Result Update: DLF, BPCL, Infinite Computer Solutions :: Emkay

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DLF Reco: REDUCE CMP: Rs 231 Target Price: Rs 220 Tough times continues ·      Weak quarter of core operations, cash outflows towards land acquisition and high interest costs depleted the objective of non-core asset sale i.e debt reduction (down by just Rs 1.7bn) ·      DLF adds land parcels in Chennai and Mumbai valued at Rs 35-40bn to the non-core assets list. Sale of Aman Resorts is delayed to Q1FY13 & monetization of wind power on cards ·      DLF intends to launch 2msf of group housing in New Gurgaon by FY12 & 2.5msf in Golf links, Gurgaon. We believe these launches will give much abated boost to core operations ·      We maintain our Reduce rating with TP of Rs 220. Cut our bottomline estimates by 22% / 15% for FY12E /13E. At TP, stock would trade at P/BV of 1.4x on FY13E

BPCL Reco: ACCUMULATE CMP: Rs 589 Target Price: Rs 655 In black on additional govt support ·      BPCL reported results which were above our and street estimates with EBIDTA at Rs.37bn and Net profit at Rs31.3bn, while revenue grew by 60.4% YoY to Rs.588bn ·      During the quarter company received budgetary support of Rs69.9bn from the government, while discount from upstream company was Rs.35.7bn ·      Average gross refining margin for Q3 FY12 was at $3.6/bbl as compared to $1.6/bbl, growth of 118% QoQ, mainly led by higher product spread in heavy distillates segment especially in FO ·      Lowered our earnings for FY12E on account of higher under recovery and increased earnings for FY13E on higher Bina thruput. At CMP stock provides limited upside, maintain ACCUMULATE with revised TP of Rs.655

Infinite Computer Solutions Reco: BUY CMP: Rs 83 Target Price: Rs 120 Profit beat aided by strong margin improvement ·      While Infinite’s rev at US$ 53 mn (-6% QoQ) missed est, mgns improved by ~310 bps QoQ to 20% aided by ~11.5% currency depreciation and reduction in employee count ·      Pfts at Rs 393 mn (+28% QoQ) beat exp aided by strong mgn show and hedging gains( Rs 64 mn V/s est of ~Rs 40 mn losses). Top 1/5/10 clients declined by ~15%/5%/8% QoQ ·      Mgmt indicates revival in business from key telecom client. Co currently pursuing 2 large rev sharing deals. Cash generation continues to improve along thesis  ·      Raise FY12/13E EPS by 13%/6% aided by Q3 beat and lower currency resets while we cut our US$ revenues. Retain BUY, TP Rs 120 on inexpensive valuations at <3x 1 yr forward P/E

Tata Chemicals Reco: ACCUMULATE CMP: Rs 363 Target Price: Rs 400 Cautious outlook; maintain Accumulate ·      Q3FY12 consol results were in line with revenues of Rs 38 bn, +32% yoy and EBITDA of Rs 5.6bn, 26% yoy (with margins of 14.6%). TCL reported APAT of Rs 2.3 bn, +70% yoy ·      US subsidiary reported strong results driven by higher topline. However, European business disappointed due to lower margins. Standalone performance remained strong ·      Though demand remained strong across most products, however rising input costs exerted cost pressures  ·      Management maintained cautious outlook. Increased soda ash supply in China will put pressure on prices; decline in phos acid prices will impact IMACID. Maintain Accumulate

McNally Bharat Engineering Reco: HOLD CMP: Rs117 Target Price: Rs 135 No re-rating catalysts, Downgrade to Hold ·      Standalone revenues up 30% yoy to Rs4.9 bn. EBITDA margins stable at 6.5%. Net profit growth at Rs10% yoy to Rs125 mn – ahead estimates ·      MSE disappoints with revenue decline of 28% yoy, EBITDA loss of Rs29 mn and net loss of Rs98 mn. CMT business net profit ahead estimates at Rs32 mn ·      Order inflows dismal at Rs1.4 bn. Order book down 8% qoq to Rs36 bn. But L1 in orders worth Rs8.6 bn. Debt continues to rise – up 46% over Mar’11 to Rs4.2 bn ·      Cut earning estimates by 20% for FY12E and 8% for FY13E. Foresee no re-rating catalysts in near term. Downgrade to Hold with revised target of Rs135 per share

