Result Update: with Emkay 7 February, 2011

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Contents

Result Update: ACC; Divis Lab; Cummins India; Great Offshore; Godawari Power and Ispatn        Research Update Included: 

ACC Q4CY10 Result Update; Results disappoint- Cost pressures increase; Accumulate; Target: Rs 1,035

n    APAT at Rs1.8bn (-47%yoy) sharply below est of Rs2.6bn led by lower realizations & higher RM & staff costs. Revenue up 1.9% yoy - volumes +4.7%yoy, realizations down 2.7% yoy

n    Costs increases drag EBITDA to Rs2.8bn (-43%yoy). EBITDA/t at Rs499 (-45%yoy). Key negative surprises -RM cost/t (+18%qoq), staff cost(+27%qoq) & OE(+15%qoq)

n    Downgrade CY11 earnings by 16.7%. Cement offtake improves in Jan. Prices hiked across regions. Sustainability remains uncertain, as demand yet to see significant pick up

n    Valuation at PER of 16.6X& EV/ton of USD112, though not cheap, looks reasonable considering ACC’s CY11E RoCE of ~21.2% & FCF of Rs77/share. Maintain ACCUMULATE

Divis Lab Q3FY11 Result Update; Strong quarter; Maintain Accumulate; Target: Rs 756

n    Divi’s Q3FY11 performance was above expectations with a) Revenue at Rs3.1bn (est. of Rs2.8bn); b) EBIDTA at Rs1.2bn (est. of Rs1.0bn)  & c) APAT at Rs984mn (est. of Rs855mn)

n    Revenues were driven by strong performance of the CSS (Custom Synthesis) and its Generics portfolio

n    Favorable product mix (improved contribution of high margin products) and cost optimization led to improved operating profitability; expect gradual recovery going forward

n    Maintain Accumulate with a price target of Rs756. Sharp correction in stock price leaves higher room for upside

Cummins India Q3FY11 Result Update; Confident Approach, Upgrade to BUY; Target: Rs 800

n    In Q3FY11, Cummins India (CIL) reports 6% yoy decline in APAT to Rs1.4 bn – Below EMKAY expectation of Rs1.6 bn

n    Increases annual capex commitment from Rs1 bn to Rs5 bn for next 3 years – CIL will invest in existing facilities, tech centre, uplift facilities alongside Megasite capex

n    Guides for 21% revenue growth in FY12E with stable margins –also retains 45% revenue growth for FY11E – CIL remains relatively confident on business operations

n    Recent price correction (down 20% in 3 months) has translated into attractive valuations – Upgrade CIL from ‘HOLD’ to “BUY’ with revised target price of Rs800/Share

Great Offshore Q3FY11 Result Update; Results a shocker- but the worst is over; Buy; Target: Rs 425

n    APAT at Rs18.3 mn (-96.3% yoy) – sharply below estimates. Revenues at Rs1.95bn down 22.3% yoy dragged by lower utlisation of rigs Badrinath, Kedarnath & construction vessel

n    EBITDA at Rs732 mn (-41.4% yoy). EBITDA margins down 1220 bps to 37.6% led by lower revenues & increase in repairs & maintenance and other exp. 

n    Cut FY11E/FY12E EPS 38.7%/ 16 % led by lower fleet utilisation & delayed deployment of Rig Amarnath and new 350 ft rig V351

n    Believe worst over for GOL - high yield rig fleet deployment to drive 79% earnings growth in FY12. Maintain BUY as valuation at PER of 4.9X leaves little downside – TP Rs425

Godawari Power and Ispat Q3FY11 Result Update; Strong performance; Buy; Target: Rs 228

n    Godawari Power and Ispat (GPIL) posted strong performance for Q3FY11 with topline came at Rs 2285 mn, growing by 13% YoY and 55% QoQ, in line with our expectations

n    EBITDA came at Rs 525 mn better than our estimates and posted a growth of 66% and 73% respectively on YoY and QoQ on better realizations and lower costs  

n    APAT on back of strong EBITDA margin of 23% rose by 56% and 193% on YoY and QoQ respectively. It could have been better without higher interest cost during the quarter

n    Our FY11E and FY12E EPS estimates stand at Rs 24.6 and Rs 48 respectively. We assign BUY rating to the stock with a target price of Rs 228/ share