Technicals- TRF, Indian Bank, Ingersoll Rand, OnMobile, MCX, BGR Energy Systems :: Business Line

TRF: Reduce- TP Rs372:: PINC

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order inflows to improve visibility
TRF reported consolidated sales growth of 48% to Rs4.3bn (PINCe Rs3.4bn)
led by better execution in project division (sales up by 132%). Margins at
operating level were at 4.4% (after adjusting forex loss). Cost overrun in
certain projects, higher material cost, unrealised foreign exchange loss and
high tax rate impacted bottom line adversely. TRF reported loss of Rs8.5mn.
Adjusted PAT was Rs27mn (PINCe Rs112mn). The company, in this quarter
managed to bag orders worth Rs2bn. It expects orders worth Rs6.5bn in
Q4FY12 in projects and product division. The automotive subsidiaries reported
subdued growth of 4% on account of slowdown in the overseas market.
Healthy order inflows expected in Q4FY12
Project division revenue increased by 132% to Rs2.5bn in Q3FY12 on account of
better execution. However, cost overrun in certain projects impacted the segmental
margins which declined sharply by 790bps to 1.7%. Order inflow in Q3FY12 was
Rs1.9bn. TRF expects orders worth Rs5.7bn mainly from NTPC and Tata Steel in
Q4FY12. We believe this is extremely positive for TRF as lack of orders in last five
consecutive quarters, reduced revenue visibility.
Subdued performance from product division
The product division report de-growth of 5% in sales to Rs694mn on account of
slowdown in demand. Change in product mix and high material cost impacted the
margins which declined sharply by 390bps to 12.2%. We believe margins to remain
under pressure in the near term.
Automotive subsidiaries witnessed an impressive sales growth of 46%. Slowdown
in demand of trailers in Middle East and Europe impacted the sales of DLT. In
9MFY12, automotive subsidiaries witnessed a revenue growth of 47% to Rs4.1bn.
Adjusting to forex loss, segmental margins improved by 70bps in Q3FY12 and
40bps in 9MFY12. With expected improvement in margins and healthy revenue
growth driven by expanded capacities coming on stream, we believe the automotive
segment would be the key growth driver for the company going forward.
VALUATIONS AND RECOMMENDATION
The current order book of the company stands at Rs12.2bn. We have increased
our sales estimates for FY12 by 8.4% and 9.2% in FY13 to factor in expected order
inflows in Q4FY12 and performance of project division in the current quarter. We
reduced our profit estimates by 35% for FY12 to factor in lower margins and increased
it by 7.8% for FY13E. We expect TRF to witness sales CAGR of 27% (FY11-14E).
The key triggers remain acceleration in order inflows and margin improvement in
automotive business. Considering the steep rise witnessed in the stock price in
last one month we believe there is limited upside. We maintain our target multiple
at 8x and downgrade the stock to ‘REDUCE’ from ‘BUY’ and revise our target price
to Rs372 (earlier Rs350).

TRF acquires balance 49% stake in DLTML; Emkay

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TRF

Reco: HOLD

CMP: Rs 209

Target Price: Rs 282

TRF acquires balance 49% stake in DLTML;

·      TRF acquires balance 49% stake in Dutch Lanka Trailers for a consideration of USD 8.33 mn w.e.f. 30 Dec’11. TRF to benefit from the above acquisition in the long run

·      Auto business to drive earnings growth for TRF during FY11-13E period. Upsides to earnings exist from penetration in domestic market and stability in operational performance

·      Revise our FY13E earnings down by -4% to Rs27.6 per share to factor higher interest costs from increased DER

·      Risks to earnings from MHE business offset upsides from Auto components business. Retain Hold rating with TP Rs282

TRF Mixed Bag, Retain Hold :Emkay

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TRF

Mixed Bag, Retain Hold

HOLD

CMP: Rs409                                        Target Price: Rs390

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n     Improved performance – Standalone Revenue up 4% yoy to Rs1.5 bn & Net profit of Rs32 nm – in line. Product delivers with 23% margins, Project disappoint with Rs60 mn EBIT loss

n     Auto components posts strong operational performance (1) Revenue up 29% (2) EBITDA margins up 110 bps yoy to 3.3%. But APAT low at Rs5 mn due to low other income & high tax

n     TRF shares optimistic outlook for FY12E (1) Order inflows at Rs10 bn (2) MHE revenue growth at 25% (3) Auto to drive growth – Sales Rs6 bn at 5% margin

n     Downgrade consolidated earnings by 9% yoy to Rs34.1 for FY12E and Rs39.0 for FY13E. Retain HOLD with revised price target of Rs390 per share (@10X FY13E)

