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In line, lower rating to REDUCE |
REDUCE
CMP: Rs74 Target Price: Rs72
n EBIDTA margin at 6.7 below est. of 6.9%, despite higher net sales (Rs 16.2 bn against est. of Rs15.8bn) due to higher staff cost and other exp. APAT at Rs 549mn against est. of 526mn.
n Scooter/Mopeds/3-Wheelers continue to drive volumes, motorcycle sales continue to disappoint. Export traction to remain strong, expect average run rate of ~20k unit’s pm.
n Upgrade FY11E/FY12E volumes by 6.4%/8.5% to 2.0/2.3 units due to higher scooters/mopeds/exports sales. Upgrade FY11E/FY12E standalone EPS by 4.5%/7.4% to Rs 4.1/Rs6.0
n Upgrade TP to Rs 72 (up 7.5%) - 12x FY12 standalone EPS. Downgrade rating to REDUCE
Net Sales – Marginally above expectation
Net sales at Rs 16.2bn was marginally above expectation of Rs 15.8bn due to higher
avg. realization per vehicle. Volume grew by 45.7% YoY and 7.8% QoQ. Avg.
realization per vehicle stood at Rs 30,285 (up 6.9% YoY and 2.6% QoQ) against
expectation of Rs 29,900 due to improving product mix.
EBIDTA in line, EBIDTA margin marginally below est.
EBITDA at Rs 1.1bn was in line with est. of Rs 1.1bn. Despite a better than expected
topline and lower RM to sales ratio (72.5% vs est. 73.6%), EBIDTA margins at 6.7%
were slightly below expectation of 6.9%. Higher other expenses (15.6% vs est. of
14.8%) and higher staff cost (5.2% vs est. of 4.7%) restricted the margin expansion
APAT at Rs 549mn marginally above expectation
Net profits at Rs 549mn was marginally above our expectation of Rs 526 mn, due to
lower interest expense of Rs 142mn (est. Rs 170mn) and lower tax rate of 19.2% (est.
20.1%) .
Valuations and View
At CMP of Rs 74, the stock trades at PER of 17.9x and 12.4x and EV/EBIDTA of 10.0x and
7.5x our FY11 and FY12 estimates respectively. We have revised our EPS estimate by 4.5%
and 7.4 % to Rs 4.1 and Rs 6.0 for FY11 and FY12 respectively due to higher volume
assumption for scooter, mopeds and exports We have valued the stock at PER of 12x of
FY12 estimates. We downgrade our rating to REDUCE on the stock.
Net Sales – Marginally above expectation
Net sales at Rs 16.2bn was marginally above expectation of Rs 15.8bn due to higher
avg. realization per vehicle. Volume grew by 45.7% YoY and 7.8% QoQ. Avg.
realization per vehicle stood at Rs 30,285 (up 6.9% YoY and 2.6% QoQ) against
expectation of Rs 29,900 due to improving product mix.
EBIDTA in line, EBIDTA margin marginally below est.
EBITDA at Rs 1.1bn was in line with est. of Rs 1.1bn. Despite a better than expected
topline and lower RM to sales ratio (72.5% vs est. 73.6%), EBIDTA margins at 6.7%
were slightly below expectation of 6.9%. Higher other expenses (15.6% vs est. of
14.8%) and higher staff cost (5.2% vs est. of 4.7%) restricted the margin expansion
APAT at Rs 549mn marginally above expectation
Net profits at Rs 549mn was marginally above our expectation of Rs 526 mn, due to
lower interest expense of Rs 142mn (est. Rs 170mn) and lower tax rate of 19.2% (est.
20.1%) .
Valuations and View
At CMP of Rs 74, the stock trades at PER of 17.9x and 12.4x and EV/EBIDTA of 10.0x and
7.5x our FY11 and FY12 estimates respectively. We have revised our EPS estimate by 4.5%
and 7.4 % to Rs 4.1 and Rs 6.0 for FY11 and FY12 respectively due to higher volume
assumption for scooter, mopeds and exports We have valued the stock at PER of 12x of
FY12 estimates. We downgrade our rating to REDUCE on the stock.
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