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Cement, electrical divisions drive earnings…
Orient Paper reported net sales of | 696 crore and net profit of | 77 crore,
which were higher than our respective estimates of | 611 crore and | 59
crore, respectively. This was on account of higher than expected
profitability from the cement and fan businesses. During the quarter,
cement sales increased ~22% YoY (~46% QoQ) to | 334 crore (our
estimate: | 313 crore) aided by 29% YoY (14% QoQ) increase in realisation
to | 3385 per tonne against our expectation of | 3165 per tonne. Cement
EBIT margins improved significantly by 1060 bps QoQ to 31% (our
estimate: 23%). The paper business reported a loss at the EBIT level due to
an increase in raw material cost and losses due to production issues.
�� Cement volume jumps 28% QoQ; realisation improves 14% QoQ
Cement realisations increased by ~29% YoY and ~14% QoQ to |
3385 per tonne on account of a sharp increase in cement prices during
the quarter. Cement sales volumes increased ~28% QoQ to 0.99 MT.
The cement EBIT per tonne improved ~45% YoY and ~73% QoQ to |
1049 per tonne.
�� Electrical division sales surged ~120% QoQ
The electrical division reported strong sales growth of ~120% QoQ
(35% YoY) to | 264.1 crore. The EBIT margin for the segment has
improved 330 bps QoQ to 11.8%. The paper business reported an
EBIT loss of | 9.4 crore in Q4FY11 against profit of | 2.4 crore in
Q3FY11.
Valuation
At the CMP of | 60, the stock is trading at 5.5x and 5.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3x
and 3.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $35 and $42 its FY12E and FY13E capacities,
respectively. We have valued the cement business at $50 per tonne (60%
discount to the current replacement cost of $125 per tonne) at its FY13E
capacity of 5 MTPA. We are maintaining our BUY rating on the stock with
a revised target price of | 67 per share
Cement business
Revenues from the cement segment increased by ~22% YoY to | 334.2
crore on account of a significant improvement in realisation by ~29%
YoY to | 3385 per tonne. The YoY growth in realisation was triggered by
pricing discipline maintained during the quarter in the company’s selling
markets of the southern and western region. The cement sales volume
declined ~6% YoY to 0.99 MT.
On a QoQ basis, revenues from the segment increased ~46% on the back
of ~14% increase in realisation and ~28% rise in sales volume. The
sequential growth in cement volume was aided by a pick-up in demand
during the quarter. The realisation improvement was on account of an
increase in cement prices during the quarter across all regions
Paper business
In the paper segment, the company reported net sales of | 97.7 crore,
which increased ~24% YoY and ~10% QoQ. At the EBIT level, the
company reported a loss of | 9.4 crore in Q4FY11 against profit of | 2.4
crore in Q3FY11 and a loss of | 11.4 crore in Q4FY10. The loss in the
paper segment was due to a sharp increase in the raw material cost and
the company's inability to pass on the cost increase to consumers. Also,
the segment suffered on account of production loss due to development
of plants. For the full year FY11, the paper segment reported an EBIT loss
of | 33.7 crore against net sales of | 277.3 crore.
Electrical business
Revenues from the electrical division increased ~35% YoY to | 264.1
crore in Q4FY11. Sequentially, it has jumped sharply by 121% on account
of better realisation and increase in fan volumes. At the EBIT level, the
company reported a profit of | 31.1 crore during the quarter, which is an
increase of ~11% YoY and ~202% QoQ. However, the EBIT margin has
declined by 250 bps YoY but improved by 330 bps QoQ to 11.8%.
Capex Plan
The company is planning to set up a 3 MTPA greenfield cement project at
Karnataka with a capex of | 1700 crore. The project is expected to be
commissioned by FY14E.
Warrant Issue
During the quarter, the company has allotted 1.2 crore share warrants on
a preferential basis to certain promoter group companies on 18th March
2011. Each warrant is convertible into one equity share of Rs 1 each at a
price of Rs 57.25 per share at any time within a period of 18 months from
the date of allotment. The company has received 25% amount against
each such warrant. The issuance of warrants is to partly fund the 3 MTPA
cement expansion project.
Valuations
We have revised our estimates for FY12E and FY13E to factor in the better
than expected numbers for Q4FY11. We estimate an EPS of | 10.8 for
FY12E and | 11.5 for FY13E.