52-WEEK FLOP: TRF:: Business Line

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While capital goods stocks have remained out of favour since the market bounce back in March 2009, stocks such as TRF saw a 10-fold increase in their market price between March'09 and May'10. However, the company's financial results at the end of the fourth quarter of FY-10 put an end to the dream rally.

Provision for bad debts incurred came as a jolt after the company reversed revenue as well as costs incurred on some transactions that were pending investigation. This resulted in earnings falling below expectations, dragging the stock price.

Its troubles continued in FY-11 on account of further provisioning done and also due to several high-margin orders not reaching the revenue-booking threshold stage.

By FY-11, net profits were negligible even as consolidated sales grew a good 29 per cent to Rs 1114 crore.

While the order book of Rs 1540 crore as of April'11 provides visibility, concerns of increasing competition in bagging orders continues to act as a drag on the stock.

The company though, has stated that it has seen a strong pick-up in order finalisation in the power sector since March 2011 and had over Rs 1000 crore of order pipeline waiting to be finalised. Over the last one year, the stock declined 56 per cent

TRF Stumped, Downgrade to Hold ::Emkay

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TRF

Stumped, Downgrade to Hold

HOLD

CMP: Rs 460                                       Target Price: Rs 428

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n     TRF disappoints – Standalone net loss at Rs15 mn attributed to inefficient project execution, which negated robust revenue growth of 69% yoy to Rs3.2 bn

n     Auto components business performance improves – posts net profit of Rs21 nm after 4 quarters of losses. This is attributed to (1) 55% yoy revenue growth and (2) High other income

n     TRF shares mixed outlook for FY12E (1) Strong pick-up in order finalization in power sector (2) Pressure on operating margins (3) Auto to drive growth – Sales Rs6 bn at 6% margin

n     Downgrade FY12E consolidated earnings by 35% yoy to Rs37.6. Downgrade rating to HOLD with revised price target of Rs428 per share (@10X FY13E)

TRF Limited Q3FY11 Conference Call Transcript (Emkay)

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Moderator
Ladies and gentlemen good morning and welcome to the Q3 FY 11Results Conference Call of TRF Ltd hosted by Emkay
Global Financial Services. As a reminder all participant lines will be in the listen-only mode and there will be an opportunity for
you to ask questions at the end of today’s presentation. If you should need assistance during the conference call please signal
an operator by pressing * and then 0 on your touchtone telephone. At this time I would like to hand the conference over to Mr.
Pritesh Chheda of Emkay Global Services Ltd. thank you and over to you sir.
Pritesh Chheda
Thanks Farah. Good morning everybody. On behalf of Emkay Global I welcome everyone to Quarter 3 FY 11 a conference
call of TRF Ltd. I even welcome the management of TRF Ltd. Today we have Mr. Sudhir Deoras – Managing Director of TRF
Ltd and Mr. Ashim Roy – CFO of TRF Ltd. First the management will give their outlook on the company for the entering
Quarters and the analysis for the Quarter 3 performance and thereafter we will open the call for Q&A. Over to you Mr. Deoras.

TRF - Regains lost ground, Retain Accumulate:: Emkay

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TRF

Regains lost ground, Retain Accumulate

ACCUMULATE

CMP: Rs 504                                        Target Price: Rs 586

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n     TRF regains lost ground – posted standalone net profit of Rs174 mn (Vs estimate of Rs80 mn. But, auto business posted net loss of Rs7 mn (Vs net profit of Rs19 mn)

n     Order book at Rs18 bn (-8% qoq) – with NO order wins in Q2FY11 and Q3FY11. Strong order bid pipeline – finalization can spillover in Q1FY12E

n     TRF expects momentum to begin from Q4FY11E and continue in FY12E  – led by execution in large NTPC project orders and commencement of new capacities in Auto business

n     NOT upgrading rating, despite price correction – looking at cues for earnings upgrades. Until then retain ACCUMULATE rating with revised price target of Rs586/Share (10X FY12E)

