Page Industries Ltd. (PIL) Q4FY09 results were in line with our expectations. Better realization and higher volumes resulted into a growth of 25.4% in net sales (YoY). Lower material cost helped in improvement of operating margins by 180bps. However, higher depreciation and employee cost (due to increased capacities) negated this to a certain extent. With increased capacities, strong brand image and pan India presence, we feel the company is well poised to capture the growth in volumes and value. We reiterate our BUY recommendation on the stock with a revised price target of Rs.612 (12x FY11E) in the next 12~18 months.
Q4FY09 result analysis:
■ PIL sold 8.35mn pcs in Q4FY09 (39mn pcs in FY09) vs 6.8mn pcs in Q4FY08 (31mn pcs in FY08). The average realization in Q4FY09 has improved to Rs.67.5 per pc (Rs.65.3 per pc in FY09) from Rs.66.2 per pc. (Rs.62.1 per pc in FY08).
■ The operating margins improved by 180bps to 17.2% mainly on account of lower raw material prices which declined by 220bps (as a % of sales).
■ PAT grew by 27.7% to Rs.55.6mn vs Rs43.5mn in the last corresponding quarter. PAT margins were under pressure mainly due to higher depreciation. We expect margins to improve as no more incremental capex is required.
■ The current capacities of the company stand at 74mn pcs p.a. up from 54 pcs p.a. These capacities would be enough to take care of demand for at least next two years.
■ The working capital turn over ratio (on an annual basis) improved from 4.5 in FY08 to 5.3 in FY09.
■ PIL had paid a dividend of Rs.17 per share for the year FY09 and had also declared interim dividend of Rs.9 per share for FY10.
■ Total no. of EBOs (Exclusive brand outlets) currently stands at 46 stores which PIL plans to augment to 100 stores in the next two years.
To see full report: PAGE INDUSTRIES LIMITED
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четверг, 25 июня 2009 г.
>AHLUWALIA CONTRACTS INDIA LIMITED (DOLAT CAPITAL)
High Performance - Delivered!!!
Ahluwalia Contracts India Ltd. (ACIL) is a premium player in contracting and caters to industrial, real estate and infrastructure segment. A healthy order book of Rs.41.5 Bn provides revenue visibility of 3.6 years. Increased contribution from Government Contracts (32% of order book) enhances certainty in the order book. ACIL has been awarded the time critical Commonwealth Projects which exhibits its quality and timely execution skills. With proven execution skills, strong promoter pedigree and sound financials with positive free cash flows, webelieve that ACIL is attractively place d. We initiate coverage with a BUY recommendation and a 12 months price target of Rs.108 which discounts its FY11E EPS of Rs.15.5 by 7x.
Investment Rationale
Huge opportunity in infrastructure segment: ACIL is actively bidding for Urban Infrastructure Projects (especially projects under the JNNURM scheme) and is currently associated with projects like Metro Rail in Mumbai, Delhi and Bangalore, Airport development in Ranchi etc. Under the JNNURM scheme, projects worth Rs.692 Bn are to be allocated over the next 3 years thereby providing ACIL a substantial opportunity landscape in the Urban Infrastructure space.
Healthy order book position to enhance revenue visibility: ACIL has a current order book of Rs.41.5 bn (3.6x FY 09 E sales) catering to residential, commercial retail, hospitality and healthcare segment. The company is currently executing time critical commonwealth projects worth Rs. 8.9 Bn (20% of order book) thereby exhibiting its credibility of timely execution. Going forward, ACIL will increase focus on infrastructure and Government projects which would perk
up the order book quality. ACIL, currently, has an order pipeline worth Rs.10 bn.
up the order book quality. ACIL, currently, has an order pipeline worth Rs.10 bn.
Out of woods.....poised for high growth: The Company has recently received its long pending payment from Emaar MGF for commonwealth games village project which has addressed the short term concerns, thereby infusing sufficient liquidity in the project and ramping up execution.We expect ACIL to clock a revenue and net profit CAGR of 30.3%and 23.6% respectively between FY 09E and 11E.The company has been generating positive free cash flows in the past 2 years. We expect it to continue generating positive free cash flow in the next two years.
