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Bajaj Hindustan
F3Q11: Strong Distillery
Volumes but High Interest
Quick Comment – Strong profitability across
businesses: BJH reported F3Q11 results with revenue,
EBITDA, and PAT of Rs10.6bn, Rs2.2bn, and R11mn,
respectively.
Key highlights of the results: 1) Sugar sales were up
39% driven by volume growth (39%); 2) Free sugar
realizations improved by 3% YoY and EBIT margin
improved 950bp YoY; and 3) interest costs increased
9% QoQ and 101% YoY on higher working capital
requirements and higher borrowing costs; management
expects the interest cost to be lower in F4Q11.
Strong profitability in sugar division: Margins in the
sugar business increased 950bp YoY driven by a 3%
improvement in realizations, lower cane costs, and
better absorption of fixed costs. Sugar business
reported strong EBIT of Rs2,940/MT of sugar sold, up
2% qoq. BJH holds 0.49mn MT of sugar inventory with
free sugar inventory valued at Rs28,010/MT.
Strong performance in Distillery division: Distillery
revenue growth (+139%) was driven by volumes
(+125%). Profit/ltr was up 80% YoY driven by lower
bagasse costs and better absorption of fixed overheads.
Margins in the Distillery business were up 20% YoY
(47% in F3Q11). Interestingly, BJH distillery division’s
realization at Rs26.3/ltr (down 3% QoQ) was better than
Balrampur Chini’s Rs23.8/ltr (down 9% QoQ).
Retain EW on BJH: BJH has underperformed (Sensex)
by 33% YTD. In our view, BJH is most levered to sugar
prices, and hence it might reverse its recent
underperformance as markets discount tighter sugar
balance. Even so, we would not chase the stock. At this
stage of the cycle, we do not feel the need to build an
aggressive scenario to justify a more positive rating on
the stock despite our positive industry view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bajaj Hindustan
F3Q11: Strong Distillery
Volumes but High Interest
Quick Comment – Strong profitability across
businesses: BJH reported F3Q11 results with revenue,
EBITDA, and PAT of Rs10.6bn, Rs2.2bn, and R11mn,
respectively.
Key highlights of the results: 1) Sugar sales were up
39% driven by volume growth (39%); 2) Free sugar
realizations improved by 3% YoY and EBIT margin
improved 950bp YoY; and 3) interest costs increased
9% QoQ and 101% YoY on higher working capital
requirements and higher borrowing costs; management
expects the interest cost to be lower in F4Q11.
Strong profitability in sugar division: Margins in the
sugar business increased 950bp YoY driven by a 3%
improvement in realizations, lower cane costs, and
better absorption of fixed costs. Sugar business
reported strong EBIT of Rs2,940/MT of sugar sold, up
2% qoq. BJH holds 0.49mn MT of sugar inventory with
free sugar inventory valued at Rs28,010/MT.
Strong performance in Distillery division: Distillery
revenue growth (+139%) was driven by volumes
(+125%). Profit/ltr was up 80% YoY driven by lower
bagasse costs and better absorption of fixed overheads.
Margins in the Distillery business were up 20% YoY
(47% in F3Q11). Interestingly, BJH distillery division’s
realization at Rs26.3/ltr (down 3% QoQ) was better than
Balrampur Chini’s Rs23.8/ltr (down 9% QoQ).
Retain EW on BJH: BJH has underperformed (Sensex)
by 33% YTD. In our view, BJH is most levered to sugar
prices, and hence it might reverse its recent
underperformance as markets discount tighter sugar
balance. Even so, we would not chase the stock. At this
stage of the cycle, we do not feel the need to build an
aggressive scenario to justify a more positive rating on
the stock despite our positive industry view.
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