TRF Concall Invite 31 January, 2001 at 9:30 AM (Monday) Emkay

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TRF Negative Surprise Galore, Downgrade to Accumulate :: Emkay

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TRF

Negative Surprise Galore, Downgrade to Accumulate

ACCUMULATE

CMP: Rs 689                                       Target Price: Rs 754

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n     Q2FY11 results is loaded with negative surprise due to (1) one-offs provision of Rs0.3 bn and (2) dismal revenue booking in Projects division

n     Fires another salvo – revised Ebidta margins guidance from 10% to 7% - for reasons less understood and unexplainable

n     Downgrade in earning estimates for FY11E (down 43% to Rs36.1/Share) and FY12E (down 34% to Rs58.4/Share)

n     20% drop in market capitalization partly discounts earnings rOne-offs strikes down Q2FY11 performance – Net loss of Rs226 mn

Research Views from Emkay; 28 October, 2010

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n        Research Views

Bank of Baroda Q2FY11 result estimates

Net interest income likely to be strong, led by robust advance growth. However higher employee expense on account of gratuity, pension liabilities and investment depreciation will result in moderate growth at the operating level. Behaviour of restructured asset- key thing to watch out.

Punjab National Bank Q2FY11 result estimates

We expect PNB’s NII to grow by 27.5%yoy driven by a healthy growth in advances albeit NIM’s to contract by 15bps sequentially on account of higher cost of funds. Key thing to watch out will be behaviour of the restructured asset which was on higher side for PNB amongst PSBs. Strong growth in income to help provide higher for NPAs too.

Andhra Bank Q2FY11 result estimates

Andhra bank is expected to report strong growth in NII led by healthy advance growth and stable NIM’s, however lower trading gains as compare to last year will moderate Net income growth. The bank could see significant recoveries and upgradations during the quarter.

Elecon Engineering Q2FY11 Results – First Cut Analysis

Marginally above estimates

Elecon Engineering reported good all-round performance in Q2FY11 – marginally above estimates.

n    Revenues grew 10.1% yoy to Rs2809 mn, marginally ahead estimates – led by strong growth in Transmission Equipment (TE) division. TE division grew by 32.7% yoy to Rs1251 mn (ahead estimates) while MHE division decreased 3% yoy to Rs1610 mn (in line with estimates).

n    EBITDA growth was healthy at 8.4% yoy to Rs400 mn and EBITDA margins declined marginally by 20 bps yoy to 14.2% - in line with estimates.

n    Led by good operational performance as well as 20% decline in interest costs, adjusted net profits increased by 31.9% yoy to Rs142 mn – marginally above estimates.

n    Order inflows during the quarter were Rs2.1 bn – down 65% qoq and up 7% yoy. Order Book declined marginally sequentially to Rs15.0 bn (including Rs3.23 bn order from Bramhani Steel – currently on hold)

At CMP, the stock is trading at 14.2X FY11E and 10.4X FY12E earnings of Rs6.9 and Rs9.4 per share respectively. We have a BUY rating on the stock.

Thermax Standalone Q2FY11 Results – First Cut Analysis

Stellar performance yet again – above estimates

Led by uptick in industrial activity, Thermax posted yet another quarter of strong performance.

n    Revenues grew by a robust 60.4% yoy to Rs10.9 bn, above estimates - led by strong growth in both segments. Environment segment continued to witness strong traction in revenues – up 50.6% yoy to Rs2.5 bn, above estimates. Led by a growing order backlog, Energy segment grew by 70.9% yoy to Rs8.9 bn, above our estimates.

n    Led by strong revenues and stable EBITDA margins at 11.8%, EBITDA growth was robust at 62.3% yoy to Rs1286 mn – above estimates. Energy segment EBIT margins declined 160 bps yoy to 10.2% while Environment EBIT margins dropped by 40 bps yoy to 12.4%.

n    Led by strong operational performance, net profits increased by 65.4% yoy to Rs895 mn, above estimates.

n    At the consolidated level, revenues increased 61% yoy to Rs11.65 bn and net profits grew by 57% yoy to Rs914 mn, above estimates. The subsidiaries posted a profit of Rs19 mn – below estimates.

