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  • 8/6/2019 Unicon Quarterly Earnings Preview - Q1FY12

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    UARTERLY EARNINGS PREVIEW / Q1 -FY12

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    Wealth Research, Unicon Financial Intermediaries Pvt. Ltd.Email: [email protected]

    1

    QUARTERLY EARNINGS PREVIEWQ1 - FY12

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    Executive Summary

    Indian market has faced various challenges in the last few quarters in terms of economicparameters, lack of reforms, political pressures & global headwinds. High inflation has beenputting pressure on RBI to take anti inflationary measures (increasing the interest rates) atthe cost of economic growth. Investments in industries and credit growth thus been hamperedin this high interest rate regime.

    In FY11, IIP registered lower growth of 7.9% as compared to 14.7% in FY10, due to fall inmanufacturing (8.3% from 15.9% in FY10) & capital goods industry (14.4% from 37.3% inFY10). The consumer goods registered a lower growth of 7.5% in FY11 from 9.1% in FY10mainly due to inflationary pressures. The first quarter of this fiscal continued to mirrorsimilar trends with inflation remaining above 9% and IIP registering a lower growth of 6.3%

    in April 2011. The Nifty during this phase has been highly volatile and slipped down by 186points to reach 5647 as on 30th June 2011. The FIIs were net sellers in market (INR ~32.99bn in last quarter) whereas the domestic institutions remained net buyers in the marketwith INR ~44.4 bn. The volatility in the market was also attributed to uncertain globalenvironment over and above domestic concerns.

    Going forward, we expect world governments to address various economic challenges likedebt crisis in Europe, high global inflation & political instability etc. On domestic front weexpect the government continue to take corrective actions on a) high inflation (on back ofhike in diesel & cooking gas prices), b) high fiscal deficit (on back of Indian government'sdecision to scrap import duties on crude oil), c) erratic FII flows d) liberalising the FDI

    policy.

    Redressal of these issues will provide much needed stability to economic growth. We believe,the rural economy would continue to remain robust on the back of good monsoon in 2011supporting the consumption led demand. Also, the government's announcement of tappingUS investors for infrastructure financing (USD 1 tn) would increase the investments in theinfra space. Thus, we expect the Indian economy to register growth of 8-8.5% in 2011-12.The markets would continue to be range bound till the concerns are addressed properly .Thereafter the rerating would lead to expansion of P/Es on selective basis. This phase shouldstart ideally post 2nd quarter results as by then benefits of lower commodity prices, capexcycle revival and execution of reform should commence. Taking a one year time framecontra & infrastructure sector is expected to outperform as orders have started to flow inthe system. We remain positive on Banking, Power Transmission, Agrochemical andconsumption oriented sectors.

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    Table of Content

    Sr. No. Sector / Company Name Rating CMP 52 Week H / L

    I Infrastructure1 Hindustan Construction Company Ltd Buy 32 73 / 28

    2 Larsen & Toubro Ltd Hold 1800 2213 / 1461

    3 IVRCL Ltd Buy 70 195 / 60

    4 NCC Ltd Accumulate 80 194 / 75

    5 Unity Infraprojects Ltd Buy 65 138 / 51

    6 Patel Engineering Ltd Hold 149 452 / 131

    7 Crompton Greaves Ltd Accumulate 260 349 / 228

    8 Bharat Heavy Electricals Ltd Buy 2044 2695 / 1872

    9 Simplex Infrastructure Ltd Accumulate 271 515 / 265

    10 Punj Lloyd Ltd Accumulate 73 150 / 53

    II Cement

    1 Shree Cement Ltd Hold 1785 2350 / 1500

    2 IndiaCement Ltd Buy 71 128 / 67

    III Oil and Gas

    1 Indraprastha Gas Ltd Hold 376 385 / 253

    2 Gujarat State Petronet Ltd Buy 88 128 / 84

    IV Power

    1 BGR Energy Systems Ltd Accumulate 459 950 / 401

    2 Jyoti Structures Ltd Buy 85 169 / 73

    3 Diamond Power Infrastructure Ltd Buy 160 265 / 126

    4 Adani Power Ltd Accumulate 110 146 / 106

    5 Tata Power Co. Ltd Hold 1283 1468 / 1133

    6 Thermax Ltd Hold 592 930 / 537

    7 CESC Ltd Buy 300 433 / 252

    8 KEC International Buy 79 123 / 70

    V Auto and Auto Ancillary

    1 Tata Motors Ltd Buy 997 1382 / 748

    2 Exide Industries Ltd Buy 165 180 / 110

    3 TVS Motor Co Ltd Hold 53 87 / 44

    VI Metal and Mining

    1 Tata Steel Ltd Buy 602 737 / 449

    2 JSW Steel Ltd Accumulate 874 1400 / 751

    3 Adhunik Metaliks Ltd Buy 82 127 / 70

    4 Hindalco Industries Ltd Buy 182 253 / 140

    5 Visa Steel Ltd Buy 59 65 / 33

    6 NMDC Ltd Hold 259 305 / 227

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    Sr. No. Sector / Company Name Rating CMP 52 Week H / L

    VIII Banking & Finance

    1 State Bank Of India Accumulate 2380 3515 / 2120

    2 Union Bank Of India Buy 299 427 / 285

    3 HDFC Bank Ltd Hold 2489 2540 / 1879

    4 IDBI Bank Ltd Buy 133 202 / 115

    5 United Bank Of India Buy 96 152 / 72

    6 Axis Bank Ltd Buy 1294 1609 / 1149

    7 Allahabad Bank Buy 196 272 / 157

    8 Corporation Bank Buy 532 815 / 475

    9 Yes Bank Ltd Buy 313 388 / 234

    10 Indusind Bank Ltd Accumulate 275 309 / 181

    11 ICICI Bank Ltd Hold 1087 1279 / 830

    12 Indian Bank Buy 215 317 / 196

    IX Media

    1 Zee Entertainment Enterprises Ltd Accumulate 140 162 / 106

    2 D.B. Corp Ltd Accumulate 236 310 / 226

    3 HT Media Ltd Hold 170 186 / 125

    4 Hindustan Media Venture Ltd Accumulate 142 220 / 123

    5 Sun TV Network Ltd Accumulate 343 557 / 260

    6 UTV Software Communications Ltd Hold 814 844 / 385

    7 Jagran Prakashan Ltd Buy 126 157 / 105

    XII Pharmaceuticals1 Aurobindo Pharma Ltd Accumulate 178 275 / 156

    2 Dr Reddy's Laboratories Ltd Accumulate 1561 1855 / 1277

    3 Biocon Ltd Accumulate 355 473 / 301

    4 Opto Circuit (India) Ltd Accumulate 295 328 / 224

    XIII Food Processing

    1 Shree Renuka Sugars Ltd Accumulate 66 108 / 56

    2 Ruchi Soya Industries Ltd Accumulate 97 143 / 80

    3 Rei Agro Ltd Buy 25 33 / 19

    XIV Fertiliser

    1 Chambal fertiliser & Chemicals Ltd Accumulate 77 105 / 62

    2 Deepak Fertilizers & Petrochemicals Corp Ltd Buy 161 213 / 135

    3 Coromandal International Ltd Buy 335 376 / 215

    XV Agri Chem

    1 Rallis India Ltd Accumulate 1516 1591 / 1031

    2 United Phosphorus Ltd Buy 153 220 / 125

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    Sr. No. Sector / Company Name Rating CMP 52 Week H / L

