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Result Reviews
BHEL
BHEL’s 2QFY2012 results were ahead of ours and street’s estimates. The
company’s top line grew by 24.3% yoy to `10,546cr (`8,491cr), which was
4.1% higher than our expectation of `10,129cr. Growth was largely driven by
the industry segment, which posted robust growth of 59.4% yoy growth to
`2,960cr (`1,858cr). In comparison, the power segment remained relatively
subdued and posted mere 11.9% yoy growth to `7,797cr (`6,695cr).
On the operating front, the industry segment witnessed phenomenal EBITM
expansion of more than 1,000bp yoy to 27.0% mainly due to execution of
high rating orders (embedded with high margins). On the other hand, the
power segment’s EBITM came off sharply by ~400bp yoy, partially due to
higher provisions in other expenditure. On an absolute basis, EBITDAM
remained nearly flat yoy ~18.6% (19.2%). Depreciation grew by 40.8% yoy to
`188.8cr (`134.1cr), partially offset by other income, which came in at `220cr
during the quarter.
Coupled with strong growth and stable margins, PAT grew by 23.6% yoy to
`1,412cr (`1,142cr), 8.5% higher than our (above street) estimate of
`1,301cr.
The company’s order intake during the quarter totaled `14,306cr, while order
backlog stood at `1,61,046cr. The earnings commentary by management
appeared passive mainly due to concerns outlined in the power sector (such as
deepening fuel crisis and environmental clearances). Unlike previous quarters,
management refrained to offer any guidance on revenue as well order inflows,
which raises a predicament over the company’s performance estimates for the
coming quarters.
The business outlook is also soured given 1) delay in order finalizations amid
concerns in the power sector; 2) weak investment capex due to a high interest
rate regime, which could take more time to gather momentum than earlier
predicted; and 3) changing dynamics in the BTG space (read sector related).
Given this, the attractive valuation of 11.3x FY2012E EPS and 9.9x FY2013E
EPS is largely overshadowed. Given the long-term structural concerns, we
remain Neutral on the stock. We will shortly come out with a detailed result
update.
Mahindra and Mahindra
Mahindra and Mahindra (MM) reported robust top-line growth of 35.4% yoy (9.3%
qoq) to `7,361cr, driven by impressive volume growth of 29.9% yoy (10.3% qoq).
Volume growth was aided by robust growth in the automotive and farm equipment
segments, which registered growth of 31.8% (19.1% qoq) and 26.1% yoy (down
4.6% qoq), respectively. Net average realization also improved by strong 5.9%
yoy, led by price increases. In the passenger UV segment, M&M posted 14.2% yoy
growth, retaining its dominant position with a market share of 54% (56.2% in
1QFY2012). Domestic tractor volumes also registered strong 28.3% yoy growth
with a market share of 41.2% (43% in 1QFY2012).
On the operating front, EBITDA margin contracted significantly by 459bp yoy
(145bp qoq) to 11.9%, largely driven by increased purchase of finished products
from the manufacturing subsidiary, Mahindra Vehicle Manufacturers Limited
(MVML), and raw-material cost pressures. Raw material as a percentage of sales
increased by 374bp yoy (167bp qoq) to 73.1%. EBIT margin in the automotive and
farm equipment segments declined by 572bp and 178bp yoy, respectively. As a
result, net profit reported a decline of 2.8% yoy (up 21.9% qoq) to `737cr. Further,
foreign exchange loss on revaluation of foreign borrowings and increased
depreciation expense impacted the company’s bottom-line performance. The stock
rating is currently under review.
Tata Motors
Tata Motors’ (TTMT) 2QFY2012 consolidated net profit was significantly impacted
by notional forex loss of `439cr on account of revaluation of foreign currency
borrowings due to unfavorable currency movement during the quarter.
On the consolidated front, the top line registered slightly better-than-expected
25.8% yoy growth (strong 7.8% qoq) to `36,198cr, aided by 33.6% yoy growth in
JLR revenue. JLR performance was led by a 23.3% yoy (9.5% qoq) increase in
volumes and a 5.7% yoy increase in net average realization. Volume performance
at JLR continued to be driven by significant growth in China and Russia, where
volumes grew by 94% and 28% yoy, respectively. Operating margin declined by
146bp yoy (flat qoq) to 12.4%, broadly in-line with our estimate of 12.2%, largely
due to raw-material cost pressures, which increased by 260bp yoy. Reported net
profit stood at `1,877cr, reporting a decline of 15.5% yoy (down 6.1% qoq).
Reported net profit was impacted by notional forex loss of `439cr on account of
revaluation of foreign currency borrowings due to unfavorable currency movement
during the quarter. Adjusted for the notional loss, the bottom line grew by healthy
10.5% yoy (12.6% qoq).
On a standalone basis, the top line grew by 15.2% yoy (8.9% qoq) to `12,954cr,
driven by 8.2% yoy growth in realization. Volume growth was subdued, growing by
4% yoy on account of a 21.8% yoy decline in passenger vehicle sales. Operating
margin declined substantially by 299bp yoy (139bp qoq) to 6.7% due to negative
effect of operating leverage, input cost pressures and increased levels of higher
other expenditure. Led by weak operating performance and forex loss (`294cr)
due to revaluation of foreign currency loans, reported net profit declined by 76.4%
yoy (74.6% qoq) to `102cr. Adjusted for forex loss, net profit fell by 7.6% yoy (flat
qoq). The stock rating is currently under review. We shall revise our estimates and
release a detailed result note soon.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Reviews
BHEL
BHEL’s 2QFY2012 results were ahead of ours and street’s estimates. The
company’s top line grew by 24.3% yoy to `10,546cr (`8,491cr), which was
4.1% higher than our expectation of `10,129cr. Growth was largely driven by
the industry segment, which posted robust growth of 59.4% yoy growth to
`2,960cr (`1,858cr). In comparison, the power segment remained relatively
subdued and posted mere 11.9% yoy growth to `7,797cr (`6,695cr).
