.5% (10.6% in 2QFY2011) to
Brent crude oil prices on account of widening spread between the heavy and the light
fractions, though in line with management guidance of 10–15% discount. Total direct
operating expenses (opex) for Rajasthan crude stood at US $2.7/bbl, which was lower than
our expectation. Management has maintained that opex will hover around US $3.5/bbl in
the long term once production at the Rajasthan field stabilises. OPM during the quarter
expanded by 1,269bp yoy to 82.8% (70.1%) and exceeded our expectation. The increase in
margins was on account of higher contribution of crude oil in the company’s revenue mix.
Thus, EBITDA surged 638.1% yoy to `2,563cr (`347cr) and was higher than our expectation
as we had expected higher work-over expenditure. On the bottom-line front, PAT grew by
591% yoy to `2,010cr (`591cr). Thus, on account of robust top-line growth and OPM
expansion during the quarter, PAT surged by 591% yoy to `2,010cr (`591cr) and was above
our expectation.
CIL continues to exhibit great reservoir deliverability. The company has indicated that
production from the Rajasthan block is likely to be ramped up to 175kbpd from the current
125kbpd by the end of CY2011E, likely entirely from Mangala and Bhagyam fields on
account of better well performance. Production from Aishwariya fields will commence in
2HCY2012E. On account of fair valuations, we maintain our Neutral view on the stock.
CESC
For 3QFY2011, CESC registered 17.8% yoy growth in its standalone top line to `939cr,
aided by 7.1% higher volumes and better realisations. Results were, however, below our
expectations due to the lower PLF recorded in the Budge-Budge plant (85.2% in 3QFY2011
v/s 97.1% in 3QFY2010). OPM expanded by 336bp yoy to 26.9% due to better realisations.
However, net profit rose marginally by 7.8% yoy on account of higher interest (up 64.3% yoy)
and depreciation expenses (up 40.8% yoy). We maintain our Buy rating on the stock with a
Target Price of `474.
BGR Energy Systems
BGR Energy posted a strong set of numbers for 3QFY2011, with robust top-line growth of
98.3% yoy to `1,257cr (`634cr), primarily driven by the strong execution of its outstanding
order book. On the operating front, margins increased by 65bp to 11.7% (11.1%) for
3QFY2011. Robust top-line growth coupled with margin expansion led to net profit growing
strongly by 108.9% yoy to `88cr (`42cr) for 3QFY2011. Currently, we maintain Buy on the
stock with a Target Price of `720. We will revisit our estimates post the conference call.
India Cements
India Cements posted a 7% yoy decline in its top line to `784cr on account of a steep ~24%
fall in cement dispatches to 2.04mn tonnes. Revenue of the cement division fell by 11.3%
yoy. However, the company’s net cement realisation improved by 20.5% yoy during the
quarter to `2,900/tonne. The improvement in realisations was largely on account of the
pricing discipline adopted by cement manufacturers in the southern region. Cement
manufacturers in the region were able to sustain the price hike carried out in September
2010. OPM increased by 152bp yoy to 16.2% on account of low base effect. The company
posted net profit of `22cr v/s `35cr in 3QFY2010. However, on a qoq basis, the bottom-line
performance improved as the company had posted net loss of `34cr in 2QFY2011 due to
better realisations. We maintain Buy on the stock with a Target Price of `139.
Madras Cements
For 3QFY2011, Madras Cements’ top line remained flat at `583cr, despite a steep ~20%
fall in cement dispatches to ~1.45mn tonnes. However, realisations improved during the
quarter despite low demand on account of the pricing discipline adopted by cement
manufacturers in the company’s key markets in the southern region. OPM increased by
786bp yoy to 26.0% on account of higher realisations. The company posted net profit of
`43cr, up 172.1% yoy. We maintain Buy on the stock with a Target Price of `141.
Prakash Industries
For 3QFY2011, Prakash Industries (PIL) reported a 6.1% yoy increase in net sales to `382cr
mainly on account of higher realisations. Sponge iron production during the quarter stood at
114kt as compared to 82kt in 3QFY2010. PIL sold 11,000 tonnes of sponge iron in
3QFY2011. Raw-material costs as a percentage of sales increased to 62.6% in 3QFY2011,
compared to 54.2% in 3QFY2010, mainly on account of high iron ore cost. Average iron ore
cost for the quarter was `5,500/tonne. As a result, EBITDA margin contracted by 569bp yoy
to 18.8%, which led to EBITDA declining by 18.6% yoy to `72cr. Depreciation for the quarter
increased by 22.7% yoy to `17cr on account of commissioning of new units; however,
interest expense declined by 84.5% yoy to `1cr. Thus, net income fell by 17.6% yoy to `54cr.