    XVI Education

    1 Educomp Solutions Ltd Buy 397 702 / 380

    2 Everonn Education Ltd Accumulate 530 756 / 435

    3 NIIT Ltd Buy 55 75 / 43

    XVIII IT

    1 Infosys Ltd Accumulate 2,865 3499 / 2639

    2 HCL Technologies Ltd Buy 489 528 / 351

    3 Tata Consultancy Services Ltd Hold 1,170 1247 / 726

    4 Rolta India Ltd Buy 129 189 / 116

    5 Persistent Systems Ltd Buy 368 505 / 335

    6 KPIT Cummins Infosystems Ltd Hold 175 193 / 113

    7 Hexaware Technologies Ltd Accumulate 69 74 / 33

    XXI Others

    1 Mundra Port & SEZ Ltd Hold 157 185 / 110

    2 Allcargo Global Logistics Buy 161 190 / 123

    * Most of the stocks are rated on 12-18 months basis, though in the near term valuation remain rich.

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    Constructions and Capital Goods

    Cooling off of higher commodity prices, interest rates near its peak, reshuffle in cabinet would speed up the decision at centreand state level to award new projects and better margins for infrastructure companies. Barring few regional issues in few states,

    n our view macroeconomic development remains conducive for companies. Key catalyst to the sector performance and stockspecific momentum would thus be based on respective companies ability to increase its order-book and execution thereafter.

    Since beginning of the calendar year, Capital Goods Index has remained under performer to the broader market indices. The fallwas led due to several factors like a) higher valuation, b) higher commodity prices, c) series of scams and policy implementationat snail speed and d) higher interest rate regime. Further hike in interest rates due to higher inflation is expected, but we believethat both large cap and mid-cap companies are trading at attractive valuations and if we take long term view on the sector, riskreward is in favour of investors.

    We prefer BHEL and Larsen in large cap and Unity Infra in the mid-cap segment.

    Hindustan Construction Company Ltd. (HCC)

    Valuation and OutlookDuring the quarter, HCC redeemed its FCCB, nominal value of USD 96.6Mn, at the redemption price of 137.7%. HCC received twoproject worth INR one project worth INR 9,996.3Mn (INR 2,986Mn from from Sardar Sarovar Nigam Ltd and b) INR 7,010Mn ina JV with Alstom, France). While stock is trading at attractive valuation, the near term concern remains as to its Lavasa project.Significant lower profit estimate than consensus is due to FCCB redemption and accounting for past interest (alternatively thiscould be adjusted through the Reserve). Due to poor order intake, higher interest cost during the quarter due to FCCB redemptionand going forward due to rising working capital, we reduce our target price to 45. Buy-High Risk

    CMP: 32 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 11,106 9,924 12,097 11.9 (8.2) 11,449 (3.0)

    Operating Expenses 9,673 8,696 10,359 11.2 (6.6) 9,938 (2.7)

    EBITDA 1,433 1,228 1,738 16.6 (17.6) 1,511 (5.2)

    EBITDA (%) 12.9 12.4 14.4 52 bps -147 bps 13.2 -2 bps

    Reported PAT 78 283 226 (72.5) (65.6) 141 (44.9)

    PAT (%) 0.7 2.9 1.9 -215 bps -117 bps 1.2 -43 bps

    EPS 0.1 0.5 0.37 (72.5) (65.5) 0.2 (44.5)

    Market Cap: 19,348 P/E (FY12E): 29.0

    *Standalone financials

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    Larsen & Toubro Ltd. (L&T)

    Valuation and OutlookDuring the quarter under review, L&T has so far bagged several orders valued at INR 146.26bn across sectors. The orders are fromthe sub sector like Roads, Oil & Gas, Power, Buildings and Factories and Material handling verticals. Though order intake growths -6% YoY, the beginning of FY12 is good so far and we expect company to meet its target for FY 12 i.e. growth in order-book at ~20-

    25% on annualised basis for current fiscal. At the CMP, stock trades around 21x its standalone revenue for FY12e. Hold, for pricetarget of INR 1,930.

    IVRCL Infrastructure Projects Ltd. (IVRCL)

    Valuation and OutlookIVRCL, during current quarter won orders worth INR 8,936.6Mn. Order worth INR 2,947.4Mn is in water division in the state ofGujarat whereas project worth INR 5,174.6Mn is in building division in several states. Of the total order-book, about 18% is fromthe overseas (ME) market (Gulf region). Order-book diversification in new segment and new geography improves the revenuevisibility of the company. However, concerns continue to remain over, stretched working capital cycle coupled with higher costof debt. Maintain buy for reduced price target of INR 85 (High risk).

    CMP: 70 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 11,914 11,062 20,516 7.7 (41.9) 12,352 (3.6)

    Operating Expenses 10,877 10,054 18,735 8.2 (41.9) 11,234 (3.2)

    EBITDA 1,036 1,008 1,781 2.9 (41.8) 1,118 (7.3)

    EBITDA (%) 8.7 9.1 8.7 -41 bps 2 bps 9.1 -4 bps

    Reported PAT 167 281 643 (40.6) (74.0) 205 (18.4)

    PAT (%) 1.4 2.5 3.1 -114 bps -173 bps 1.7 -15 bps

    EPS 0.6 1.0 2.41 (40.6) (74.4) 0.7 (10.5)

    Market Cap: 18,637 P/E (FY12E): 9.2

    *Standalone financials

    CMP: 1,800 Hold

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 94,008 78,351 150,784 20.0 (37.7) 96,320 (2.4)

    Operating Expenses 82,351 68,281 127,375 20.6 (35.3) 85,013 (3.1)

    EBITDA 11,657 10,071 23,409 15.8 (50.2) 11,307 3.1

    EBITDA (%) 12.4 12.9 15.5 -45 bps -312 bps 11.7 6 bps

    Reported PAT 7,427 6,662 16862 11.5 (56.0) 7,334 1.3

    PAT (%) 7.9 8.5 11.2 -60 bps -328 bps 7.6 4 bps

    EPS 12.3 11.1 27.7 11.5 (55.5) 11.8 4.4

    Market Cap: 1,095,934 P/E (FY12E): 21.4

    *Standalone financials

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    NCC Ltd. (NCC)

    Valuation and OutlookIn terms of new order intake, company has not secured any contract during the current quarter under review. We expect, itscurrent order-book at INR 151.68bn. We estimate overall yearly growth of ~ 10-12% in its topline against management guidanceof 15% for FY12. For lower order-intake, higher working capital cycle, we lower our price target to INR 90.

    Unity Infraprojects Ltd. (UIL)

    Valuation and OutlookDuring Q1FY12, (till date) Unity Infraprojects has secured contracts over ~INR 4bn. UIL aims to raise money through ECB in orderto retire its high cost debt. Change rating to accumulate (from Buy) for price target of INR 80.

