HDFC Sec: Buy GIPCL (Gujarat Industrial Power Company Ltd) - technical pick

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GIPCL :: 2QFY2012 Result Update -Angel Broking,

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For 2QFY2012, GIPCL’s bottom line rose by 77.5% yoy to `28cr, in-line with our
estimates. Bottom-line growth was aided by higher yoy capacity in 2QFY2012.
(The 250MW SLPP station II became commercially operational in September 2010
and, hence, did not contribute to the company’s top line in the first two months of
2QFY2011). Further, higher availability factor reported by power generation
stations led to higher recovery of fixed costs. Vadodara stations I and II operated
at PAF of 97.7% (95.4% in 2QFY2011) and 98.9% (90.7% in 2QFY2011),
respectively. SLPP I and II stations operated at PAFs of 78.4% (68.0% in
2QFY2011) and 61.6% (53.2% in 2QFY2011), respectively. We maintain our Buy
recommendation on the stock.
Higher availability of plants results in healthy 41.9% yoy top-line growth: GIPCL
posted top-line growth of 41.9% yoy, driven by higher availability factor even
though generation rose only marginally by 3% yoy to 985MU. Modest growth in
generation was on account of lower yoy PLFs reported by Vadodara stations I and
II. During 2QFY2012, Vadodara I posted PLF of 70.7% (79.3% in 2QFY2011)
and Vadodara II posted PLF of 37.3% (56.4% in 2QFY2011). It has to be noted
that the second quarter is a seasonally weak quarter on account of the monsoon
season (resulting in low demand and affecting mining work) and maintenance
activities undertaken by the company.
Outlook and valuation: GIPCL is well placed in terms of fuel security, with the
entire fuel requirement of 500MW SLPP stations I and II met from captive lignite
mines. Further, power generated by the company has assured offtake through
PPAs signed under the cost-plus model, ensuring regulated but fixed returns.
At the CMP of `77, the stock is trading at 0.7x FY2013 P/BV. We have assigned a
P/BV of 0.9x on FY2013 book value to arrive at a target price of `95.
We maintain our Buy recommendation on the stock.

GIPCL: :: 2QFY2012, Result review: Angel Broking

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GIPCL
For 2QFY2012, GIPCL’s top line reported growth of 41.9% yoy to `304cr. Growth
was driven by higher capacity, even though generation rose marginally by 3% yoy
to 986MU. SLPP station II became commercial operational only in September
2010 and, hence, did not contribute to the top line in the first two months of
2QFY2011. All of the company’s plants, barring SLPP station II, had healthy plant
availability factor during the quarter. Vadodara stations I and II operated at PAF of
97.7% (95.4% in 2QFY2011) and 98.9% (90.7% in 2QFY2011), respectively. SLPP
I and II stations operated at PAFs of 78.4% (68.0% in 2QFY2011) and 61.6%

(53.2% in 2QFY2011). The company’s OPM stood at 31.2%, down 774bp yoy due
to higher gas prices. GIPCL’s 2QFY2012 bottom line rose by 77.5% yoy to `28cr
(in-line with our estimates), aided by higher PAF. We maintain our Buy rating on
the stock; the target price is under review.

Buy GIPCL – 3QFY2011 Result; Target Price of Rs. 135. -Angel Broking

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 GIPCL – 3QFY2011 Result Update

Angel Broking maintains a Buy on GIPCL with a Target Price of Rs. 135.

For 3QFY2011, GIPCL posted a 15.4% yoy decline in net profit to `24cr,

primarily due to higher interest and depreciation costs. On the operating front

too, the company posted low PLF’s owing to low availability of gas and plant

shutdown for maintenance, affecting top-line growth. Going ahead, we expect the

newly commissioned 250MW Surat Lignite Power Plant (SLPP) units 3&4 to record

higher PLF’s, which would result in generation volumes spurting. We maintain a

Buy on the stock.

GIPCL– 2QFY2011 Result Update-Angel Broking

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GIPCL– 2QFY2011 Result Update

Angel Broking maintains an Buy on GIPCL with a Target Price of Rs135.

GIPCL posted 23% yoy improvement in net profit to `15cr for 2QFY2011,

primarily due to lower tax expense resulting from the tax refunds received for the

earlier years and booked during the quarter. The company had a net tax credit of

`10cr during 2QFY2011 as against `8cr of tax expenses recorded in 2QFY2010.