Valuations: At CMP, the stock trades at 7.9x its FY10E earning and 5.4x its FY11E earning. We initiate the coverage with a BUY recommendation and a 12 months price target of Rs.108 which discounts its FY11E EPS of Rs.15.5 by 7x.
To see full report: AHLUWALIA CONTRACTS INDIA LIMITED
четверг, 18 июня 2009 г.
>INDUSIND BANK LIMITED (DOLAT CAPITAL)
New wine in a new bottle…!!!
IndusInd Bank is in restructuring mode after a change in the top level management. The bank historically was characterized by low business growth and profitability. However, the restructuring efforts have started showing results with improved performance in the various business segments – profitability, NIMs and business growth. We believe the stock is yet to completely re-rate with the change in business performance. At CMP, the stock trades at 11x FY11E EPS of Rs 7.1, 1.6x FY11E book value of Rs 47 and 2.2x FY11E adjusted book value of Rs 35. We recommend a BUY with a target price of Rs 94 (2x FY11E book value) over the next 12 months.
Investment Rationale
■ Change of guard to augur well for business growth
IndusInd bank has roped in a new management with a clear focus on profitability, productivity and efficiency. The new management aims to reposition the bank as a top 3 performer – in terms of RoE, RoA, NIM, Asset Quality and efficiency amongst the new private banking space. The management has created separate business units to cater to the needs of specific customers and increase the client base. Additionally, effort has been made to increase per branch productivity and efficiency with a focus on cost reduction. The bank has licenses for 30 branches from RBI and intends to apply for additional licenses. This, in our opinion, would entail higher CASA and consequently stronger NIM’s. We expect the bank’s core earnings to register a 31% CAGR during FY09-FY11e.
■ Improvement in core operations
The restructuring process has started showing results in the bank’s performance with core earnings growing 53%, NIMs improving to 1.9% (1.5% in FY08) and net profit growing by 98% in FY09. Further, the C/I ratio has improved to ~60% (67% in FY08). Going forward, we expect the bank’s core earnings to grow by a 31% CAGR driven by business growth of 22.2% CAGR and NIMs improving to 2.3%. Net profit is expected to grow by 30% CAGR after factoring higher slippages and also increasing the coverage ratio to 48.5% (30% in FY09). The RoE and RoA improve to 13.7% and 0.7% in FY 11e respectively.
■ Factoring in asset quality deterioration but no major worries
The bank has been saddled with poor asset quality historically. However post the turnaround in its strategy, the bank has been able to improve its gross NPL’s and net NPLs to 1.6% and 1.1% respectively (3.1% and 2.3% in FY08) with a coverage ratio of 30%. We factor in increased slippages for the bank (gross NPL’s at 3.3% in FY10E and net NPL’s at 1.7% in FY10E) and consequently build in higher provisions in our estimates.
View and Valuations
We believe that the bank will continue to reap the fruits of its turnaround strategy and record an impressive growth on the business and operational front. We believe the stock is yet to completely re-rate with the change in the business performance. At CMP, the stock trades at 11x FY11E EPS of Rs 7.1, 1.6x FY11E book value of Rs 47 and 2.2x FY11E adjusted book value of Rs 35.4. We recommend a BUY with a target price of Rs 94 (2xFY11E book value) over the next 12 months.
To see full report: INDUSIND BANK
IndusInd Bank is in restructuring mode after a change in the top level management. The bank historically was characterized by low business growth and profitability. However, the restructuring efforts have started showing results with improved performance in the various business segments – profitability, NIMs and business growth. We believe the stock is yet to completely re-rate with the change in business performance. At CMP, the stock trades at 11x FY11E EPS of Rs 7.1, 1.6x FY11E book value of Rs 47 and 2.2x FY11E adjusted book value of Rs 35. We recommend a BUY with a target price of Rs 94 (2x FY11E book value) over the next 12 months.