    CMP: 65 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Dev (%)

    Revenue from Operations 3,825 3,398 5,703 12.6 (32.9) NA NA

    Operating Expenses 3,335 2,955 4,918 12.9 (32.2) NA NA

    EBITDA 490 443 785 10.5 (37.6) NA NA

    EBITDA (%) 12.8 13.0 13.8 -24 bps -96 bps NA NA

    Reported PAT 187 195 307 (4.0) (38.9) NA NA

    PAT (%) 4.9 5.7 5.4 -84 bps -48 bps NA NA

    EPS 2.5 2.6 4.14 (4.0) (39.0) NA NA

    Market Cap: 4,793 P/E (FY12E): 4.2

    *Standalone financials

    CMP: 80 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 11,594 10,851 14,496 6.8 (20.0) 12,292 (5.7)

    Operating Expenses 10,527 9,793 13,187 7.5 (20.2) 11,137 (5.5)

    EBITDA 1,067 1,058 1,309 0.9 (18.5) 1,155 (7.7)

    EBITDA (%) 9.2 9.7 9.0 -55 bps 17 bps 9.4 -20 bps

    Reported PAT 267 414 357 (35.6) (25.3) 257 3.8

    PAT (%) 2.3 3.8 2.5 -152 bps -16 bps 2.1 21 bps

    EPS 1.0 1.6 1.39 (35.6) (25.4) 1.0 3.7

    Market Cap: 20,578 P/E (FY12E): 9.7

    *Standalone financials

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    Patel Engineering Ltd. (PEL)

    Valuation and OutlookWith no significant order-win during the quarter under review, we expect its order-book to be around INR 85bn. The concernsremains over no incremental growth in its order-book on the one hand and continued pressure on its working capital with higherdebt service cost. At the current market price, stock trades at PE of 7. Given the PE of 7.5, in line with other similar infrastructurecompanies, and value for its real estate business, hold for price target of 150.

    Crompton Greaves Ltd. (CGL)

    Valuation and OutlookWe expect CGL to report an 18% growth in its topline on YoY basis and 12% growth in its PAT on consolidated basis. Completionof low margin legacy orders from recently acquired NELCO's division would reflect from Q2FY12, in our view. During the quarter,CGL has acquired Sweden-based Emotron Group for Euro 57.8Mn (~INR 3700Mn). CGL also concluded an arrangement for theacquisition (subject to regulatory approvals in US) of QEI, Inc. for an enterprise value of ~USD 30Mn. QEI is a market-leadingprovider of SCADA and automation systems, and products for the management of electric T&D networks. The acquisition wouldead to product and geography diversification. Accumulate for price target of 300.

    CMP: 260 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 27,248 23,022 29,080 18.4 (6.3) 26,390 3.3

    Operating Expenses 23,923 20,049 25,350 19.3 (5.6) 23,066 3.7

    EBITDA 3,324 2,973 3,731 11.8 (10.9) 3,324 0.0

    EBITDA (%) 12.2 12.9 12.8 -71 bps -63 bps 12.6 -40 bps

    Reported PAT 2,153 1,909 2514 12.8 (14.4) 2,125 1.3

    PAT (%) 7.9 8.3 8.6 -39 bps -75 bps 8.1 -15 bps

    EPS 3.4 3.0 3.92 12.8 (14.3) 3.7 (9.2)

    Market Cap: 166,788 P/E (FY12E): 16.4

    *Consolidated financials

    CMP: 149 Hold

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg VarianceRevenue from Operations 6,777 7,023 15,965 (3.5) (57.5) NA NA

    Operating Expenses 5,747 5,838 14,666 (1.6) (60.8) NA NA

    EBITDA 1,030 1,185 1,299 (13.1) (20.7) NA NA

    EBITDA (%) 15.2 16.9 8.1 -167 bps 706 bps NA NA

    Reported PAT 359 442 437 (18.7) (17.8) NA NA

    PAT (%) 5.3 6.3 2.7 -99 bps 256 bps NA NA

    EPS 8.4 10.3 6.25 (18.7) 33.9 NA NA

    Market Cap: 10,404 P/E (FY12E): 7.1

    *Consolidated financials

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    Crompton Greaves Ltd. (CGL)

    Valuation and OutlookWe expect CGL to report an 18% growth in its topline on YoY basis and 12% growth in its PAT on consolidated basis. Completionof low margin legacy orders from recently acquired NELCO's division would reflect from Q2FY12, in our view. During the quarter,CGL has acquired Sweden-based Emotron Group for Euro 57.8Mn (~INR 3700Mn). CGL also concluded an arrangement for theacquisition (subject to regulatory approvals in US) of QEI, Inc. for an enterprise value of ~USD 30Mn. QEI is a market-leadingprovider of SCADA and automation systems, and products for the management of electric T&D networks. The acquisition wouldead to product and geography diversification. Accumulate for price target of 300.

    Bharat Heavy Electricals Ltd. (BHEL)

    Valuation and OutlookDuring the quarter under review, BHEL has signed provisional INR 15bn deal with the government of Iraq. This could translatento supply of 10 gas turbines of 126 megawatts (MW). During the quarter, company announced order win for solar power project

    worth INR 620Mn only. The Order-book of the company stands at over over ~INR 1.5Tn and provides revenue visibility overFY13e. Given the a) revenue visibility, b) low valuation, c) low debt on books and d) attempt to diversify its business model in itscore area of engineering favours long term investors. Buy for price target of INR 2,650.

    CMP: 260 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 27,248 23,022 29,080 18.4 (6.3) 26,390 3.3

    Operating Expenses 23,923 20,049 25,350 19.3 (5.6) 23,066 3.7

    EBITDA 3,324 2,973 3,731 11.8 (10.9) 3,324 0.0

    EBITDA (%) 12.2 12.9 12.8 -71 bps -63 bps 12.6 -40 bps

    Reported PAT 2,153 1,909 2514 12.8 (14.4) 2,125 1.3

    PAT (%) 7.9 8.3 8.6 -39 bps -75 bps 8.1 -15 bps

    EPS 3.4 3.0 3.92 12.8 (14.3) 3.7 (9.2)

    Market Cap: 166,788 P/E (FY12E): 16.4

    *Consolidated financials

    CMP: 2,044 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 78,151 64,797 179,214 20.6 (56.4) 76,394 2.3

    Operating Expenses 68,226 55,147 136,278 23.7 (49.9) 67,068 1.7

    EBITDA 9,925 9,650 42,936 2.8 (76.9) 9,326 6.4

    EBITDA (%) 12.7 14.9 24.0 -219 bps -1126 bps 12.2 49 bps

    Reported PAT 7,581 6,677 27980 13.5 (72.9) 7,736 (2.0)

    PAT (%) 9.7 10.3 15.6 -60 bps -591 bps 10.1 -43 bps

    EPS 15.5 13.6 57.16 13.5 (72.9) 16.8 (7.8)

    Market Cap: 1,000,579 P/E (FY12E): 14.6

    *Standalone financials

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    Simplex Infrastructures Ltd. (SIL)

    Valuation and OutlookWe expect, SIl's order book at ~INR 134bn. We continue to believe that SIL's working capital remain under pressure and expectower PAT margin compared to consensus. Besides, given the 23% growth in its Sales on YoY basis during last quarter would also

    reduce the yearly growth in its revenue and profit due to higher base. Given the a) diversification of its order-book across segmentand geographies which mitigates the risk of dependency in specific vertical or geography and sound execution track record,maintain, Accumulate for price target of 300.

