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Aditya Birla Nuvo Ltd. — Strong margins in key
businesses
Price Objective Change
PO up led by telecom; re-iterate Buy
Post 1Q results, we have raised PO for AB Nuvo (ABNL) to Rs1090/sh (up ~15%)
led by higher valuation of its stake in Idea Cellular (PO of Rs100/sh) and rollforward
to FY13. Multiples for the insurance business are at 7x FY13E NBAP on
better margins. Value of the manufacturing businesses also stands trimmed led
mostly by earnings cut especially for the BPO, garments & fertilizer businesses.
Tariff hikes lift Idea’s margin outlook
We have a Neutral rating on Idea (Rs92.45/sh) due to strong short-term earnings
but already rich valuations. Post the recent 20% hike in on-net tariffs by GSM
majors including Idea, we expect strong earnings momentum in FY12 on the back
of improving margins. Our long-term outlook is cautious as the industry’s
competitive structure remains fragmented & potential changes in spectrum pricing
are a key regulatory risk.
Margins in insurance look strong; other businesses stable
We value the life-insurance business (BSLI) at Rs503/sh. New business is
forecast to grow +10/15% in FY12/13 & we estimate NBAP margins at 20%. The
AMC & NBFC biz are valued at Rs136/share. BSLI reported 1Q PBT of Rs1.4bn
driven by lower new business strain, better persistency & lower opex. The Co
reported full-year FY11 NBAP margin at a high 27.5% and FY11 EV grew 8%
YoY. However, new business premia in 1Q was down 32% YoY
1Q FY12: insurance & telecom key +ves, mixed bag in mfg.
ABNL’s consolidated 1Q FY12 net profit stood at Rs2.5bn, up 70% YoY and
down 14% QoQ. EBITDA grew 47% YoY and stayed flat QoQ beating our
expectations due to better than expected insurance and telecom margins. The
mfg. businesses posted mixed results with BPO being a key disappointment &
textiles doing better.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Aditya Birla Nuvo Ltd. — Strong margins in key
businesses
Price Objective Change
PO up led by telecom; re-iterate Buy
Post 1Q results, we have raised PO for AB Nuvo (ABNL) to Rs1090/sh (up ~15%)
led by higher valuation of its stake in Idea Cellular (PO of Rs100/sh) and rollforward
to FY13. Multiples for the insurance business are at 7x FY13E NBAP on
better margins. Value of the manufacturing businesses also stands trimmed led
mostly by earnings cut especially for the BPO, garments & fertilizer businesses.
Tariff hikes lift Idea’s margin outlook
We have a Neutral rating on Idea (Rs92.45/sh) due to strong short-term earnings
but already rich valuations. Post the recent 20% hike in on-net tariffs by GSM
majors including Idea, we expect strong earnings momentum in FY12 on the back
of improving margins. Our long-term outlook is cautious as the industry’s
competitive structure remains fragmented & potential changes in spectrum pricing
are a key regulatory risk.
Margins in insurance look strong; other businesses stable
We value the life-insurance business (BSLI) at Rs503/sh. New business is
forecast to grow +10/15% in FY12/13 & we estimate NBAP margins at 20%. The
AMC & NBFC biz are valued at Rs136/share. BSLI reported 1Q PBT of Rs1.4bn
driven by lower new business strain, better persistency & lower opex. The Co
reported full-year FY11 NBAP margin at a high 27.5% and FY11 EV grew 8%
YoY. However, new business premia in 1Q was down 32% YoY
1Q FY12: insurance & telecom key +ves, mixed bag in mfg.
ABNL’s consolidated 1Q FY12 net profit stood at Rs2.5bn, up 70% YoY and
down 14% QoQ. EBITDA grew 47% YoY and stayed flat QoQ beating our
expectations due to better than expected insurance and telecom margins. The
mfg. businesses posted mixed results with BPO being a key disappointment &
textiles doing better.
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