At the CMP of | 60, the stock is trading at 5.5x and 5.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3x
and 3.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $35 and $42 its FY12E and FY13E capacities,
respectively. We have valued the cement business at $50 per tonne (60%
discount to the current replacement cost of $125 per tonne) at its FY13E
capacity of 5 MTPA. We are maintaining our BUY rating on the stock with
a revised target price of | 67 per share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cement, electrical divisions drive earnings…
Orient Paper reported net sales of | 696 crore and net profit of | 77 crore,
which were higher than our respective estimates of | 611 crore and | 59
crore, respectively. This was on account of higher than expected
profitability from the cement and fan businesses. During the quarter,
cement sales increased ~22% YoY (~46% QoQ) to | 334 crore (our
estimate: | 313 crore) aided by 29% YoY (14% QoQ) increase in realisation
to | 3385 per tonne against our expectation of | 3165 per tonne. Cement
EBIT margins improved significantly by 1060 bps QoQ to 31% (our
estimate: 23%). The paper business reported a loss at the EBIT level due to
an increase in raw material cost and losses due to production issues.
�� Cement volume jumps 28% QoQ; realisation improves 14% QoQ
Cement realisations increased by ~29% YoY and ~14% QoQ to |
3385 per tonne on account of a sharp increase in cement prices during
the quarter. Cement sales volumes increased ~28% QoQ to 0.99 MT.
The cement EBIT per tonne improved ~45% YoY and ~73% QoQ to |
1049 per tonne.
�� Electrical division sales surged ~120% QoQ
The electrical division reported strong sales growth of ~120% QoQ
(35% YoY) to | 264.1 crore. The EBIT margin for the segment has
improved 330 bps QoQ to 11.8%. The paper business reported an
EBIT loss of | 9.4 crore in Q4FY11 against profit of | 2.4 crore in
Q3FY11.
Valuation
At the CMP of | 60, the stock is trading at 5.5x and 5.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3x
and 3.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $35 and $42 its FY12E and FY13E capacities,
respectively. We have valued the cement business at $50 per tonne (60%
discount to the current replacement cost of $125 per tonne) at its FY13E
capacity of 5 MTPA. We are maintaining our BUY rating on the stock with
a revised target price of | 67 per share
Cement business
Revenues from the cement segment increased by ~22% YoY to | 334.2
crore on account of a significant improvement in realisation by ~29%
YoY to | 3385 per tonne. The YoY growth in realisation was triggered by
pricing discipline maintained during the quarter in the company’s selling
markets of the southern and western region. The cement sales volume
declined ~6% YoY to 0.99 MT.
On a QoQ basis, revenues from the segment increased ~46% on the back
of ~14% increase in realisation and ~28% rise in sales volume. The
sequential growth in cement volume was aided by a pick-up in demand
during the quarter. The realisation improvement was on account of an
increase in cement prices during the quarter across all regions
Paper business
In the paper segment, the company reported net sales of | 97.7 crore,
which increased ~24% YoY and ~10% QoQ. At the EBIT level, the
company reported a loss of | 9.4 crore in Q4FY11 against profit of | 2.4
crore in Q3FY11 and a loss of | 11.4 crore in Q4FY10. The loss in the
paper segment was due to a sharp increase in the raw material cost and
the company's inability to pass on the cost increase to consumers. Also,
the segment suffered on account of production loss due to development
of plants. For the full year FY11, the paper segment reported an EBIT loss
of | 33.7 crore against net sales of | 277.3 crore.
Electrical business
Revenues from the electrical division increased ~35% YoY to | 264.1
crore in Q4FY11. Sequentially, it has jumped sharply by 121% on account
of better realisation and increase in fan volumes. At the EBIT level, the
company reported a profit of | 31.1 crore during the quarter, which is an
increase of ~11% YoY and ~202% QoQ. However, the EBIT margin has
declined by 250 bps YoY but improved by 330 bps QoQ to 11.8%.
Capex Plan
The company is planning to set up a 3 MTPA greenfield cement project at
Karnataka with a capex of | 1700 crore. The project is expected to be
commissioned by FY14E.
Warrant Issue
During the quarter, the company has allotted 1.2 crore share warrants on
a preferential basis to certain promoter group companies on 18th March
2011. Each warrant is convertible into one equity share of Rs 1 each at a
price of Rs 57.25 per share at any time within a period of 18 months from
the date of allotment. The company has received 25% amount against
each such warrant. The issuance of warrants is to partly fund the 3 MTPA
cement expansion project.
Valuations
We have revised our estimates for FY12E and FY13E to factor in the better
than expected numbers for Q4FY11. We estimate an EPS of | 10.8 for
FY12E and | 11.5 for FY13E.
At the CMP of | 60, the stock is trading at 5.5x and 5.2x its FY12E and
FY13E earnings, respectively. The stock is trading at an EV/EBITDA of 3x
and 3.5x FY12E and FY13E EBITDA, respectively. On an EV/tonne basis,
the stock is trading at $35 and $42 its FY12E and FY13E capacities,
respectively. We have valued the cement business at $50 per tonne (60%
discount to the current replacement cost of $125 per tonne) at its FY13E
capacity of 5 MTPA. We are maintaining our BUY rating on the stock with
a revised target price of | 67 per share.
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