Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QSY11 results
Bajaj Hindusthan’s 2QSY11 standalone net profit came above estimate at
Rs729mn. With Bajaj selling 72% of its estimated annual sugar sales
whereas a much higher proportion of its fixed costs have not yet been
booked, 1H is likely to be much better than 2H in SY11. The board’s
decision to look at a rights issue of upto Rs20bn will further exacerbate
the already dismal ROEs earned by the company. We maintain our U-PF
rating and target price of Rs80/sh on the stock based on 0.65x P/book.
Above estimate 2QSY11 result
Bajaj’s 2QSY11 net profit came ahead of our estimate at Rs728mn. While net
profit rose 129%YoY, numbers are not strictly comparable due to
amalgamation of Bajaj’s subsidiary BHSIL. Ebitda (Rs3bn,+284%YoY) came
above our estimate primarily on the back of higher than expected sugar
realisation on re-export of raw sugar and above estimate power sales
volumes (108mn units). Bajaj has produced 0.95mt of sugar and we have
adjusted our full year SY11 numbers as crushing has ended for the company.
2H likely to be worse than 1HSY11
With Bajaj already having sold 72% of its estimated full year sugar sales
(1.24mt) in 1H, we believe that 2H will be significantly lower than 1H as a
large proportion of annual fixed costs remain unabsorbed. With current price
of Rs28/kg and a lower export parity price, Bajaj’s sugar inventory valued at
Rs25/kg is likely to return losses unless we see an unlikely rebound in sugar
price. Our estimates do not build in any contribution from Bajaj’s power foray.
Sugar prices likely to stay around current levels
With SY11 sugar production likely to end near estimated 25mt range, we do
not see any triggers for significantly higher prices over the next few months.
However, SY11 end inventory is likely to be below 2 months of consumption,
which should allow producers to earn a gross margin of c.Rs8/kg.
Maintain U-PF
High interest costs would prevent Bajaj from reporting profits even with a
gross margin of Rs8/kg. Bajaj’s mid cycle ROEs are unlikely to be above a
dismal 10% under the current capital structure. The decision of the board of
directors to raise equity through rights issue (approval of upto Rs20bn or
nearly the current market cap) will further lower ROEs earned by Bajaj. We
maintain our U-PF rating and target price of Rs80/share based on
0.65xP/book, which implies 8xSY11Ev/EBITDA and 5x P/CE.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QSY11 results
Bajaj Hindusthan’s 2QSY11 standalone net profit came above estimate at
Rs729mn. With Bajaj selling 72% of its estimated annual sugar sales
whereas a much higher proportion of its fixed costs have not yet been
booked, 1H is likely to be much better than 2H in SY11. The board’s
decision to look at a rights issue of upto Rs20bn will further exacerbate
the already dismal ROEs earned by the company. We maintain our U-PF
rating and target price of Rs80/sh on the stock based on 0.65x P/book.
Above estimate 2QSY11 result
Bajaj’s 2QSY11 net profit came ahead of our estimate at Rs728mn. While net
profit rose 129%YoY, numbers are not strictly comparable due to
amalgamation of Bajaj’s subsidiary BHSIL. Ebitda (Rs3bn,+284%YoY) came
above our estimate primarily on the back of higher than expected sugar
realisation on re-export of raw sugar and above estimate power sales
volumes (108mn units). Bajaj has produced 0.95mt of sugar and we have
adjusted our full year SY11 numbers as crushing has ended for the company.
2H likely to be worse than 1HSY11
With Bajaj already having sold 72% of its estimated full year sugar sales
(1.24mt) in 1H, we believe that 2H will be significantly lower than 1H as a
large proportion of annual fixed costs remain unabsorbed. With current price
of Rs28/kg and a lower export parity price, Bajaj’s sugar inventory valued at
Rs25/kg is likely to return losses unless we see an unlikely rebound in sugar
price. Our estimates do not build in any contribution from Bajaj’s power foray.
Sugar prices likely to stay around current levels
With SY11 sugar production likely to end near estimated 25mt range, we do
not see any triggers for significantly higher prices over the next few months.
However, SY11 end inventory is likely to be below 2 months of consumption,
which should allow producers to earn a gross margin of c.Rs8/kg.
Maintain U-PF
High interest costs would prevent Bajaj from reporting profits even with a
gross margin of Rs8/kg. Bajaj’s mid cycle ROEs are unlikely to be above a
dismal 10% under the current capital structure. The decision of the board of
directors to raise equity through rights issue (approval of upto Rs20bn or
nearly the current market cap) will further lower ROEs earned by Bajaj. We
maintain our U-PF rating and target price of Rs80/share based on
0.65xP/book, which implies 8xSY11Ev/EBITDA and 5x P/CE.
No comments:
Post a Comment