    Punj Lloyd Ltd. (PLL)

    Valuation and OutlookDuring the quarter, PLL won contracts worth INR 25.08bn. Punj Lloyds unit, Sembawang Development, acquired a 50% stake ina thermal coal mine in Kalimantan, Indonesia. Mine reserves are estimated at 134 MnT. Alike it peers, working capital and highercost of debt remains a concern for the company. Given the recent orders win, which have lower execution cycle compared to purenfrastructure projects, revenue and margin visibility has improved for the company. Upgrade to Accumulate for price target of

    INR 85.

    CMP: 270 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 12,520 11,745 13,654 6.6 (8.3) 12,802 (2.2)

    Operating Expenses 11,298 10,545 12,280 7.1 (8.0) 11,535 (2.1)

    EBITDA 1,223 1,201 1,374 1.8 (11.0) 1,267 (3.5)

    EBITDA (%) 9.8 10.2 10.1 -46 bps -30 bps 9.9 -13 bps

    Reported PAT 300 362 370 (17.0) (18.7) 338 (11.1)

    PAT (%) 2.4 3.1 2.7 -68 bps -31 bps 2.6 -24 bps

    EPS 6.1 7.3 7.47 (17.0) (19.0) 6.8 (11.0)

    Market Cap: 13,358 P/E (FY12E): 8.9

    *Standalone financials

    CMP: 73 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg VarianceRevenue from Operations 20,345 16,058 21,921 26.7 (7.2) 19,646 3.6

    Operating Expenses 18,799 14,717 19,841 27.7 (5.3) 18,035 4.2

    EBITDA 1,546 1,341 2,080 15.3 (25.7) 1,611 (4.0)

    EBITDA (%) 7.6 8.4 9.5 -75 bps -189 bps 8.2 -60 bps

    Reported PAT 264 (306) 177 (186.5) 49.9 108 144.9

    PAT (%) 1.3 (1.9) 0.8 320 bps 49 bps 0.5 75 bps

    EPS 0.8 -0.9 0.53 (186.5) 50.1 0.3 165.2

    Market Cap: 24,392 P/E (FY12E): 19.9

    *Consolidated financials

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    India Cement Ltd. (ICL)

    Valuation and OutlookICL's margin is expected to continue to remain under pressure both on account of higher input cost as well as due to higher powerand fuel charges. At the CMP, stock relatively trades at attractive valuation on replacement basis. Moreover, due to the valuationof its franchisee rights in Chennai Super King, we maintain Buy for price target of INR 110.

    Shree Cement Ltd. (SCL)

    Valuation and OutlookWe expect Shree Cement to report de-growth of 6% on sequential basis and its EBITDA/ton is expected at 1050-1100/ton. While

    realisation and margin from its Cement division is expected to remain under pressure due to higher input cost, we expect betterrealisation from its Power segment would partly off-set the negativity of its cement business. Hold for price target of 1950.

    CementCement companies are expected to report marginally better number this quarter on the back of higher realisation. However,gain from higher realisation would partially be off set by low production and higher raw material cost and fuel. Recent hike indiesel prices would have negative impact on the bottom line of cement companies and would get reflected from Q2FY12. Due to

    timely and good onset of monsoon this year, pace of infrastructure development activities would also slow down, so we keepcautious approach on the sector.

    However, from valuation perspectives, our preferred pick remains, Shree Cement and India Cement.

    CMP: 1785 Hold

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 10,059 9,445 10,701 6.5 (6.0) NA NA

    Operating Expenses 7,484 6,553 7,719 14.2 (3.0) NA NA

    EBITDA 2,575 2,892 2,982 (11.0) (13.7) NA NA

    EBITDA (%) 25.6 30.6 27.9 -502 bps -227 bps NA NA

    Reported PAT 835 1,059 657 (21.2) 27.0 NA NA

    PAT (%) 8.3 11.2 6.1 -292 bps 216 bps NA NA

    EPS 24.0 30.4 18.87 (21.2) 27.0 NA NA

    Market Cap: 62,184 P/E (FY12E): 22.0

    *Standalone financials

    CMP: 71 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 10,356 8,807 10,279 17.6 0.7 10,113 2.4

    Operating Expenses 8,720 7,785 8,469 12.0 3.0 8,444 3.3

    EBITDA 1,636 1,022 1,810 60.2 (9.6) 1,669 (2.0)

    EBITDA (%) 15.8 11.6 17.6 420 bps -181 bps 16.5 -70 bpsReported PAT 425 250 553 70.0 (23.2) 458 (7.3)

    PAT (%) 4.1 2.8 5.4 126 bps -128 bps 4.5 -43 bps

    EPS 1.4 0.8 1.799 70.0 (23.5) 0.9 53.0

    Market Cap: 21,717 P/E (FY12E): 12.6

    * Standalone Financials

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    Oil & GasCrude oil prices have increased from USD 95 per barrel at the beginning of the quarter to USD 115 per barrel currently on the

    back of tensions rising in the Middle East. As per a Reuters survey, Libya's production posted the largest drop in OPEC of 1.03

    million barrels per day (bpd) in March, to average 320,000 bpd. Until violence broke out earlier this year, output had been

    running at a normal rate near 1.6 million bpd. Supply also fell in Nigeria in March, because of field maintenance, the surveyshowed. Saudi Arabia, the United Arab Emirates and Kuwait have boosted production in March, helping to make up for supply

    ost due to violence in Libya. Supply from all 12 members of OPEC has averaged 29.13 million bpd this month, down from 29.43

    million bpd in February.

    Higher crude prices augur negative for the Indian oil PSUs, whose subsidy burden will increase. We expect crude prices to

    remain firm on the back of a continuing crisis in the Middle East. We remain positive on the upstream companies like ONGC and

    Cairn India and negative on the oil refining and marketing companies.

    Indraprastha Gas Ltd. (IGL)

    Valuation and OutlookIGL has guided for a volume growth of 20% to 25% for FY12 along with a capex of INR 20 bn over the next three years. IGL plansto spend this amount to expand the infrastructure for compressed natural gas (CNG) and piped natural gas (PNG). Given thehigher valuation, maintain price target of INR 390.

    CMP: 376 Hold(INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 5,566 3,350 5,093 66.2 9.3 5,439 2.3

    Operating Expenses 4,080 2,275 3,721 79.4 9.7 3,993 2.2

    EBITDA 1,486 1,075 1,372 38.3 8.3 1,446 2.8

    EBITDA (%) 26.7 32.1 26.9 -539 bps -24 bps 26.6 11 bps

    Reported PAT 735 571 692 28.7 6.2 704 4.4

    PAT (%) 13.2 17.0 13.6 -384 bps -39 bps 12.9 26 bps

    EPS 5.3 4.1 4.94 28.7 6.3 6.0 (12.5)

    Market Cap: 52,633 P/E (FY12E): 17.7

    * Standalone Financials

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    Gujarat State Petronet Ltd (GSPL)

    Valuation and OutlookGSPL, Gujarat based company, has a gas pipeline network of 1,900kms in the state. Company aims to invest ~INR 12-15bn overFY13e to expand its footprint in the state. Recently a consortium led by GSPL (52%) won two bids for cross-country pipelinesenabling it to expand its operations. These are a) AP to Rajasthan 1,688kms and b) Gujarat to Punjab 1,611kms. These incrementalcapacity would add to its top-line from 1QFY15. Considering expected new business on the back of higher demand of gas andGSPLs capex plan to capture the opportunity, maintain Buy for Price target of INR 125.