On the operating front, the industry segment witnessed phenomenal EBITM
expansion of more than 1,000bp yoy to 27.0% mainly due to execution of
high rating orders (embedded with high margins). On the other hand, the
power segment’s EBITM came off sharply by ~400bp yoy, partially due to
higher provisions in other expenditure. On an absolute basis, EBITDAM
remained nearly flat yoy ~18.6% (19.2%). Depreciation grew by 40.8% yoy to
`188.8cr (`134.1cr), partially offset by other income, which came in at `220cr
during the quarter.
Coupled with strong growth and stable margins, PAT grew by 23.6% yoy to
`1,412cr (`1,142cr), 8.5% higher than our (above street) estimate of
`1,301cr.
The company’s order intake during the quarter totaled `14,306cr, while order
backlog stood at `1,61,046cr. The earnings commentary by management
appeared passive mainly due to concerns outlined in the power sector (such as
deepening fuel crisis and environmental clearances). Unlike previous quarters,
management refrained to offer any guidance on revenue as well order inflows,
which raises a predicament over the company’s performance estimates for the
coming quarters.
The business outlook is also soured given 1) delay in order finalizations amid
concerns in the power sector; 2) weak investment capex due to a high interest
rate regime, which could take more time to gather momentum than earlier
predicted; and 3) changing dynamics in the BTG space (read sector related).
Given this, the attractive valuation of 11.3x FY2012E EPS and 9.9x FY2013E
EPS is largely overshadowed. Given the long-term structural concerns, we
remain Neutral on the stock. We will shortly come out with a detailed result
update.
Mahindra and Mahindra
Mahindra and Mahindra (MM) reported robust top-line growth of 35.4% yoy (9.3%
qoq) to `7,361cr, driven by impressive volume growth of 29.9% yoy (10.3% qoq).
Volume growth was aided by robust growth in the automotive and farm equipment
segments, which registered growth of 31.8% (19.1% qoq) and 26.1% yoy (down
4.6% qoq), respectively. Net average realization also improved by strong 5.9%
yoy, led by price increases. In the passenger UV segment, M&M posted 14.2% yoy
growth, retaining its dominant position with a market share of 54% (56.2% in
1QFY2012). Domestic tractor volumes also registered strong 28.3% yoy growth
with a market share of 41.2% (43% in 1QFY2012).
On the operating front, EBITDA margin contracted significantly by 459bp yoy
(145bp qoq) to 11.9%, largely driven by increased purchase of finished products
from the manufacturing subsidiary, Mahindra Vehicle Manufacturers Limited
(MVML), and raw-material cost pressures. Raw material as a percentage of sales
increased by 374bp yoy (167bp qoq) to 73.1%. EBIT margin in the automotive and
farm equipment segments declined by 572bp and 178bp yoy, respectively. As a
result, net profit reported a decline of 2.8% yoy (up 21.9% qoq) to `737cr. Further,
foreign exchange loss on revaluation of foreign borrowings and increased
depreciation expense impacted the company’s bottom-line performance. The stock
rating is currently under review.
Tata Motors
Tata Motors’ (TTMT) 2QFY2012 consolidated net profit was significantly impacted
by notional forex loss of `439cr on account of revaluation of foreign currency
borrowings due to unfavorable currency movement during the quarter.
On the consolidated front, the top line registered slightly better-than-expected
25.8% yoy growth (strong 7.8% qoq) to `36,198cr, aided by 33.6% yoy growth in
JLR revenue. JLR performance was led by a 23.3% yoy (9.5% qoq) increase in
volumes and a 5.7% yoy increase in net average realization. Volume performance
at JLR continued to be driven by significant growth in China and Russia, where
volumes grew by 94% and 28% yoy, respectively. Operating margin declined by
146bp yoy (flat qoq) to 12.4%, broadly in-line with our estimate of 12.2%, largely
due to raw-material cost pressures, which increased by 260bp yoy. Reported net
profit stood at `1,877cr, reporting a decline of 15.5% yoy (down 6.1% qoq).
Reported net profit was impacted by notional forex loss of `439cr on account of
revaluation of foreign currency borrowings due to unfavorable currency movement
during the quarter. Adjusted for the notional loss, the bottom line grew by healthy
10.5% yoy (12.6% qoq).
On a standalone basis, the top line grew by 15.2% yoy (8.9% qoq) to `12,954cr,
driven by 8.2% yoy growth in realization. Volume growth was subdued, growing by
4% yoy on account of a 21.8% yoy decline in passenger vehicle sales. Operating
margin declined substantially by 299bp yoy (139bp qoq) to 6.7% due to negative
effect of operating leverage, input cost pressures and increased levels of higher
other expenditure. Led by weak operating performance and forex loss (`294cr)
due to revaluation of foreign currency loans, reported net profit declined by 76.4%
yoy (74.6% qoq) to `102cr. Adjusted for forex loss, net profit fell by 7.6% yoy (flat
qoq). The stock rating is currently under review. We shall revise our estimates and
release a detailed result note soon.
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