We have a positive bias on Thermax in view of uptick in industrial capex, robust order backlog and inflows, earnings visibility for next 2 years. Currently, we have earnings of Rs31.8 and Rs39.5 per share for FY11E and FY12E respectively. We have a BUY rating.

Bharat Bijlee Q2FY11 Results First Cut

Improvement accelerates, higher than expectations

n    PAT grow by 22% yoy and 160% qoq to Rs151mn (our expectations – Rs129mn); significant improvement driven by improvement in EBITDA margins to 13.8% (up 140bps yoy) due to low base. 

n    Revenue growth at 8%, below expectations of 13% growth 

n    Earnings for the quarter stood at Rs26.8/Share.

n    H1FY11 EPS stands at Rs37.1/Share (up 27% yoy)

n    Likely to maintain earnings of Rs96.1 and Rs116.4 in Fy11E and FY12E with upward bias going into Q3FY11. H2FY11 implied number stand at Rs59/share (growth of 35% yoy).

n    At CMP of Rs1087, the Stock is trading at 7.2xFY12E earnings & 1.6xFY12E Book Value (ex Siemens investment at 50% discount to CMP). The valuations are at 20% discount to peers at 9x. We currently have an accumulate rating on the stock with a target of Rs1350/Share. We will come out with a detailed update post discussion with mgmt….

n        Research Update Included

Patni Computers Q3CY10 Result Update; In line quarter, Disappointing Guidance for Q4CY10; Not Rated

n    Rev at US$ 178.8 mn, marginally ahead of est. Mgns at 18.9%, were down by ~130 bps QoQ  impacted by strong hiring (net adds of 1,663, +11% QoQ), impact of consolidation of CHCS

n    Profits at Rs 1.3 bn ahead of est. driven by higher than expected forex gains. See margin pangs continuing driven by supply side pressures( attrition at near peak levels)

n    Despite strong hiring, co’s Dec’10 rev guidance is muted. Patni’s rev growth continues to be anemic with strong margin defence until now getting threatened as expected by us

n    Tweak CY11E EPS down by ~5.7% to Rs 35.3 driven primarily by lower margin assumptions (partly on a/c of higher currency reset). At Rs 465, Patni trades at 13.1x/11.7x CY11E/12E EPS

United Phosphorus Q2FY11 Result Update; Results below estimates; Buy; Target: Rs 230

n    Q2FY11 results were marginally lower than estimates due to weak margins with RPAT of Rs 1.15 bn, +12%yoy

n    Implied H2FY11 revenue and EBITDA growth of 33% and 52% on higher side – may risk FY11 management guidance

n    We have adjusted downward our FY11 revenue, EBITDA and APAT estimates by 5.8%, 2.9% and 1.5%, respectively

n    Maintain BUY recommendation with target price of Rs 230 based on 12x FY12 estimates. Growing profit contribution from India is likely to drive valuations going forward

Ultratech Cement Q2FY11 Result Update; Numbers Disappoint. Maintain REDUCE; Target: Rs1040

n    PAT at Rs1.16 bn (-79.2% qoq) – below estimates led by lower realizations & higher P&F & staff costs. Revenues decline 19.4% qoq-volumes down 12.4%, realisations down 8%

n    Lower realizations and cost pressure dragged EBIDTA down by 59% qoq. EBITDA/t at Rs448 down 53.4% qoq. Downgrade FY11 earnings by 16.2% (EPS Rs54.8)

n    With recent cement prices hikes, expect the worst phase of profitability to be over for UTCL

n    Upgrade target to Rs1040 (valuing UTCL at EV/EBIDTA of 8X EV/Ton of USD130. However rich valuations at PER of 16.6X & EV/ton of USD135 leaves little upside. Maintain REDUCE

NTPC Q2FY11 Result Update; MAT grossing to hit ROE by 4%; Downgrade to Hold; Target Price: Rs 190

n    Results disappoint (APAT down 2%) due to (1) grossing up ROE at MAT, (2) Kahalgaon/Farakka continue to report lower PAF (70%) on fuel constraints & (3) lower interest income

n    Changed the grossing up to MAT rate frm earlier full tax rate; to hit profits by Rs10bn or 4% of core ROE from 28% to 24%

n    Reduce earnings by 11-13% in FY11E/12E

n    Valuations at 2.3xFY12E Book value, not attractive on core ROE of 24% (Earlier 28%); Lower target price to Rs190/Share; Downgrade to ‘Hold’