    CMP: 88 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg VarianceRevenue from Operations 2,629 2,518 2,551 4.4 3.1 2,703 (2.7)

    Operating Expenses 200 (27) 225 (840.1) (11.2) 166 20.4

    EBITDA 2,429 2,545 2,326 (4.5) 4.4 2,537 (4.2)

    EBITDA (%) 92.4 101.1 91.2 -867 bps 122 bps 93.9 -146 bps

    Reported PAT 1,191 1,051 1506 13.3 (20.9) 1,205 (1.2)

    PAT (%) 45.3 41.7 59.0 356 bps -1374 bps 44.6 72 bps

    EPS 2.1 1.9 2.68 13.3 (20.9) 2.1 (1.2)

    Market Cap: 49,507 P/E (FY12E): 15.7

    * Standalone Financials

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    Power

    We are Neutral on the sector given the delays in setting up capacity. Shortage of fuel and environmental clearances remain amajor concern for the sector. Imported coal blending in existing plants are facing limitations - technically and due to inflationary

    concerns and this may lead to lower PLFs despite capacity addition. The power ancillary companies are expected to post robustearnings on the back of strong order book. However new order inflows for these companies remains slow. Powergrid (PGCIL) isexpected to come out with large tenders in CY11 as it goes in for capacity expansion. We expect transmission & distribution EPCcompanies to do well on the back of expected PGCIL & SEB contracts but competition will remain strong. The investment by thecentral transmission company are on track to achieve their 11th plan targets.

    Our top picks are CESC Ltd, KEC International and Diamond Power Infrastructure.

    BGR Energy Systems Ltd (BGR)

    Valuation & OutlookIssues related to environmental clearances and coal linkage which could delay the award process could potentially strain rev-enue growth and visibility in FY13E. Furthermore, increased competition in the BoP as well as BTG space may have a negativempact on margins. Key upside triggers for the stock would be a positive outcome on the Rajasthan project as well as the NTPC

    bulk tender decision in BGRLs favor.Though the stock has corrected sharply, sustained order inflows in FY12 could re-rate thestock. Recommend Accumulate with a price target of INR 528.

    CMP: 459 459 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 11,067 9,067 14,616 22.1 (24.3) 10,315 7.3

    Operating Expenses 9,789 8,029 12,943 21.9 (24.4) 9,170 6.7

    EBITDA 1,278 1,038 1,674 23.2 (23.6) 1,145 11.6

    EBITDA (%) 11.6 11.4 11.5 11 bps 10 bps 11.1 11 bps

    Reported PAT 719 605 984 18.8 (26.9) 653 10.2

    PAT (%) 6.5 6.7 6.7 -18 bps -23 bps 6.3 6 bps

    EPS 9.98 8.4 13.63 18.6 (26.8) 9.1 10.2

    Market Cap: 33098 33098 P/E (FY12E): 9.4x

    *Standalone Financials

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    Jyoti Structures Ltd

    Valuation & OutlookAs ordering activity from PGCIL gathers pace in FY12, Jyoti Structures Ltd (JSL) stands to benefit from this. The slowdown inorder inflows has weighed heavily on the stock. However as order inflows increase we could see the stock getting re-rated. Thecurrent order book stands at INR 45 bn which is 1.8x its FY11 sales, thus providing good revenue visibility for FY12. We maintainour Buy rating on the stock with a target price of INR 116.

    Diamond Power Infrastructure Ltd (DPIL)

    Valuation & OutlookDiamond Powers foray in Transmission and Extra High Voltage segment will get a boost and the company would be able toeverage its presence by serving all segments of the T&D Industry. Order book position as on Q4FY11 stands at INR 14,000 mn

    which is 0.84x our FY12 revenue estimates. We expect order inflows to pick in FY12 on the back of high tender activity from PGCIL& SEBs. We maintain our Buy rating on the stock with a target of INR 234.

    CMP: 85 85 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 6,090 5,643 7,218 7.9 (15.6) NA NA

    Operating Expenses 5,396 5,004 6,378 7.8 (15.4) NA NA

    EBITDA 694 639 840 8.6 (17.4) NA NA

    EBITDA (%) 11.4 11.3 11.6 7 bps -24 bps NA NA

    Reported PAT 280 263 350 6.4 (20.0) NA NA

    PAT (%) 4.6 4.7 4.8 -7 bps -25 bps NA NA

    EPS 3.41 3.2 4.27 6.4 (20.0) NA NA

    Market Cap: 6975 6975 P/E (FY12E): 5.8x

    * Consolidated Financials

    CMP: 160 160 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,669 3,816 3,424 (3.9) 7.2 NA NA

    Operating Expenses 3,162 3,270 2,956 (3.3) 7.0 NA NA

    EBITDA 506 546 468 (7.3) 8.3 NA NA

    EBITDA (%) 13.8 14.3 13.7 -51 bps 15 bps NA NA

    Reported PAT 279 312 252 (10.7) 10.8 NA NA

    PAT (%) 7.6 8.2 7.3 -58 bps 25 bps NA NA

    EPS 7.49 11.1 6.76 (32.7) 10.9 NA NA

    Market Cap: 5953 5953 P/E (FY12E): 5.5x

    * Consolidated Financials

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    Adani Power Ltd (Adani)

    Valuation & Outlook

    Adani Power is currently implementing 16,500 MW of power generation projects across different locations in India. With thecommissioning of new units at the Mundra Power plant Adani's project execution remains on track and we can see high earningsgrowth visibility. Having access to mines in Indonesia, the company has better control on cost and supply of fuel and is betterpoised as compared to its peers. The average PPA sell for the company is about 70-75%, and balance goes to merchant. This givesan assurance of a steady cash flow for the future. We recommend Accumulate with a price target of INR 124.

    Tata Power Ltd

    Valuation & OutlookThe company plans to install over 2,600MW of generation capacity from thermal power in FY12 which will be coming from theMundra UMPP (1,600MW) and Maithon (1,050MW) plants. With all its projects progressing well on scheduled, the company'sgrowth is expected to remain strong in FY12. The company could face resistance in securing coal at a fixed rate from Indonesia forMundra units due to possible law changes in Indonesia. This would be an overhang on the stock. The commissioning of Maithonand Mundra power plants and increasing coal prices will be the key triggers for the stock to move up. We maintain Hold with aprice target of INR 1367.