PIL is currently trading at 3.2x and 2.7x FY2011E and FY2012E EV/EBITDA, respectively. On
P/B basis, it is trading at 0.6x and 0.5x FY2011E and FY2012E, respectively. PIL’s
3QFY2011 profitability was below our expectations. Moreover, prices of key inputs have
risen in the past three–six months. Hence, we will lower our FY2012 estimates and target
price in our update report. The stock is currently under review.
Kesoram Industries
Kesoram Industries’ (Kesoram) 3QFY2011 top line grew by 11.4% yoy to `1,418cr, aided by
a 20.4% increase in the tyre division’s revenue. Growth in the tyre division was on account of
70tpd of additional capacity in the Uttarakhand plant. The cement division’s revenue
declined by 4.6% yoy on account of a steep fall of ~14% in dispatches. However, cement
realisations improved by 9% yoy during the quarter despite low demand on account of the
pricing discipline adopted by cement manufacturers in the southern region. The company’s
OPM fell by 178bp yoy to 8.8%, primarily due to higher rubber prices. However, the cement
division’s adjusted OPM improved to 20.6% in 3QFY2011 as against operating loss of 1.8%
in 2QFY2011. The company reported net loss of `15.3cr during the quarter, primarily due to
poor performance of the tyre business, higher depreciation and interest costs. We maintain
Buy on the stock with a Target Price of `304.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Reviews – 3QFY2011
Cairn India
Cairn India (CIL) announced strong 3QFY2011 results, driven by the volume ramp-up at the
Rajasthan block. The company’s top line during the quarter registered growth of 525% yoy to
`3,096cr (`495cr), which was marginally higher than our expectation of `3,019cr. Growth
was driven by higher volumes and realisations on the back of higher sales from the Mangala
fields. Working interest production during the quarter grew 307.6% yoy to 100,270boepd
(24,599boepd) on account of production ramp-up from the Rajasthan field. Gross
production at the Rajasthan’s Mangala fields stood at an average 124,861bpd in
3QFY2011 compared to 116,058bpd in 2QFY2011. Current production from the field is
hovering around 125,000bopd pending approval to ramp up to potential 150,000bpd.
During the quarter, blended realisations registered an increase of 15.2% yoy to US
$74.3/boe (US $64.5/boe), led by higher contribution of crude oil in the revenue mix on
account of increased production from Mangala fields. Oil realisations from the Mangala
field stood at US $74.8/bbl, at a higher discount of around 13.5% (10.6% in 2QFY2011) to
Brent crude oil prices on account of widening spread between the heavy and the light
fractions, though in line with management guidance of 10–15% discount. Total direct
operating expenses (opex) for Rajasthan crude stood at US $2.7/bbl, which was lower than
our expectation. Management has maintained that opex will hover around US $3.5/bbl in
the long term once production at the Rajasthan field stabilises. OPM during the quarter
expanded by 1,269bp yoy to 82.8% (70.1%) and exceeded our expectation. The increase in
margins was on account of higher contribution of crude oil in the company’s revenue mix.
Thus, EBITDA surged 638.1% yoy to `2,563cr (`347cr) and was higher than our expectation
as we had expected higher work-over expenditure. On the bottom-line front, PAT grew by
591% yoy to `2,010cr (`591cr). Thus, on account of robust top-line growth and OPM
expansion during the quarter, PAT surged by 591% yoy to `2,010cr (`591cr) and was above
our expectation.
CIL continues to exhibit great reservoir deliverability. The company has indicated that
production from the Rajasthan block is likely to be ramped up to 175kbpd from the current
125kbpd by the end of CY2011E, likely entirely from Mangala and Bhagyam fields on
account of better well performance. Production from Aishwariya fields will commence in
2HCY2012E. On account of fair valuations, we maintain our Neutral view on the stock.
CESC
For 3QFY2011, CESC registered 17.8% yoy growth in its standalone top line to `939cr,
aided by 7.1% higher volumes and better realisations. Results were, however, below our
expectations due to the lower PLF recorded in the Budge-Budge plant (85.2% in 3QFY2011
v/s 97.1% in 3QFY2010). OPM expanded by 336bp yoy to 26.9% due to better realisations.