Going ahead, we expect the newly commissioned 250MW Surat Lignite Power

Plant (SLPP) units 3&4 to record higher PLF’s resulting in growth in total sales

volumes. We maintain a Buy on the stock.

Research Views - Emkay: Nov 11, 2010

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Contents

n        Research Views

Bharati Shipyard Q2FY11E Result Estimates

We expect BSL to report healthy performance in Q2FY11E

n    Revenues growth at 16% YoY to Rs3682 mn

n    EBITDA margins to improve by 260 bps YoY to 21.5% due to lower input costs

n    Led by strong margin expansion, expect robust EBITDA growth at 33% YoY to Rs790 mn.

n    Subsidy income to rise sharply by 46% YoY to Rs246 mn

n    APAT growth at 41% YoY to Rs462 mn.

Outlook on core ship building, resumption of order inflows and growth strategy for Great Offshore would be watched keenly.

HBL Power Systems Q2FY11E Result Estimates

Performance expected to improve significantly qoq driven by higher volumes (revenue growth of 14% qoq) and operating leverage (EBITDA margins +390bps qoq). However, it would still be muted yoy due to very high base in Q2FY10. Expect revenue to fall by 8.8% YoY. Expect decline (771bps yoy) in EBITDA margins (very high base) to lead to EBITDA decline of 40% yoy. Consequently, PAT is expected to decline by 45% to Rs180mn. Key things to watch - (1) revenues traction in various segments esp. telecom segment, (2) impact of operating leverage, (3) overall margins and (4) status of defense order. 

Apollo Tyres Ltd. (ATL) – Standalone Q2FY11 result expectation

We expect ATL to report disappointing operating performance, due to loss of production at Perambara as well as South Africa in Q2FY11 and higher rubber prices. Topline is expected to remain flat YoY but increase 10% QoQ due to higher avg. realizations. Expect EBIDTA margins to decline by 730bps YoY and 130bps QoQ. Key things to watch out for (1) Rubber price movement and (2) price hikes

n    We expect net sales to increase by 1.6% YoY and 10.5% QoQ to Rs 12.4bn

n    We expect EBIDTA to decline 43.9% YoY and 3.9% QoQ to Rs 1.1bn

n    EBIDTA margin are likely to compress by 730 bps YoY and 130 bps QoQ to 9.1%

n    We expect APAT to decline by 62.4% YoY and 5.4% QoQ to Rs 384mn

n        Research Update Included

Tata Motors Q2FY11 Conso Result Update; JLR margins are sustainable, Raise TP to Rs1,550; BUY

n    Conso performance above est. due to stellar performance by JLR (margins at 15.6%). However, standalone business disappoints significantly with margins at 9.5% (est. of 10.8%)

n    JLR margins are sustainable at high level (around 14%) given the strong demand in most of the geographies, ample scope of cost reduction and higher share of new model launch

n    Upgrade FY11E/FY12E EPS by 39%/22% to Rs 141.1/168.3 due to margin upgrade in JLR. Upgrade rating to BUY from ACUUMULATE

n    Adverse currency swings is the biggest risk to JLR margins.  Capex/R&D at ~10% of JLR FY11 sales continues to affect  FCF generation

Sun Pharma Q2FY11 Result Update; Fairly Valued; Maintain Hold; Target: Rs2,300

n    Sun Pharma’s higher than expected Q2FY11 performance is driven by residual revenue booking of Eloxatin, Taro’s consolidation and robust domestic formulation growth

n    APAT at Rs5bn was higher than our est. of Rs3.1bn driven by a) 26% growth in revenue to Rs13.7bn (est. of Rs10.7bn) & b) 33% growth in EBIDTA to Rs4.7bn (est. of Rs3bn)

n    Management’s revenue guidance revision from 20% to 35% on Taro’s consolidation looks conservative

n    Caraco’s recovery will be gradual

n    Raise estimates to incorporate Taro; upgrade TP to Rs2,300; maintain Hold

Garware Offshore Q2FY11 Result Update; Number in line-Maintain Hold; Target: Rs160

n    Garware Offshore Services ltd (GOSL’s) Q2FY11 net profit at Rs43.1 mn (-32% yoy) is in line with estimates. Revenues decline 8.9% yoy on account of lower day rates

n    21.8% yoy increase in employee expenditure, drag down EBIDTA (Rs188 mn) by 17.3% yoy, (Est- Rs179 mn). EBIDTA margins at 38.1% declined 386bps yoy

n    Downgrade earnings by 18.5% for FY11 led by lower day rates for vessels in Singapore subsidiary and delayed delivery of the new PSV

n    GOSL expected to bag term contracts for 2 AHTs  (currently operating in spot), improving revenue backlog by 30% to USD 62mn. Upgrade target to Rs160 – Maintain HOLD