    CMP: 110 110 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 10,649 3,531 8,556 201.6 24.5 12,277 (13.3)

    Operating Expenses 4,366 1,399 3,431 212.0 27.3 4,494 (2.8)

    EBITDA 6,283 2,132 5,125 194.7 22.6 7,783 (19.3)

    EBITDA (%) 59.0 60.4 59.9 -138 bps -90 bps 63.4 -439 bps

    Reported PAT 2,130 1,145 1,743 86.0 22.2 4,448 (52.1)

    PAT (%) 20.0 32.4 20.4 -1242 bps -37 bps 36.2 -1623 bps

    EPS 0.98 0.5 0.8 84.3 22.1 2.0 (52.1)

    Market Cap: 239804 239804 P/E (FY12E): 7.9x

    * Standalone Financials

    CMP: 1283 1283 Hold(INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Dev (%)

    Revenue from Operations 58,726 51,848 50,155 13.3 17.1 55,434 5.9

    Operating Expenses 44,045 41,964 36,584 5.0 20.4 41,684 5.7

    EBITDA 14,682 9,885 13,570 48.5 8.2 13,750 6.8

    EBITDA (%) 25.0 19.1 27.1 594 bps -206 bps 25.0 0 bps

    Reported PAT 6,166 3,536 6,307 74.4 (2.2) 4,940 24.8

    PAT (%) 10.5 6.8 12.6 368 bps -207 bps 8.9 18 bps

    EPS 22.88 13.1 26.68 74.4 (14.2) 20.8 10.0

    Market Cap: 304465 304465 P/E (FY12E): 13.5x

    * Consolidated Financials

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    Thermax Ltd

    Valuation & OutlookThere seems to be a slowdown in the independent power producer segment, despite all the perceived action on setting up newprojects in the power sector. Orders from this segment may improve, especially since the company has entered into a jointventure with Babcock and Wilcox to make supercritical boilers. This will add to revenue only from FY13. According to themanagement, the company will rely on businesses like water, chemicals, and cooling, for incremental orders that will compensatefor any lack of traction from the infrastructure side. The pace of order inflows and reduction of cost pressures going forwardwould be critical to Thermaxs further profitability. We recommend Hold with a revised target of INR 648.

    CESC Ltd

    Valuation & OutlookThe company would be aggressively scouting for coal equity and linkages both in domestic and overseas market. It expects tomport two million tonnes of coal per annum from South Africa for the next 20 years to begin from 2014. CESC is also looking tobid aggressively when auction of coal blocks by the Centre comes through in the next one year. Stake sale in its subsidiariesSpencers and Haldia Energy) is expected soon. The company was expected to sell anywhere between 15% and 25% in Spencers

    and Haldia Energy to part finance its expansion. The management has said that its operations of Spencer's are likely to break evenafter 18-21 months. This however is contingent upon adding trading areas, which in turn, is dependent upon developers complet-ng their projects on time. This turnaround in its retail business remains a key catalyst for the price to move up. We remain

    positive on the companys power business and recommend Buy with a price target of INR 411.

    CMP: 591 591 Hold

    (INR in Mn)

    ParticularsQ1FY12E

    Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 9,385 7,898 17,713 18.8 (47.0) 8,638 8.6

    Operating Expenses 8,328 6,938 15,762 20.0 (47.2) 7,636 9.1

    EBITDA 1,057 960 1,951 10.1 (45.8) 1,002 5.5

    EBITDA (%) 11.3 12.2 11.0 -89 bps 25 bps 11.6 -34 bps

    Reported PAT 713 662 1,265 7.8 (43.6) 700 1.9

    PAT (%) 7.6 8.4 7.1 -78 bps 46 bps 8.1 -50 bps

    EPS 5.99 5.6 10.62 7.9 (43.6) 5.9 1.9

    Market Cap: 70421 70421 P/E (FY12E): 16.4x

    * Standalone Financials

    CMP: 300 300 Buy

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 10,475 10,960 8,750 (4.4) 19.7 11,496 (8.9)

    Operating Expenses 7,752 8,400 6,290 (7.7) 23.2 8,719 (11.1)

    EBITDA 2,724 2,560 2,460 6.4 10.7 2,778 (1.9)

    EBITDA (%) 26.0 23.4 28.1 264 bps -211 bps 24.2 184 bps

    Reported PAT 1,236 1,100 1,120 12.4 10.4 1,271 (2.7)

    PAT (%) 11.8 10.0 12.8 176 bps -100 bps 11.1 74 bps

    EPS 9.89 8.8 8.95 12.3 10.5 10.2 (2.7)

    Market Cap: 37481 37481 P/E (FY12E): 7.5x* Standalone Financials

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    TVS Motors

    Valuation & OutlookTVS Motors is expected to perform well on the back of favorable product mix in the motorcycle segment along with higher volumen scooter segment down the line. The company is targeting for higher volumes in the premium segment where margins are better

    compared to the economy segment. The company plans to launch a new 125cc motorcycle in Q4FY12 which may increase thevolume going forward. The Indonesian business of the company may take some time for a significant contribution to the bottom-ine. At CMP the stock is trading at PE of 10.5x its FY12e earnings. We recommend HOLD with a price target of INR 58.

    Metals / Mining

    Tata Steel Ltd

    Valuation & OutlookTATA steel's steady focus towards strategic product mix with continuous stride to deleverage the balancesheet made it attractiveDemand for the Steel industry was quite robust for the last quarter which is expected to remain intact for H1FY12 but slowdownn the Europe could hamper the operation of Corus To mitigate the risk of de-growth the company has initiated product restruc-

    turing to cater high value market. Further in the recent past, Tata Steel has initiated various new investment and divestment planwith debt restructuring. With expectation of high growth in the auto sector the company is targeting to increase delivery of Auto

    grade steel by 20% to 1.2 mn tonnes for FY12. The recent decision of 27% stake sales in Riversdale and low cost debt raises willresult in high cash flow which will help company to ride over the margin pressure. At an EV/EBIDTA of 5.5x on FY12e, the stocks attractively priced considering the future growth plan Indian operation and streamlining of the European operation. At CMP

    the stock is trading at EV/EBITDA of 6.5x of its FY12e. We remain positive on the stock with a price target of 690.

    CMP: INR 602

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 301,450 270,101 334,427 11.6 -9.9 267,694 13

    Operating Expenses 254,665 225,775 289,766 12.8 -12.1 220,274 16

    EBITDA 46,785 44,326 44,661 5.5 4.8 47,420 (1)

    EBITDA (%) 15.5 16.4 13.4 -89 bps 217 bps 17.7 (12)

    Reported PAT 17,350 18,253 41,756 -4.9 -58.4 17,674 (2)

    PAT (%) 5.8 6.8 12.5 -100 bps -673 bps 6.6 (13)

    EPS 18.1 20.6 46 -12.1 -60.7 19 (7)

    Market Cap: 577,063

    * Consolidated Financials

    BUY

    (INR in Mn)

    P/E (FY12E): 8.3x

    CMP: INR 53

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 18,673 13,696 16,046 36.3 16.4 16,275 15

    Operating Expenses 17,395 12,659 15,134 37.4 14.9 15,448 13

    EBITDA 1,278 1,037 913 23.2 40.1 827 55

    EBITDA (%) 6.8 7.6 5.7 -73 bps 116 bps 5.1 35

    Reported PAT 563 404 417 39.4 35.1 469 20

    PAT (%) 3.0 2.9 2.6 7 bps 42 bps 2.9 5

    EPS 1.2 0.9 1 40.0 35.2 1 20

    Market Cap: 25,251

    * Standalone Financials

    (INR in Mn)

    P/E (FY12E): 11.2x

    HOLD

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    JSW Steel Ltd (JSW)

    Valuation & OutlookThe recent brown field expansion at Vijaynagar plant has positioned JSW steel as the largest player in the domestic market withcurrent total capacity of 10 MTPA. The management had guided for a volume of ~ +9 mn tones for FY12 which would be anaggressive plan in term of number as well as volume. With major concentration in the domestic market with value addedproducts and JSW Shoppe the company is expected to perform strong volume in FY12 but margins would be pressurize forQ1FY12 due to high raw material prices. Moreover, the takeover of ISPAT industries is expected to provide synergy to the growthstory. The material sourcing remains a concern for the company going forward, as mere ~25% of the raw material materialrequirement (during full capacity utilization) would be met captively. Thus JSW is continuously striving for new mine acquisi-tion as well as value added products to mitigate the raw material price volatility(Prices of iron ore continue to remain firm, whilecoking coal price contracts for 1QFY2012 have been signed at US$330/tonne). At CMP of INR 874 the stock is trading at EV/EBITDA

    of 6.7x of its FY12e. Considering the huge expansion plan we remain bullish on the stock with a price target of INR 970.

