Query Corner -sintex, Gati, Maruti, Reliance Mediaworks, McNally Bharat, Diamond Power Infrastructure, Century Enka: Business Line

Result Update: Tata Chemicals, McNally Bharat Engineering, Reliance Power, Cipla Ltd:: Emkay

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Click in link to read report: Result Update

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)

McNally Bharat Engineering Company: Buy :: Business Line

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We recommend a buy in the stock of McNally Bharat Engineering Company from a short-term perspective. It is seen from the charts of the stock that it has been on a long term downtrend from its lifetime high of Rs 385 registered in April 2010. Both medium and short-term trends are also down for the stock. However, the presence of long-term significant support at Rs 100 is currently cushioning the stock. The stock has formed an inverted hammer candlestick pattern, a bullish reversal pattern, on Wednesday. It is considered to be a potential reversal pattern. In the succeeding trading session, the stock jumped 4.7 per cent signalling initial signs of bullishness. We notice that there has been an increase in volumes in the past three trading sessions. Moreover, daily as well as weekly moving average convergence divergence indicators and weekly relative strength index are displaying positive divergence indicating a potential trend reversal.

Taking a contrarian stance on the stock from a short-term perspective, we are bullish on it. We anticipate the stock's up move to continue and reach our price target of Rs 111 or Rs 114.5 in the upcoming trading sessions.

Traders with short-term perspective can consider buying the stock with stop-loss at Rs 104.5.

McNally Bharat Engineering Jolt from Extras, Retain BUY:: Emkay

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McNally Bharat Engineering

Jolt from Extras, Retain BUY

BUY

CMP: Rs 135                                       Target Price: Rs 201

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n     Good standalone performance – (1) revenue grew 28% yoy to Rs3.6 bn (2) 260 bps increase in EBITDA margin to 6.7% and (3) APAT grew 24% yoy to Rs76 mn

n     However, Extras disappoint –MSE reports Ebidta margin of mere 11.3% and 26% yoy drop in APAT – Misses to report CMT performance

n     Tones down FY12E revenue by 10% to Rs27 bn. Reiterates EBITDA margin guidance of 8-9% - led by MSE and CMT

n     Revise FY12E & FY13E earnings by -22% (Rs20.1) and -20% (Rs26.6) - Retain BUY rating with revised target of Rs201

McNally Bharat Engineering Subdued performance, Retain BUY:; EMkay

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McNally Bharat Engineering

Subdued performance, Retain BUY

BUY

CMP: Rs 189                                       Target Price: Rs 260

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n     Subdued operational performance with 23% yoy revenue growth to Rs6.9 bn and 130 bps yoy drop in EBITDA margins. But APAT in line at Rs223 mn due to lower finance costs

n     McNally Sayaji disappoints yet again with 56% yoy decline in net profits. But CMT (Germany) delivers with loss of Rs10 mn before taxes – in line

n     Order book stable at Rs43.4 bn on back of 5% yoy decline in order inflows to Rs7.9 bn. Forward order book cover reduces to 1.8X revenues (Vs 2.4X in FY10)

n     Downgrade FY12E earnings by 11% to Rs25.9. Post recent stock price correction, MBE trading attractively at 7.3X FY12E earnings. Retain BUY with revised target of Rs260

McNally bags order worth `116cr from Neyveli Lignite - Angel Broking

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McNally bags order worth `116cr from Neyveli Lignite
McNally Bharat Engineering’s MHE division has bagged an order worth `116cr from
Neyveli Lignite Corp. Ltd., which is to be delivered over 30 months. The company’s
consolidated order book at the end of 3QFY2011 stood at `4,370cr (2.4x FY2010
revenue), which currently stands at `4,160cr (2.3x FY2010 revenue).
We believe an improving economic scenario, continuous government focus on
infrastructure spend and pick-up in private capex augur well for companies providing EPC
solutions to the core sectors of the economy.
At `219, the stock is available at attractive valuations of 7.5x FY2012E earnings and 4.5x
FY2012E EV/EBITDA. We maintain our Buy rating on the stock with a Target Price of `337.