Divis Lab Q2FY11 Result Update; Below expectations; Downgrade to Accumulate; Target: Rs756

n    Divi’s Q211 performance was below expectations with a) Revenue at Rs2.6bn (est. of Rs2.9bn); b) EBIDTA at Rs878mn (est. of Rs1.2bn)  & c) APAT at Rs719mn (est. of Rs976mn)

n    Unfavorable product mix impacted operating performance; expect gradual recovery going forward

n    Carotenoids is the next growth driver for the company; to drive earnings growth in FY12E

n    Tweak earning estimates by 14%/10% for FY11E/FY12E; Cut target price to Rs756 and downgrade the rating from Buy to Accumulate

Panacea Biotec Q2FY11 Result Update; In-line; Raise target price and maintain hold; Target: Rs241

n    Panacea Biotec’s Q2FY11 PAT was impacted by higher tax provisioning. Revenues at Rs2.56bn (est. of Rs2.47) and, b) EBITDA at Rs564mn (est. of Rs580mn) were in-line

n    Revenues were driven by a) 61% growth in vaccines (Easyfive contributed revenue of Rs723mn) and b) 37% growth in pharma formulation business

n    Higher tax provision (41% vs. est. of 24%) and higher interest cost (up 14% YoY) restricted PAT at Rs190mn vs. est. of Rs256mn

n    Earning estimates revised upward by 6% to Rs18 and Rs24 for FY11E and FY12E respectably, owing to buy back of equity; Raise target price and maintain Hold rating

Bharat Petroleum Corp Q2FY11 Result Update; Times are getting better; Accumulate; Target: Rs 805

n    BPCL reported results which were above our estimates at EBIDTA and PAT Level, primarily due to issuance of oil bonds/Cash receivables during the quarter

n    EBIDTA at Rs.24.8bn, against EBIDTA loss of Rs0.9bn, mainly due to issuance of oil bonds/cash receivables from the government of India

n    Average gross refining margin for 1H FY11 was at $3.19/bbl as compared to $3.53/bbl (decline of 10% YoY) below our expectation of $3.7/bbl

n    Valuations look attractive at 1.4x FY12E ABV, mainly due to recent change in reforms,  Accumulate rating with TP of Rs.805

Bharti Airtel Q2FY11 Result Update; Results miss estimate, Retain HOLD; Target: Rs345

n    Q2FY11 PAT of Rs16.6bn misses estimate of Rs19.2bn on absence in domestic revenue growth owing to seasonality and margin pressure in African operations

n    ARPU fall of 6.4% QoQ led by 5.4% drop in MOU as realization remains largely stable at Rs0.44/ minute.

n    Cut EPS estimate by 8.5% /6.3% to Rs18.3 /21.6 for FY11E/12E due to African margin pressures and higher tax.

n    Valuations at 15.2x EPS and 6.9x EBIDTA provide comfort. Retain HOLD rating with target price Rs345.

GIPCL Q2FY11 Result Update; Numbers impacted by capitalization at low PLFs; Accumulate; Target: Rs 135

n    GIPCL results include the impact of new plant starting September, even though one unit continued to remain idle due to technical problems & 2nd unit ran at low PLF

n    Depreciation & interest cost of new plant has impacted numbers; Stabilization of new plant still remains overhang; management guiding for Dec 2010

n    But on the conservative side, we now assume normal functioning from FY12E; FY11E numbers to take significant hit on the fixed cost of new plant; FY12E maintained

n    Still some value left in stock but depends on the stabilization; valuations at 1.3xFY12E Book; core ROE of 20%; downgrade to Accumulate on quantum of upside; Target Rs135

Research Views -Emkay; 10 November, 2010

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n        Research Views

Thermax acquires Danstoker – A European biomass boiler maker for Euro 30 mn

Thermax acquired Denmark based Danstoker A/S along with its subsidiary Omnical Kessel, Germany for Euro 29.5 mn. Danstoker (along with Omnical) is a manufacturer of biomass, oil & gas based boilers and heat recovery systems and products for a wide range of industries. Danstoker has manufacturing facilities in Denmark and Germany with marketing presence in UK, France and Russia. Its core products range from 200 to 100,000 kg of steam / hour and design pressures upto 86 bar. Danstoker is a profitable company with revenues of Euro 40 mn pa and employs 237 employees.