However, net profit rose marginally by 7.8% yoy on account of higher interest (up 64.3% yoy)
and depreciation expenses (up 40.8% yoy). We maintain our Buy rating on the stock with a
Target Price of `474.
BGR Energy Systems
BGR Energy posted a strong set of numbers for 3QFY2011, with robust top-line growth of
98.3% yoy to `1,257cr (`634cr), primarily driven by the strong execution of its outstanding
order book. On the operating front, margins increased by 65bp to 11.7% (11.1%) for
3QFY2011. Robust top-line growth coupled with margin expansion led to net profit growing
strongly by 108.9% yoy to `88cr (`42cr) for 3QFY2011. Currently, we maintain Buy on the
stock with a Target Price of `720. We will revisit our estimates post the conference call.
India Cements
India Cements posted a 7% yoy decline in its top line to `784cr on account of a steep ~24%
fall in cement dispatches to 2.04mn tonnes. Revenue of the cement division fell by 11.3%
yoy. However, the company’s net cement realisation improved by 20.5% yoy during the
quarter to `2,900/tonne. The improvement in realisations was largely on account of the
pricing discipline adopted by cement manufacturers in the southern region. Cement
manufacturers in the region were able to sustain the price hike carried out in September
2010. OPM increased by 152bp yoy to 16.2% on account of low base effect. The company
posted net profit of `22cr v/s `35cr in 3QFY2010. However, on a qoq basis, the bottom-line
performance improved as the company had posted net loss of `34cr in 2QFY2011 due to
better realisations. We maintain Buy on the stock with a Target Price of `139.
Madras Cements
For 3QFY2011, Madras Cements’ top line remained flat at `583cr, despite a steep ~20%
fall in cement dispatches to ~1.45mn tonnes. However, realisations improved during the
quarter despite low demand on account of the pricing discipline adopted by cement
manufacturers in the company’s key markets in the southern region. OPM increased by
786bp yoy to 26.0% on account of higher realisations. The company posted net profit of
`43cr, up 172.1% yoy. We maintain Buy on the stock with a Target Price of `141.
Prakash Industries
For 3QFY2011, Prakash Industries (PIL) reported a 6.1% yoy increase in net sales to `382cr
mainly on account of higher realisations. Sponge iron production during the quarter stood at
114kt as compared to 82kt in 3QFY2010. PIL sold 11,000 tonnes of sponge iron in
3QFY2011. Raw-material costs as a percentage of sales increased to 62.6% in 3QFY2011,
compared to 54.2% in 3QFY2010, mainly on account of high iron ore cost. Average iron ore
cost for the quarter was `5,500/tonne. As a result, EBITDA margin contracted by 569bp yoy
to 18.8%, which led to EBITDA declining by 18.6% yoy to `72cr. Depreciation for the quarter
increased by 22.7% yoy to `17cr on account of commissioning of new units; however,
interest expense declined by 84.5% yoy to `1cr. Thus, net income fell by 17.6% yoy to `54cr.
PIL is currently trading at 3.2x and 2.7x FY2011E and FY2012E EV/EBITDA, respectively. On
P/B basis, it is trading at 0.6x and 0.5x FY2011E and FY2012E, respectively. PIL’s
3QFY2011 profitability was below our expectations. Moreover, prices of key inputs have
risen in the past three–six months. Hence, we will lower our FY2012 estimates and target
price in our update report. The stock is currently under review.
Kesoram Industries
Kesoram Industries’ (Kesoram) 3QFY2011 top line grew by 11.4% yoy to `1,418cr, aided by
a 20.4% increase in the tyre division’s revenue. Growth in the tyre division was on account of
70tpd of additional capacity in the Uttarakhand plant. The cement division’s revenue
declined by 4.6% yoy on account of a steep fall of ~14% in dispatches. However, cement
realisations improved by 9% yoy during the quarter despite low demand on account of the
pricing discipline adopted by cement manufacturers in the southern region. The company’s
OPM fell by 178bp yoy to 8.8%, primarily due to higher rubber prices. However, the cement
division’s adjusted OPM improved to 20.6% in 3QFY2011 as against operating loss of 1.8%
in 2QFY2011. The company reported net loss of `15.3cr during the quarter, primarily due to
poor performance of the tyre business, higher depreciation and interest costs. We maintain
Buy on the stock with a Target Price of `304.
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