Reliance Power Reco: BUY CMP: Rs 107 Target Price: Rs 155 Continues to deliver on timelines; Reiterate buy ·      PAT of Rs2.04bn above estimates on better profitability at Rosa and higher other income ·      Factor in better profitability from Rosa and higher other income in FY12E (upgrade earnings by 16%) but maintain our FY13E earnings ·      3Q progress – (1) Rosa unit 3 commissioned, (2) Sasan coal mine- own equipments also put to work; considerable overburden removed, (3) Indo mines - JORC report for IInd block and trial barge transportation and (4) Tilaiya mine R&R initiated and section 24 notification in exp. In next 2 months ·      Building solidity - (1) huge cheap captive coal, (2) merchant capacity in captive coal plants only, (3) plants near load centers (PoC), (4) minimizing cost of capital & (5) low to reasonable tariffs - offtake and payment risk minimized  ·      Solidity & positive triggers ignored with stock at 30% discount to fair value. Foresee RPL as the most sustainable private power utility; Reiterate ‘Buy’ with TP of Rs155/Share

Cipla Ltd Reco: SELL CMP: Rs 342 Target Price: Rs 318 No Earnings Catalyst – Downgrade to Sell ·      Cipla’s Q3FY12 results were below expectation with a) Revenues up 14% to Rs17.1bn b) EBITDA up 23% to Rs3.9bn and c) APAT up 16% to Rs2.7bn  ·      Revenues were driven by 18% growth in domestic biz. EBITDA margins declined 215bps QoQ despite strong growth in domestic biz and INR dep ·      Going forward with no favorable impact of currency, we believe gross margins will return to ~55% from current levels of 58%, thereby restricting EBITDA margins to 21-22% ·      On account of delay in Indore SEZ ramp-up and weakening in margins going ahead – we downgrade the stock to Sell with a target price of Rs318 (18xFY13 EPS of Rs17.6)

Eicher Motors Ltd Reco: HOLD CMP: Rs 1,705 Target Price: Rs 1,915 Mixed bag, Downgrade to HOLD ·      EBIDTA at 1.5bn (4% below est). APAT at Rs 854mn (in line). CV business surprised positively, while two wheeler performance was below est. ·      Waiting list for two wheelers continues despite capacity increase. Strong CV performance will be driven by expansion in HD ·      Fine tune CY12 est. by -2% to Rs 137.8. Introduce CY13 with EPS of Rs 161. See downside risk to vol. est. due to macro environment/capacity constraints ·      Downgrade to HOLD with a TP of Rs 1,915 (current business value – Rs 1,762, NPV of engine business – Rs 153). Key triggers – faster capacity addition of two wheelers

Sun Pharma Reco: ACCUMULATE CMP: Rs 552 Target Price: Rs 586 Strong Performance - Maintain Accumulate ·      Sun Pharma’s Q3FY12 results - Revenues at Rs21bn (up 34% YoY), EBITDA at Rs9.6bn (up 119% YoY) and RPAT at Rs6.6bn (up 91% YoY) ·      Strong performance was led by 63% growth in US which was driven by ramp-up in market share of recently launched products, increase in selling prices of select products in Taro and INR dep. Domestic biz grew 17% ·      Going forward in FY13E, growth will be driven by Para-IV launch of Lexapro, Plavix, Eloxatin and Stalevo in US and continued momentum in domestic biz ·      With strong traction from US market and a stable domestic business – we maintain Accumulate rating with a revised target price of Rs586 at 21x FY13E EPS of Rs28

Motherson Sumi Systems Ltd Reco: ACCUMULATE CMP: Rs 174 Target Price: Rs 210 In line, Retain ACCUMULATE ·      EBIDTA at Rs 2.6bn was in line (est. Rs 2.5bn). APAT at Rs 1.2bn was above est. of Rs 885mn due to lower tax rate. SMR reports 150bps QoQ margins expansion with higher utilization ·      Peguform reports Sales/Adj. EBITDA/APAT of Rs11.5bn/Rs 43mn/ Rs -156mn for 38 days. Peguform to be EPS accretive but not assigning value due to limited information ·      Concerns with Debt overdone. Net Debt (ex Peguform) is Rs 16bn (marginally up QoQ).  Of the total gross debt of Rs 29bn of Peguform, debt attributable to MSSL is only Rs 11bn ·      Retain ACCUMULATE with a TP of Rs 210.  SMR margins to further improve with increase in utilization. Major benefit visible from 2QFY13

State Bank of India Reco: HOLD CMP: Rs 2,129 Target Price: Rs 1,950 Slippages remain higher; capital infusion inadequate ·      SBI Q3FY12 – NII at Rs114bn ahead of estimates aided by higher loan growth and strong NIM at 4.1%. However, with lower other inc, PAT at Rs32.6bn came in line with our est ·      Asset quality continues to disappoint with gross slippages at Rs81bn (3.6% ann). Further, despite equity infusion, Net NPL / networth would stand at high 20%+ for FY12 ·      Loan growth at 7% qoq came in as a surprise. With 3% qoq growth in deposits, LDR inched 330bps qoq to 85%. Mgmt guided for 16% yoy loan growth for FY12 ·      Capital infusion + plough back of PAT would raise tier I CAR to 9%.  Also, with lower accretion in net slippages, pressure on asset quality to ease. Upgrade to Hold with PT of 1,950