We believe that the acquisition will enhance Thermax’s packaged boiler product portfolio under the Cooling & Heating Business Unit. However, in absence of key earnings information of Danstoker, we are unable to determine the impact on the Thermax’s earnings – await clarity in the same to factor it in our earning estimates. At CMP the stock is trading at 27.5X FY11E and 22.1X FY12E consolidated earnings of Rs31.8 and Rs39.5 per share respectively. We have a BUY recommendation on Thermax.

GIPCL Q2FY11E Result Estimates (Results on 10th November)

We expect Q2FY11E to be strong on the back of very low base in Q2FY10 due to plant maintenance in the Q2FY10 quarter. We expect revenues to grow 7% yoy to Rs2.1bn. Expect 392bps YoY improvement low base) in EBITDA margins to lead to EBITDA growth of 27% yoy. APAT is expected to grow by 100% YoY to Rs249mn. Reported PAT to be higher due to Rs88mn income tax refund received last quarter. Key things to watch - (1) PLF of the plants, (2) update on new plant commercialization and (3) update on further expansion of 600MW.

n        Research Update Included

Aurobindo Pharma Q2FY11 Result Update; Above estimates; Raise target price; BUY; Target: Rs1,581

n    Aurobindo’s Q2FY11 performance was above estimates with a) Revenues at Rs10.4bn (est. Rs9.9bn), b) EBITDA at Rs2.5bn (est. Rs2.1bn), and c) APAT at Rs1.4bn (est. Rs1.1bn)

n    Strong revenue growth was driven by 38% growth in formulation business, higher dossier income (Rs699mn vs. Rs400mn) and ramp-up in SEZ facility (full impact in Q3FY11)

n    APAT (excl forex gain of Rs546mn net of tax), was up 35% to Rs1.4bn

n    On account of strong performance, raise target price to Rs1,581 (earlier Rs1,242); Maintain Buy

PGCIL FPO Note; Core ROE of 22.5% offered at 1.5x; No brainer; subscribe; Price Band: Rs 85-90

n    FY10 actual core ROE of 21.3% - (1)18.9% from regulated business, (2) 1.1% from STOA, (3) 1.3% from consultancy and (4) -1.7% reduced by deferred tax accounting

n    Core ROE to increase by 1% to about 22.5% in next two years led by Short Term Open Access volumes; Potential of further 1% ROE upside if assume likely numbers on volumes

n    FPO at 1.5xFY13E Book, cheap on absolute basis with core ROE of 22.5% and relative basis – NTPC core ROE at 24% (including 3% from UI) and P/BV at 2.1x

n    Operating cash flow yield of 16% in FY12E; November 11 target of Rs128/Share; Sure Shot returns; Subscribe  

Eicher Motor Q3CY10 Result Update; Margins to remain under pressure in short term; Not Rated

n    EBIDTA margin disappoints at 7.2% (est. of 9.2%) due to lower topline (Rs 11.0bn vs est. Rs11.6bn) & higher staff cost. Lower other income impacts APAT ( Rs 387mn vs est. 675mn)

n    Price increased by 2% to 4%in CVs to pass on the emission cost and some of the other cost pressures. Margins under pressure in the short term due to focus on HCVs

n    Valued the stock on SOTP basis with TP of Rs 1,326 (current business – Rs 1,173, NPV of engine business – Rs 153).

n    Was a preferred play in the CV space since last two quarters. Find valuations unattractive, post the strong outperformance

ICRA Q2FY11 Result Update; Robust results; raising to ACCUMULATE; Target: Rs1,550

n    ICRA’s Q2FY11 results above expectations with operating revenue at Rs484mn and Adj. net profit at Rs141mn

n    The revenue growth was driven by healthy growth in rating, consulting and professional services segment

n    Operating margins expanded by 524bps yoy to 41.2% as the operating leverage played out partially with controlled costs

n    We expect the 23% CAGR in core earnings over FY10-13E. Upgrade to ACCUMULATE with TP of Rs1,550, valuing at 16x FY13E EPS (now introduced) plus cash of Rs365/share