Investment Rationale
■ Change of guard to augur well for business growth
IndusInd bank has roped in a new management with a clear focus on profitability, productivity and efficiency. The new management aims to reposition the bank as a top 3 performer – in terms of RoE, RoA, NIM, Asset Quality and efficiency amongst the new private banking space. The management has created separate business units to cater to the needs of specific customers and increase the client base. Additionally, effort has been made to increase per branch productivity and efficiency with a focus on cost reduction. The bank has licenses for 30 branches from RBI and intends to apply for additional licenses. This, in our opinion, would entail higher CASA and consequently stronger NIM’s. We expect the bank’s core earnings to register a 31% CAGR during FY09-FY11e.
■ Improvement in core operations
The restructuring process has started showing results in the bank’s performance with core earnings growing 53%, NIMs improving to 1.9% (1.5% in FY08) and net profit growing by 98% in FY09. Further, the C/I ratio has improved to ~60% (67% in FY08). Going forward, we expect the bank’s core earnings to grow by a 31% CAGR driven by business growth of 22.2% CAGR and NIMs improving to 2.3%. Net profit is expected to grow by 30% CAGR after factoring higher slippages and also increasing the coverage ratio to 48.5% (30% in FY09). The RoE and RoA improve to 13.7% and 0.7% in FY 11e respectively.
■ Factoring in asset quality deterioration but no major worries
The bank has been saddled with poor asset quality historically. However post the turnaround in its strategy, the bank has been able to improve its gross NPL’s and net NPLs to 1.6% and 1.1% respectively (3.1% and 2.3% in FY08) with a coverage ratio of 30%. We factor in increased slippages for the bank (gross NPL’s at 3.3% in FY10E and net NPL’s at 1.7% in FY10E) and consequently build in higher provisions in our estimates.
View and Valuations
We believe that the bank will continue to reap the fruits of its turnaround strategy and record an impressive growth on the business and operational front. We believe the stock is yet to completely re-rate with the change in the business performance. At CMP, the stock trades at 11x FY11E EPS of Rs 7.1, 1.6x FY11E book value of Rs 47 and 2.2x FY11E adjusted book value of Rs 35.4. We recommend a BUY with a target price of Rs 94 (2xFY11E book value) over the next 12 months.
To see full report: INDUSIND BANK
среда, 27 мая 2009 г.
>IRB INFRASTRUCTURE DEVELOPERS LIMITED (DOLAT CAPITAL)
IRB’s FY09 results were in line with our estimates. The consolidated net revenue has grown by 35% YoY on the back of ~23% YoY increase in toll revenue and ~56% YoY increase in construction revenue. However, margins have shown a dip due to rise in construction cost on account of higher raw material prices. The construction cost saving upto 20% is estimated on Surat Dahisar BOT which will have a positive impact on the project and aggregate NPV. However, it would be too early to factor in this development as the project has just begun and will be completed in the next 28 months. We believe, in the current scenario, change in our assumptions (traffic growth rate, cost of equity and debt, toll escalation rate) are not warranted. Our calculation suggests the NPV of BOT projects will have the highest sensitivity to the traffic growth rate amongst other factors. We have valued the stock on SOTP (BOT – NPV and EPC – PER) method and believe that the stock remains overvalued at these levels. We maintain a SELL on the stock with target price of Rs 67(BOT - Rs.56 and EPC - Rs.11).
Order book details
The Company has an order book of Rs.58.9 bn as on 31st March 2009 (of which O&M work accounts for 43.7%, EPC in ongoing BOT projects accounts for 51.6% and rest 4.6% is attributed to funded projects). Further, the EPC order book of Rs.30.46 bn is confined to construction work of ~300 kms, out of which Surat Dahisar accounts for 239 kms and KIRDP (Kolhapur Road Integrated Development Programme) for 50 kms. The company expects to execute the order book in next two and half years.