McNally Bharat bags order worth `24cr : Angel broking

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McNally Bharat bags order worth `24cr
McNally Bharat Engineering has bagged an order worth `24cr from Tata Projects Ltd. under
its steel, mining and port. The order consists of supplying coal grinding plant structure. The
current order book position stands at `3,920cr. At the end of March 2010, the company had
an order book worth `3,939cr. At the previous close of `215, the stock is trading at
attractive valuation 8.2x its estimated earnings of FY2012. We maintain our Buy rating on
the stock with a Target Price of `368.

McNally Bharat Engineering:: Add Target :Rs 238:: ICICI Securities

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McNally Bharat Engineering: High on visibility…
Multiple sector exposure, strong sales visibility and impressive
expansion plans make McNally Bharat Engineering (MBE) an attractive
play in the domestic capital goods sector. Having successfully executed
several BOP and material handling  equipment (MHE) projects, MBE is
gradually transitioning itself into a full-scale EPC contractor. We expect
the improved domestic economic outlook and continued emphasis on
infrastructure development by the government to drive order inflows
over the next few years. We are initiating coverage with an ADD rating.

McNally Bharat Engineering wins order from Marg:: Angel Broking

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McNally Bharat Engineering wins order from Marg
McNally Bharat Engineering has bagged an order worth `108cr from Marg for conveyor
system for coal handling at its Karaikkal Port. The order is to be completed over a period of
10 months. The company’s current order book position stands at `3,900cr, which is 3.5x
FY2010E consolidated revenue. At the CMP, the stock is trading at 13.3x and 8.6x its
estimated earnings of FY2011 and FY2012. We maintain our Buy rating on the stock with a
Target Price of `368.

McNally Bharat - Fallen From Cliff, Attractive Valuations:: Emkay

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McNally Bharat - Fallen From Cliff, Attractive Valuations

(Mkt Cap – Rs 7.04 bn, CMP – Rs 226, TP – Rs 418, Reco - BUY)

n    McNally Bharat (MBE) is a market underperformer for the past 2 quarters (underperformed the Sensex by 20% & 31% in the past 3 months and 6 months respectively). This is mainly attributed to subdued performance in H1FY11 (Revenues increased 23% yoy to Rs6.9 bn while PAT grew merely 12% yoy to Rs158 mn) and concerns on execution and margins, thereby contemplating earnings downgrades.

n    We expect MBE to meet our FY11E earnings estimates with improved traction beginning Q3FY11E. This is based on:

1.   No aggressive estimates built for H2FY11E à standalone estimates have (1) Revenue growth at 30% yoy to Rs11.6 bn, (2) Operating Profit growth at 27% yoy to Rs808 mn with margins of 6.9% and (3) Net Profit of Rs268 mn (-6% yoy).

2.   Robust consolidated order backlog – equivalent to 2.4X FY10 revenues – further cushioning our H2FY11E earning estimates

3.  Most importantly – adequate comfort from our recent interaction with Mr. Prabir Ghosh, CFO – who reiterated FY11E guidance and indicated no pressure on margins. Additionally, Mr. Deepak Khaitan, Chairman also gave robust outlook for MBE in a recent television interview (Please see highlights below)

n    Post the recent correction, MBE is trading at attractive valuations of 9.3X FY11E and 7.4X FY12E consolidated earnings of Rs24.3 and Rs30.6 per share respectively – amongst the cheapest in our ECI universe. Considering improved performance beginning Q3FY11E and attractive valuations, we believe that the stock can yield significant upsides (20-25%) in the short term. We have a BUY rating on the stock with a target price of Rs418/-.

McNally Bharat Engineering: Buy: Business Line

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Restructuring its business to focus more on project implementation and hiving off its products division to a subsidiary has helped the company clock growth.