    Adhunik Metaliks Ltd

    Valuation & OutlookAdhunik Metaliks plan for backward integration got hampered due to delay in the environmental clearance(still pending) for itsSuleipat iron ore mine & Keonjhar in Orissa which was expected to commence commercial operations in Q1FY12. Considering

    market scenario, Adhunik Metaliks has shifted its major focus to the mining segment OMML (Orissa Minerals & Manganese Ltd.100% wholly owned subsidiary) which has the second largest manganese ore reserve in India with merchant license. Thecompanys strategic plan to concentrate on cost reduction in Steel business through beneficiation and pelletisation along withmajor focus in high profitable business of mining is expected to provide better margin down the line with rapid increase in theron & manganese ore prices. At CMP the stock is trading at EV/EBITDA of 6.2x its FY12e. We recommend BUY on the stock with

    a price target of INR 120.

    CMP: INR 874

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 89,275 48,180 72,094 85.3 23.8 NA NA

    Operating Expenses 70,805 37,396 55,474 89.3 27.6 NA NA

    EBITDA 18,470 10,784 16,620 71.3 11.1 NA NA

    EBITDA (%) 20.7 22.4 23.1 -169 bps -236 bps NA NA

    Reported PAT 8,395 2,954 7,936 184.2 5.8 NA NA

    PAT (%) 9.4 6.1 11.0 327 bps -160 bps NA NA

    EPS 37.6 15.4 36 144.8 5.7 NA NA

    Market Cap: 194,915

    * Consolidated Financials

    P/E (FY12E): 6.5x

    ACCUMULATE

    (INR in Mn)

    CMP: INR 82

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 5,374 4,284 5,513 25.4 -2.5 5,113 5

    Operating Expenses 3,769 2,716 3,882 38.7 -2.9 3,525 7

    EBITDA 1,605 1,568 1,631 2.4 -1.6 1,588 1

    EBITDA (%) 29.9 36.6 29.6 -673 bps 28 bps 31.1 (4)Reported PAT 527 564 374 -6.6 40.8 545 (3)

    PAT (%) 9.8 13.2 6.8 -336 bps 302 bps 10.7 (8)

    EPS 4.3 4.6 3 -6.6 40.9 4 (3)

    Market Cap: 10,133

    * Consolidated Financials

    P/E (FY12E): 4.8x

    BUY

    (INR in Mn)

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    VISA Steel

    Valuation & OutlookVisa Steel, a part of the VISA group has strategically planned to get in to forward integration to cater value added products wheremargin remains to be at high compared to the crude steel.The recent commencement of the 0.5 MTPA of SMS (Steel Melt Shop) plantand 0.5 MTPA of Bar & Wire rod Mills (expect to commence in Q3FY12) would add value to the bottomline. The higher realizationwith better margin in upcoming products i.e. Billets and Rolled products compared to the current product lines (Sponge iron &Pig iron) will drive the growth of the company. Moreover VISAs JV with China's Baosteel which is expected to commence fromMarch 2012 will further drive the growth story. At CMP of INR 58 stock is trading EV/EBITDA of 6x and 3.8x of its FY12e & FY13erespectively. We recommend BUY on the stock with a price target of INR 75.

    Valuation & OutlookHindalco has undergone huge expansion both internationally and domestically in the recent past. The company is doubling itsdomestic aluminum smelting capacity to 1.29MTPA (current 5LTPA), and tripling its domestic refining capacity to 4.5MTPAcurrent 1.5MTPA). This expansion is likely to be completed by FY15 in a phased manner at a cost of ~INR 436 bn. By FY12 the

    company is likely to see a smelting capacity of 917,000 TPA. It is also expanding its global operations by increasing Noveliscapacity from the current 3MTPA to 4MTPA. This is likely to be commissioned in a phased manner by FY16 at a cost of $1.5bn.Thusthe company is likely to post robust numbers going ahead on the back of strong volume growth. However the continuous delay

    n the Utkal refinery project and the lack of visibility with respect to the Mahan coal block has setback the domestic growth pathof the company. The Utkal refinery is rescheduled to be operational by Q2FY12 which will result in delaying alumina supply tothe Mahan smelter. By 2016, when all the projects of the company come on-stream, the company will be one of the lowest costproducers of the aluminium. Considering all these expansion along with continuous rise in the product price realization we feelthe stock to do well going forward. We recommend BUY on the stock with a price target of INR 193.

    Hindalco Industries Ltd.

    CMP: INR 59

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 4,850 2,205 4,240 119.9 14.4 NA NA

    Operating Expenses 4,121 1,800 3,490 129.0 18.1 NA NA

    EBITDA 729 405 750 79.8 -2.9 NA NA

    EBITDA (%) 15.0 18.4 17.7 -336 bps -267 bps NA NA

    Reported PAT 242 76 231 217.4 4.7 NA NA

    PAT (%) 5.0 3.5 5.5 153 bps -46 bps NA NA

    EPS 2.2 0.7 2 218.8 4.8 NA NA

    Market Cap: 6,490

    * Consolidated Financials

    P/E (FY12E): 5.4x

    BUY

    (INR in Mn)

    CMP: INR 182

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 91,506 51,455 67,608 77.8 35.3 98,203 (7)

    Operating Expenses 80,608 43,130 58,463 86.9 37.9 89,071 (10)

    EBITDA 10,898 8,325 9,145 30.9 19.2 9,132 19

    EBITDA (%) 11.9 16.2 13.5 -427 bps -162 bps 9.3 28

    Reported PAT 6,746 5,344 7,084 26.2 -4.8 7,236 (7)

    PAT (%) 7.4 10.4 10.5 -301 bps -311 bps 7.4 0

    EPS 3.5 2.8 4 26.2 -4.9 4 (1)

    Market Cap: 348,520

    * Standalone Financials

    P/E (FY12E): 12.9x

    (INR in Mn)

    BUY

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    Valuation & OutlookBeing the largest domestic player in the iron ore mining, NMDC is least prone to the current iron ore price softening in the market.Prices of iron ore have declined slightly in the last two months on the back of higher supplies of iron ore from Australian part andexpected deceleration in the steel production. As NMDCs most of the sales are done in the domestic market where the iron oreprices are floating below the international prices it would have less impact to the companys financials going forward. Howeverwe feel that there would not be much growth in the volume due to the Naxal activities in few of its mining region. Considering allthis scenario we expect companys margin to be shrink in the near future. The stock is currently trading at 7.7x & 7.1x of its FY12e& FY13e respectively. We recommend HOLD on the stock with a price target of INR 240.