Project update
Surat Dahisar BOT
The EPC cost of the project (~Rs.25 bn) is expected to be reduced by ~20% on account of reduction in raw material prices and cost of funding. This is expected to result in a saving of around Rs.5 bn. However, it would be too early to predict the extent of cost saving as only 2 months of construction period has gone by out of a total period of 30 months. Hence, any upward movement in RM cost in the balance period of construction might not reduce the construction cost to the extent of 20% as anticipated by the company.
IRB has started collecting toll from 20th Feb 2009 on this stretch and has so far collected Rs.335.9 mn on gross level (around 7.3% contribution to total toll revenue) but this is lower than earlier expectation by around ~26%. The current run rate is ~Rs.8.5 mn/day on the gross basis as against the expected ~Rs.11.5 mn/day. The lower toll collection is on account of lesser port traffic on the stretch due to slow down in exports and economic activities.
Sensitivity of NPV to change in construction cost (EPC) at constant 6% traffic growth
The NPV of Surat Dahisar BOT will range between - Rs.4.82 per share to Rs 3.71 per share for 0% to 20% cost saving in construction expense.
Our aggregate NPV is estimated to improve between 3.8% to 15.3% for reduction in construction cost between 5% to 20%. (NPV range – Rs 55.90 per share to Rs 64.43 per share).
To see full report: IRB INFRASTRUCTURE
Order book details
The Company has an order book of Rs.58.9 bn as on 31st March 2009 (of which O&M work accounts for 43.7%, EPC in ongoing BOT projects accounts for 51.6% and rest 4.6% is attributed to funded projects). Further, the EPC order book of Rs.30.46 bn is confined to construction work of ~300 kms, out of which Surat Dahisar accounts for 239 kms and KIRDP (Kolhapur Road Integrated Development Programme) for 50 kms. The company expects to execute the order book in next two and half years.
Project update
Surat Dahisar BOT
The EPC cost of the project (~Rs.25 bn) is expected to be reduced by ~20% on account of reduction in raw material prices and cost of funding. This is expected to result in a saving of around Rs.5 bn. However, it would be too early to predict the extent of cost saving as only 2 months of construction period has gone by out of a total period of 30 months. Hence, any upward movement in RM cost in the balance period of construction might not reduce the construction cost to the extent of 20% as anticipated by the company.
IRB has started collecting toll from 20th Feb 2009 on this stretch and has so far collected Rs.335.9 mn on gross level (around 7.3% contribution to total toll revenue) but this is lower than earlier expectation by around ~26%. The current run rate is ~Rs.8.5 mn/day on the gross basis as against the expected ~Rs.11.5 mn/day. The lower toll collection is on account of lesser port traffic on the stretch due to slow down in exports and economic activities.
Sensitivity of NPV to change in construction cost (EPC) at constant 6% traffic growth
The NPV of Surat Dahisar BOT will range between - Rs.4.82 per share to Rs 3.71 per share for 0% to 20% cost saving in construction expense.
Our aggregate NPV is estimated to improve between 3.8% to 15.3% for reduction in construction cost between 5% to 20%. (NPV range – Rs 55.90 per share to Rs 64.43 per share).
To see full report: IRB INFRASTRUCTURE
среда, 6 мая 2009 г.
>Castrol India Ltd. (DOLAT CAPITAL)
Castrol India Ltd. (CIL) has reported a good set of numbers considering the economic slowdown, which has impacted both the automotive and industrial segment. Despite the volume pressure, CIL recorded a top line growth (YoY) of 2.6% due to product price hikes taken in CY08. The full effect of fall in base oil prices (came down by ~50% from its peak) would be fully reflected from Q2CY09. The strong brand pull would enable CIL to hold on to its market share. Our ground level interaction suggests that the price cuts taken in February 2009 would augur well for CIL. We reiterate our Accumulate recommendation with a price target of Rs 371 to trade at 15x CY09E earnings.