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Vidya Bala -Business Line

Investors can consider accumulating the stock of turnkey engineering solutions provider McNally Bharat Engineering. The stock is among the mid-caps that have fallen steeply as a result of broad market volatility. The correction offers a good opportunity to add the stock. At the current market price of Rs 204, the stock trades at 10 times its expected consolidated per share earnings for FY-12. As the rights issue proposed last year has not shown any signs of taking off, shareholders can use the current weakness to accumulate the stock.

McNally Bharat Engineering – 2QFY2011 Result Update-Angel Broking

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McNally Bharat Engineering – 2QFY2011 Result Update

Angel Broking maintains a Buy on McNally Bharat Engineering with a Target Price of Rs368.

McNally Bharat Engineering (MBE) posted strong set of numbers for 2QFY2011

on standalone basis. The company’s consolidated order book stood at `4,518cr

(2.5x FY2010 consolidated revenues) at the end of 2QFY2011 led by the power

sector, which lends high revenue visibility. We maintain a Buy on the stock.

Research Update with Emkay; 18 November, 2010

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n        Research Update Included

Deccan Chronicle Q2FY11 Result Update; Results below estimates, Catalyst exist - BUY; Target Price: Rs 175

n    Q2FY11 headline profit declined by 17% yoy to Rs826mn, below our estimate of Rs1.05bn affected by 5.7% yoy decline in revenues

n    Shift of festivities to Q3 and high base led to ad-revenue decline of 6% yoy

n    Cut EPS estimates by 6.5% and 5.5% to Rs12.1 and Rs15 for FY11E and FY12E respectively

n    Target price cut to Rs175. Retain BUY rating on attractive valuations. Buyback upto Rs180/share and IPL franchise stake sale are near term triggers

McNally Bharat Engineering Q2FY11 Result Update; Management holds guidance, Reiterate BUY; Target Price: Rs 418

n    Q2FY11 performance remains below estimates - revenue growth was healthy at 32% yoy to Rs4 bn, but APAT growth at 10% yoy to Rs97 mn was below expectations

n    CMT springs positive surprise on qoq basis – revenues up 46% qoq and PBT up 425% qoq. MSE failed to deliver – revenues down 10% yoy and APAT down 24% yoy

n    Despite lower Ebidta margins in H1FY11 - reiterates consolidated revenue guidance for FY11E of Rs25 bn and EBITDA margins at 10%, lending much needed comfort

n    Valuations attractive at 8.1X FY12E - Reiterate ‘BUY’ rating with target price of Rs418/Share

Orient Paper & Industries Q2FY11 Result Update; Cement division hurts profitability; BUY; Target Price: Rs 77

n    Net profit at Rs5mn (-98.8% yoy) below estimates, led by poor performance of cement division. Revenues at Rs4.25bn (+8%), electricals (+26%) & Paper division (+15%)

n    Though EBITDA declined by 74%, led by 91% decline in cement EBIT, paper division surprised positively, showing signs of turnaround. Electricals margins saw dip of 658 bps to 5.2%

n    Downgrade earnings by 11.9% for FY11 (EPS of Rs6.5) and 6.8% for FY12(EPS of Rs8.8) led by lower cement realizations and margin pressure in electricals segment

n    OPIL on the verge of earnings recovery led by recent cement price hikes in its key markets and turnaround of paper division. Upgrading TP to Rs77 by rolling over to FY12 nos

Tulip Telecom Q2FY11 Result Update; In-line results, Retain BUY; Target Price: Rs 240

n    Q2FY11 EBIDTA grew 28.5% to Rs1.6bn and APAT grew 35.3% yoy to Rs781mn, in line with estimate

n    Better than expected revenue growth of 19% to Rs5.9bn along with EBIDTA margin expansion of 200bps yoy drives profit growth

n    Net-debt rises to Rs11.6bn v/s Rs9.6bn in Q1FY11 primarily due to Qualcomm investment (Rs1.4bn)

n    Retain estimates, BUY rating and target price Rs240. Valuations at FY12E EV/EBIDTA of 4.1x & P/E 6.9x, attractive

