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Aditya Birla Nuvo Ltd.
Insurance recovery to drive
upside
Profit growth moderates but valuations intact; Buy
Factoring 2Q FY12 results, we have cut ABNL’s consolidated EBITDA by 6-7%
for FY12-13E. The cuts are led by 1) lower insurance profits factoring service-tax
adjustments highlighted in 2Q results, 2) weaker outlook for carbon black. Our PO
for ABNL stays unchanged at Rs1090/sh as insurance valuations at this stage are
predominantly driven by premia growth & lower carbon black profits are offset by
better garment valuations; telecom (Idea) valuation in ABNL stays unchanged.
Upbeat on insurance as market growth recovers
A key highlight of ABNL’s 2Q FY12 performance is the 58% growth in NBP in
September. This mostly reflects market share gains and we expect growth to
remain strong led by overall market recovery. We forecast new business growth
at 10% YoY in FY12 (vs -17% in 1H) and 15% in FY13. We expect ABNL to
outperform the industry in terms of NBAP margins, owing to its product mix and
improving persistency.
Uptick in net debt & working capital are concerns
In 2Q FY12, ABNL’s standalone net debt rose 15% QoQ and net working capital
increased 28% QoQ. These increases are points of concern given that standalone
net debt/EBIDTA is already high at 3.5x. Our discussions with the Co indicate low
likelihood of further deterioration. Also, borrowing costs for ABNL are expected to
remain low at least for the next 2 years given fully hedged & low fixed-cost loans.
2Q FY12 results cushioned by conglomerate model
ABNL’s recurring 2Q FY12 net profit stood at Rs2.1bn, up 3% YoY and down 15%
QoQ. Results were below consensus and our expectations due to QoQ pull-back
in insurance profits owing to service tax adjustments and new-business strain.
Among other businesses, carbon black was weaker than expected due to slower
top line while garments did better on a combination of higher growth & margins.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Aditya Birla Nuvo Ltd.
Insurance recovery to drive
upside
Profit growth moderates but valuations intact; Buy
Factoring 2Q FY12 results, we have cut ABNL’s consolidated EBITDA by 6-7%
for FY12-13E. The cuts are led by 1) lower insurance profits factoring service-tax
adjustments highlighted in 2Q results, 2) weaker outlook for carbon black. Our PO
for ABNL stays unchanged at Rs1090/sh as insurance valuations at this stage are
predominantly driven by premia growth & lower carbon black profits are offset by
better garment valuations; telecom (Idea) valuation in ABNL stays unchanged.
Upbeat on insurance as market growth recovers
A key highlight of ABNL’s 2Q FY12 performance is the 58% growth in NBP in
September. This mostly reflects market share gains and we expect growth to
remain strong led by overall market recovery. We forecast new business growth
at 10% YoY in FY12 (vs -17% in 1H) and 15% in FY13. We expect ABNL to
outperform the industry in terms of NBAP margins, owing to its product mix and
improving persistency.
Uptick in net debt & working capital are concerns
In 2Q FY12, ABNL’s standalone net debt rose 15% QoQ and net working capital
increased 28% QoQ. These increases are points of concern given that standalone
net debt/EBIDTA is already high at 3.5x. Our discussions with the Co indicate low
likelihood of further deterioration. Also, borrowing costs for ABNL are expected to
remain low at least for the next 2 years given fully hedged & low fixed-cost loans.
2Q FY12 results cushioned by conglomerate model
ABNL’s recurring 2Q FY12 net profit stood at Rs2.1bn, up 3% YoY and down 15%
QoQ. Results were below consensus and our expectations due to QoQ pull-back
in insurance profits owing to service tax adjustments and new-business strain.
Among other businesses, carbon black was weaker than expected due to slower
top line while garments did better on a combination of higher growth & margins.
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