■ The revenue grew by 2.6% on a YoY basis to Rs 5059 mn despite the volume pressure. This is on the back of the three price hikes taken by CIL in CY08. The volume pressure is expected to continue in the coming quarter.
■ The raw material price increased by 4% on a YoY basis. Going forward, we expect this to come down sharply on a YoY basis due to the correction in base oil prices.
■ The PAT margin expanded by 30 bps on a YoY basis. We expect the margin to expand further considering the fall in raw material prices.
Key Developments:
■ CIL has taken a price cut of Rs 10-12 per liter, thereby reducing the lubricant prices by 5~7% across the product portfolio. The same has been done in light of the price correction in base oil prices (~50%). The cut would reduce the price gap with competition and arrest the brand shift from Castrol.
■ Going forward, CIL plans to increase the proportion of synthetic based lubricants (higher margins) in their product portfolio and phase out low margin products.
■ The refurbished CRB products are well accepted in the market.
■ CIL would go slow on Castrol Bike Zone roll outs.
Valuation
The price cut taken by CIL is marginal as compared to fall in the base oil prices. This strategy would enable margin expansion. The full impact of the fall in raw material cost would be visible from Q2CY09. The improvement in the economic activities and thrust on personal mobility segment would augur well for CIL. At CMP of Rs 318, the stock is trading at 12.9x and 12.0x of CY09E and CY10E earnings respectively. We reiterate our Accumulate recommendation with a price target of Rs 371 to trade at 15x CY09E earnings.
To see full report: CASTROL
■ The revenue grew by 2.6% on a YoY basis to Rs 5059 mn despite the volume pressure. This is on the back of the three price hikes taken by CIL in CY08. The volume pressure is expected to continue in the coming quarter.
■ The raw material price increased by 4% on a YoY basis. Going forward, we expect this to come down sharply on a YoY basis due to the correction in base oil prices.
■ The PAT margin expanded by 30 bps on a YoY basis. We expect the margin to expand further considering the fall in raw material prices.
Key Developments:
■ CIL has taken a price cut of Rs 10-12 per liter, thereby reducing the lubricant prices by 5~7% across the product portfolio. The same has been done in light of the price correction in base oil prices (~50%). The cut would reduce the price gap with competition and arrest the brand shift from Castrol.
■ Going forward, CIL plans to increase the proportion of synthetic based lubricants (higher margins) in their product portfolio and phase out low margin products.
■ The refurbished CRB products are well accepted in the market.
■ CIL would go slow on Castrol Bike Zone roll outs.
Valuation
The price cut taken by CIL is marginal as compared to fall in the base oil prices. This strategy would enable margin expansion. The full impact of the fall in raw material cost would be visible from Q2CY09. The improvement in the economic activities and thrust on personal mobility segment would augur well for CIL. At CMP of Rs 318, the stock is trading at 12.9x and 12.0x of CY09E and CY10E earnings respectively. We reiterate our Accumulate recommendation with a price target of Rs 371 to trade at 15x CY09E earnings.
To see full report: CASTROL
>Kalindee Rail Nirman Ltd (DOLAT CAPITAL)
Kalindee Rail reported 4QFY09 results below our expectations with 25.8% increase in sales to Rs613.8mn and 40% de-growth in PAT to Rs12.8mn. The margins for the quarter declined by 90bps on account of substantial increase in employees cost and other expenses. With the new government in making, we expect significant delays in Dedicated Freight Corridor (DFC) and other orders flows from railways. Also, delay in execution caused by other sub-contractors has further pushed Kalindee’s revenue booking which has reflected in the numbers and should impact the earnings going forward. As the scenario remains bleak for order inflows for at least the next two quarters, we recommend a Sell on the company with a target price of Rs93 at which it would be trading at a PER of 5xFY10E earnings. Our target price of Rs125 has been achieved and we downgrade the price by another 25.6%.
Result Highlights
■ Sales for 4QFY09 increased by 25.8% to Rs613.8mn. The operating margin declined by 90 bps yoy to 6.8%. This was mainly on account of 145% increase in staff cost and 125% increase in other expenses (which includes work costs). However, the raw material costs have declined by 20% signifying a positive impact from falling commodity prices.