Pharma Q2FY11 Results Review

n    Emkay Pharma universe grew by 13.8% (est. of 11.2%), driven by 51% and 26% each in Panacea Biotec, Aurobindo and Sun Pharma. Most of the companies in domestic pharma market reported robust growth.

n    OPM contracted by 46bps (EBIDTA growth of 11.4%) to 21.6% (est. of 21.5%). Sun Pharma (34% vs. est. of 29%) & Panacea Biotec (22% vs. est. of 17.2%) surprised positively while Divi’s (33.9% vs. est. of 40.4%) & Dishman (17.4% vs. est. of 23) surprised negatively. During the quarter, most of the companies reported higher gross margins driven by improved product mix and higher contribution of domestic formulation business. However higher employee cost and SGA cost on account of ramp-up in sales force impacted operating margins.

n    Despite higher depreciation cost (up 26%), APAT grew by 14% (est. of 6%) because of lower interest cost (down 15%).

n    CRAMS companies again disappointed in this quarter. We expect gradual recovery in second half and strong growth in FY12E, driven by a) increased outsourcing by global players post consolidation phase and b) lower base effect

n    Though the valuations of pharma sector has moved up (trading 8-10% premium to 5 years average multiple) but they are not yet in stretched territory

n    While we remain positive on the sector (as fundamentals remain strong), we believe there is less room for error after the recent outperformance. Post strong outperformance, we believe that it pays to be more stock specific now rather than having a bullish stand on entire pharma space

n    In the large cap - DRL, Lupin and Cadila are our preferred bet.

n    In mid cap - we continue to like Torrent, Aurobindo and Ipca Labs.

n    In the CRAMS space - we prefer Jubilant LifeSciences over other companies because of valuation comfort

McNally Bharat Engineering-Management holds guidance, BUY:: Emkay

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McNally Bharat Engineering

Management holds guidance, Reiterate BUY

BUY

CMP: Rs 239                                       Target Price: Rs 418

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n     Q2FY11 performance remains below estimates - revenue growth was healthy at 32% yoy to Rs4 bn, but APAT growth at 10% yoy to Rs97 mn was below expectations

n     CMT springs positive surprise on qoq basis – revenues up 46% qoq and PBT up 425% qoq. MSE failed to deliver – revenues down 10% yoy and APAT down 24% yoy

n     Despite lower Ebidta margins in H1FY11 - reiterates consolidated revenue guidance for FY11E of Rs25 bn and EBITDA margins at 10%, lending much needed comfort

n     Valuations attractive at 8.1X FY12E - Reiterate ‘BUY’ rating with target price of Rs418/Share

Research Views-- Emkay; 15 Nov, 2010

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n        Research Views

ABG Shipyard Q2FY11E Result Estimates

Expect strong operational performance by ABG Shipyard in Q2FY11E on the back of a healthy order backlog.

n    Robust revenue growth at 38% YoY to Rs4.9 bn.

n    EBITDA margins to improve by 270 bps YoY aided by lower input costs. Consequently, expect EBITDA growth to be strong at 59% YoY to Rs1.0 bn.

Research Views: Emkay: Nov 12, 2010

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Contents

n        Research Views

Indotech Transformers Q2FY11E Result Estimates

Expect improvement qoq after 5 qtrs of disastrous performance. Expect volume growth of 100% led by pick up in order inflow and flat realizations to result in revenue growth of 100% YoY. Expect positive EBITDA margins of 8.2% and PAT of Rs21mn. Key things to watch - (1) commentary on GE PROLEC’s plans for ITL, (2) order inflows & realizations and (3) margins outlook.