DB Corp Q2FY11 Result Update; Results miss est., Cut rating to HOLD; Target: Rs284

n    Q2FY11 PAT grew by 20.8% yoy to Rs550mn, below our estimate of Rs770mn impacted by sharp rise in opex towards new launches

n    Advertisement revenues grew by 16% yoy to Rs3bn equally led by volume and price growth

n    Cut EPS estimate by 10% /2% to Rs13.6 /14.6 for FY11E/12E due to higher than expected opex on new launches

n    Downgrade rating from ACCUMULATE to HOLD with target price Rs284

Union Bank of India Q2FY11 Result Update; Provisioning hits bottom-line; downgrade to HOLD; Target: Rs400

n    UBI’s Q2FY11 net profit at Rs3.0bn (-40%yoy), significantly below expectation led by higher provisioning and opex

n    The NII at 15.4bn inline with expectation, led by 30bps expansion in NIMs, albeit advances remaining flat qoq

n    The slippages during the quarter were higher at Rs11.3bn (3.6% annualised) including Rs4.2bn from agriculture NPAs, Rs760mn from restructured pool & Rs2.2bn from one big a/c 

n    Valuations expensive at 1.7x FY12E looking at sharp slippages and provision requirements. Downgrade to HOLD rating with TP of Rs400

Asian Paints Q2FY11 Result Update; Volume Allude, Maintain HOLD; Target Price: Rs 2,510

n    Asian Paints (APL) reported mixed performance – revenue growth at 5% yoy missed expectation and APAT growth at 4.4% yoy meets expectation

n    Volume growth alluded in the quarter- on back of high volume growth in Q1FY11 leading to pipeline filling and higher dealer inventory

n    Maintain earnings for FY11E (Rs92.2/Share) and FY12E  (Rs104.6/Share) – Maintain ‘HOLD’ rating with target price of Rs2510/Share

Marico Q2FY11 Result Update; Price Hike Initiated, Maintain HOLD; Target: Rs 128

n    Marico’s Q2FY11 performance meets expectation - revenue growth of 12.5% yoy to Rs7.8 bn and APAT growth of 14.8% yoy to Rs715 mn

n    Implemented price hike to offset material price inflation - 13% in ‘Parachute’ and ‘10%’ in ‘Saffola’ rice bran oil

n    Satisfactory volume growth at 15% yoy - ‘Parachute’ grew by 10%, ‘Saffola’ grew by 18% and ‘Hair oil’ grew by 27%

n    Maintain earnings estimates of Rs4.9/Share and Rs5.8/Share for FY11E and FY12E – Maintain ‘HOLD’ rating with price target of Rs128/Share

Voltas Q2FY11 Result Update; H2FY11 Promise; Retain BUY; Target Price: Rs 275

n    Results marginally below estimates with (1) 3% yoy decline in revenues to Rs10.7 bn (2) 140 bps yoy drop in EBITDA margins and (3) 17% yoy decline in PAT to Rs746 mn

n    EMP division performance negatively impacted due to slower execution on international orders & one-off expenditure

n    Order inflows up 76% yoy to Rs8.5 bn – YTD secured 44% of FY11E target order flows. Order book at Rs49.7 bn – equivalent to 1.4X standalone FY10 revenues

n    Maintain earnings estimates and Maintain ‘BUY’ with target price of Rs275/Share

TRF Q2FY11 Result Update; Negative Surprise Galore, Downgrade to Accumulate; Target Price: Rs 754

n    Q2FY11 results is loaded with negative surprise due to (1) one-offs provision of Rs0.3 bn and (2) dismal revenue booking in Projects division

n    Fires another salvo – revised Ebidta margins guidance from 10% to 7% - for reasons less understood and unexplainable

n    Downgrade in earning estimates for FY11E (down 43% to Rs36.1/Share) and FY12E (down 34% to Rs58.4/Share)

n    20% drop in market capitalization partly discounts earnings revision -  Downgrade from ‘BUY’ to ‘ACCUMULATE’ with revised target price of Rs754/Share