Result Updates with Emkay 8 February, 2011

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Contents

Result Update: Cipla; Aurobindo Pharma; Motherson Sumi Systems; Punj Lloyd; Lanco Infratech; and Oil & Gas Event Updaten        Research Views

Punj Lloyd Q3FY11 Results – First Cut

Below Expectation... Led by Lower Revenue Booking & Lower Ebidta Margins

n    Revenue down 27% yoy to Rs21.2 bn (but up 7% qoq) à below estimates of Rs25.3 bn

n    EBIDTA margins dropped 280 bps yoy and 470 bps qoq to 4.5% à below estimates of 8.0%

n    EBIDTA declined 55% yoy and 48% qoq to Rs958 mn à below estimates of 2.0 bn.

n    Led by both Lower Revenue Booking & Lower Ebidta Margins, Punj Lloyd reported net loss at Rs621 mn à Vs estimate of net profit of Rs275 mn

n    Order inflows at Rs44.3 bn (+169% qoq, +191% yoy), Order Book at Rs278 nm (+9% qoq).

n    There will be downward revision in earnings estimates for FY11E and FY12E

Lanco Infratech Ltd – Q3FY11 first cut

Revenues below expectations, change in depreciation policy back to SLM

n    Conso revenue declined by 3% to Rs15.6bn – lower than estimates mainly due to (1) higher inter-company elimination in construction (Rs.13.5bn on revenues of Rs20.2bn) and (2) lower power realizations.

n    Conso EBITDA grew by 66% to Rs4.8bn, lower than estimates – same reasons + construction EBITDA margins stood at 13.7% (slightly lower than estimates of 15%). 

n    Conso reported Net profit of Rs1.64bn (up 55% yoy).

n    Significant highlight is that company has changed its depreciation policy back to SLM. The write back in this qtr is Rs1.4bn (previous year) + Rs1.6bn (current year) – Tax adjustments (Rs2.5bn). The net impact on PAT of this qtr is +Rs0.5bn.

n    One more notable item is unallocable expenses of Rs760mn in the qtr versus Rs206mn in Q3FY10 and Rs340mn in H1FY11. Need to find out the reason.  

n    Adjusted net profit stood at Rs1.1bn. We have adjusted for depreciation impact and not for higher unallocable expenses.

n    EPS for the qtr – Rs0.7/Share.

n    Our FY12E and FY13E numbers to change significantly (50-80%) from Rs2.8 and Rs3.9/Share, due to depreciation policy change. The book value at the end of FY13E is Rs31, to increase (~20%) due to depreciation change.

n    We will come out with a detailed note after the concall today at 10am – Dial in - 30650129.

n    Current rating is Buy with a target price of Rs71/Share.

n        Research Update Included

Cipla Q3FY11 Result Update; Earnings lag estimates; Downgrade to Reduce; Target: Rs 310

n    Cipla’s Q3FY11 result were disappointing with a) Revenues at Rs15.5bn (est. Rs16.1bn) b) EBITDA at Rs3.2bn (est. Rs3.9bn) and c) APAT at Rs2.3bn (est. Rs2.8bn)

n    OPM contracted 593bps YoY to 20.5%, led by 24% increase in overheads, largely due to the commissioning of the Indore SEZ plant

n    On account of earnings disappointment and optimal utilization at Indore SEZ still 2 years away, we cut our EPS estimates for FY11/12E by 12%/11% respectively

n    With EPS acceleration potentially an FY13 story; we downgrade the stock to Reduce with a target price of Rs310

Aurobindo Pharma Q3FY11 Result Update; Continual improvement with multiple drivers; Buy; Target: Rs 1,581

n    Aurobindo reported another strong quarter with a) Revenues at Rs11.9bn (est. Rs11.5bn), b) EBITDA at Rs3.2bn (est. Rs2.6bn), and c) PAT at Rs1.8bn (est. Rs1.5bn)

n    Strong revenue growth was driven by 52% growth in formulation business, higher dossier income (Rs1204mn vs. Rs800mn) and ramp-up in SEZ facility

n    Management has guided for dossier income of Rs2.6bn for FY11

n    On account of continual improvement in performance, maintain target price of Rs1,581 with Buy rating

Motherson Sumi Systems Q3FY11 Result Update; Strong operating performance, Retain ACCUMULATE; Target: Rs 210

n    MSSL delivers strong operating performance. Sales stood at Rs21.3bn (est. Rs 21.7bn), EBIDTA at Rs 2.2bn (est. Rs2.1bn) and APAT at Rs 870mn (est. of 812mn)

n    Adverse currency movement resulted in SMR reporting in line results due to higher translational losses. Avg exchange rate for 3QFY11 was 60.9 (Rs/Euro) vs 68.7 in 3QFY10

n    Demand outlook remains strong across geographies, increase in new business orders with SMR, expect benefits of cross leveraging to start from 2HFY12

n    Upgrade our FY12 EPS by 5.6% to Rs 13.7 due to better margins at SMR and standalone business, retain ACCUMULATE rating

Oil & Gas Event Update; Crisis continues, but stability in sight;

n    Crude oil prices after showing an increase of 5% post Egypt crisis, seems to be stabilizing at the current level of $ 90/bbl

n    Egypt hardly contributes 0.9% and 0.8% of the world crude oil production and consumption respectively

n    India’s import from Egypt as a percentage of its total imports were around 0.59%, while export at around 0.79% of its total export, in 2010.

n    Smooth supply from Suez Canal hints at stable international crude oil prices