■ PAT de-grew by 40% to Rs.12.8mn with a decline in net margins by 230bps to 2.1% despite other income of Rs.2.7mn (nil last quarter). The margins were impacted adversely due to increase in depreciation and interest cost by 33.3% & 195% respectively.
■ For FY09, the Sales grew by 14.3% to Rs.2812.2mn and PAT de-grew by 19% to Rs.115.3mn. The operating margins remained stable at 9.5%. However, PAT margins declined substantially by 170 bps mainly on account of 173% increase in interest cost.
Key Developments
■ The company has reported below expectation numbers on topline due to delay by a mid-tier construction company based in north for two orders of Rs1000mn and Rs800mn.
■ The delay in execution caused by other sub-contractors has further pushed Kalindee’s revenue booking. This has also impacted the earnings negatively as the company has already hired the requisite equipments and machinery for the project but is unable to execute due to delay by links in the value chain. The interest cost and depreciation for such equipments is adding up to a significant amount hitting the margins negatively.
■ The Company’s current order book stands at Rs.4000mn (1.4x FY09 Sales). We feel that there should be a slowdown in order inflows for at least the next two quarters until a stable government is formed. This would further delay the DFC and RVNL projects.
Valuation
Though Kalindee is well placed to tap the opportunities in Railways due to its technical expertise, we feel that delay in crucial projects would postpone the revenue booking. Also, a bleak scenario for order book build-up does not augur well for the company. As the scenario remains bleak for order inflows for at least the next two quarters, we recommend a Sell on the company with a target price of Rs93 at which it would be trading at a PER of 5xFY10E earnings. Our target price of Rs125 has been achieved and we downgrade the price by another 25.6%.
To see full report: KALINDEE RAIL NIRMAN
Result Highlights
■ Sales for 4QFY09 increased by 25.8% to Rs613.8mn. The operating margin declined by 90 bps yoy to 6.8%. This was mainly on account of 145% increase in staff cost and 125% increase in other expenses (which includes work costs). However, the raw material costs have declined by 20% signifying a positive impact from falling commodity prices.
■ PAT de-grew by 40% to Rs.12.8mn with a decline in net margins by 230bps to 2.1% despite other income of Rs.2.7mn (nil last quarter). The margins were impacted adversely due to increase in depreciation and interest cost by 33.3% & 195% respectively.
■ For FY09, the Sales grew by 14.3% to Rs.2812.2mn and PAT de-grew by 19% to Rs.115.3mn. The operating margins remained stable at 9.5%. However, PAT margins declined substantially by 170 bps mainly on account of 173% increase in interest cost.
Key Developments
■ The company has reported below expectation numbers on topline due to delay by a mid-tier construction company based in north for two orders of Rs1000mn and Rs800mn.
■ The delay in execution caused by other sub-contractors has further pushed Kalindee’s revenue booking. This has also impacted the earnings negatively as the company has already hired the requisite equipments and machinery for the project but is unable to execute due to delay by links in the value chain. The interest cost and depreciation for such equipments is adding up to a significant amount hitting the margins negatively.
■ The Company’s current order book stands at Rs.4000mn (1.4x FY09 Sales). We feel that there should be a slowdown in order inflows for at least the next two quarters until a stable government is formed. This would further delay the DFC and RVNL projects.
Valuation
Though Kalindee is well placed to tap the opportunities in Railways due to its technical expertise, we feel that delay in crucial projects would postpone the revenue booking. Also, a bleak scenario for order book build-up does not augur well for the company. As the scenario remains bleak for order inflows for at least the next two quarters, we recommend a Sell on the company with a target price of Rs93 at which it would be trading at a PER of 5xFY10E earnings. Our target price of Rs125 has been achieved and we downgrade the price by another 25.6%.
To see full report: KALINDEE RAIL NIRMAN
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