    NMDC

    CMP: INR 259

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 34,729 25,180 37,698 37.9 -7.9 NA NA

    Operating Expenses 8,889 4,669 10,307 90.4 -13.8 NA NA

    EBITDA 25,840 20,511 27,390 26.0 -5.7 NA NA

    EBITDA (%) 74.4 81.5 72.7 -705 bps 175 bps NA NA

    Reported PAT 19,326 15,040 20,986 28.5 -7.9 NA NA

    PAT (%) 55.6 59.7 55.7 -408 bps -2 bps NA NA

    EPS 4.9 3.8 5 28.5 -7.9 NA NA

    Market Cap: 1,026,463

    * Consolidated Financials

    (INR in Mn)

    P/E (FY12E): 13.3x

    HOLD

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    Banking

    The credit growth of ~24% witnessed in FY11 is likely to slowdown in FY12 due to high interest rate regime. However, we believethat the interest rates are near its peak levels as most of the commodity prices have already started to correct which would lead

    to softer inflation. Thus banking industry is expected to register a credit growth of approx. 18%. This growth will be primarily ledby non-infra & retail loan book which has higher risk to asset quality of banks & can lead to higher provisioning affecting theprofitability. Public sector banks are more vulnerable given the asset quality concerns as compared to private sector banks.Growth in deposits which has been lagging till now will see a revival going forward, due to recent SB & FD rate hikes.This alongwith more focus on branch expansion will help the banks in garnering more CASA, and maintain its NIMs.The Bank Nifty Index has corrected by 3.8% since April 2011 till date pricing in the near term challenges and expected dip inearnings due to lower GDP forecast. However, the correction in public sector banks especially mid cap psus was more than theprivate sector banks. We remain positive on selective banks which have a) robust deposit franchise, b) diversified loan book &growth visibility, c) healthy capital adequacy and d) comfortable valuation. Our preferred picks are 1) Axis Bank 2) IDBI Bank 3)YES Bank 4) Indian Bank

    State Bank of India (SBI)

    Valuation & OutlookBank has guided the loan growth of 17-18% medium term; NIMs could pick up from here on (management guided to 3.5% NIM inFY12); cost efficiency should improve as much of the pain has already been taken. However, there are still questions on assetquality slippages, management suggests, will provide for it more aggressively than in recent past. We believe next 2-3 quarterswe are likely to see some pressures on the stock. However, with much of the pain behind us, we would look to accumulate onfurther weakness for target price to INR 2777.

    CMP: 2,379 ACCUMULATE

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 238,935 184,521 217,214 29.5 10.0 NA NA

    Interest Expense 147,564 111,484 136,633 32.4 8.0 NA NA

    Net Interest Income 91,371 73,037 80,581 25.1 13.4 NA NA

    Operating Profit 88,013 61,344 60,797 43.5 44.8 NA NA

    Operating Profit (%) 36.8 33.2 28.0 11 bps 32 bps NA NA

    Reported PAT 30,984 29,142 208 6.3 14796.2 NA NA

    PAT (%) 12.9 15.7 0.1 -280 bps 1280 bps NA NA

    EPS 48.79 45.90 0.33 6.30 14684.85 NA NA

    Market Cap: 1,510,663

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 2.0x

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    Union Bank of India

    Valuation & OutlookUnion Bank of India is expected to grow deposits & credit ~20% & ~22% in FY12E respectively and fee-based income in line withthe loan-book thus overall profitability should be up by 22% in FY12E. Going forward margins are likely to witness somepressure, largely in line with the industry trend. On the other hand, we expect slippages to remain elevated in the coming fewquarters due to migration to system based NPL recognition method. We have BUY rating on stock for the price target of INR 405.

    Outlook & ValuationHDFC Bank, going forward is expected to keep ~22% of credit growth & also expected to maintain the CASA ratio at ~50%. On backof continuous growth momentum, strong business & credit growth, improvement in asset quality & strong capital adequacyHDFC bank commands a premeium in its valuations. We have HOLD rating on the stock for a target price of INR 2565 next 12-18months.

    HDFC Bank

    CMP: 298 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 49,845 36,857 46,153 35.2 8.0 NA NA

    Interest Expense 31,886 23,376 28,987 36.4 10.0 NA NA

    Net Interest Income 17,959 13,480 17,165 33.2 4.6 NA NA

    Operating Profit 10,996 10,437 8,695 5.4 26.5 NA NA

    Operating Profit (%) 22.1 28.3 18.8 -626 bps 322 bps NA NA

    Reported PAT 6,771 6,014 5,976 12.6 13.3 NA NA

    PAT (%) 13.6 16.3 13.0 -274 bps 63 bps NA NA

    EPS 10.66 11.91 9.41 -10.50 13.28 NA NA

    Market Cap: 156,251

    * Standalone Financials

    P/BV (FY12E): 1.2x

    (INR in Mn)

    CMP: 2,489 HOLD

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 59,060 44,202 54,686 33.6 8.0 NA NA

    Interest Expense 28,131 20,190 26,291 39.3 7.0 NA NA

    Net Interest Income 30,929 24,011 28,395 28.8 8.9 NA NA

    Operating Profit 23,388 17,487 20,969 33.7 11.5 NA NA

    Operating Profit (%) 39.6 39.6 38.3 4 bps 126 bps NA NA

    Reported PAT 12,800 8,117 11,147 57.7 14.8 NA NA

    PAT (%) 21.7 18.4 20.4 331 bps 129 bps NA NA

    EPS 27.52 17.66 23.96 55.83 14.86 NA NA

    Market Cap: 1,157,947

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 4.0x

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    Valuation & OutlookThe management has maintained its strategy of slower loan book growth, in favour of a higher CASA share and higher NIMs &ndicated to take branch network to about 1100 by end of FY12. While the present 810 branches are predominantly urban-

    concentrated (67%), the bank intends to increase its presence in semi-urban areas going forward. We believe this would continueto increase the contribution of retail deposits in the banks funding mix and drive strong CASA. In wake of lower NIMs, the bankhas indicated a strategy of lower advances growth (~15% for FY12) than the system to concentrate on increasing the percentageof low-cost CASA deposits and consciously shifting focus from large corporate lending to retail and MSME lending to bring inhigher-yielding loans. In our view, IDBI will return to growth trajectory over medium to long period as it has now strategicallyopted for low business growth and improving performance. This would enable the bank to bring its perormance in line withndustry average. We value the stock at 1.2x and maintain BUY recommendation with a price target of INR 196.

    IDBI Bank

    United Bank of India

    Outlook & valuationUnited Bank of India (UBI) to focus on MSME and agriculture sector and to expand its product suite and services resulting in ahealthy bottom line growth in FY12E. Bank to foray into merchant banking & loan syndication business which will help it toncrease its fee income. However, RBI's policy measures are likely to affect the bank's margins going ahead. We maintain our BUY

    rating on the stock for a target price of INR 131.

    CMP: 132 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Interest Income 56,281 42,890 50,251 31.2 12.0 NA NA

    Interest Expense 42,691 34,378 39,166 24.2 9.0 NA NA

    Net Interest Income 13,591 8,512 11,085 59.7 22.6 NA NA

    Operating Profit 13,643 8,312 11,668 64.1 16.9 NA NA

    Operating Profit (%) 21.3 17.5 20.4 382 bps 90 bps NA NA

    Reported PAT 5,468 2,509 5,162 117.9 5.9 NA NA

    PAT (%) 8.5 5.3 9.1 326 bps -54 bps NA NA

    EPS 5.55 3.46 5.24 60.40 5.92 NA NA

    Market Cap: 129,963

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 0.8x

    CMP: 95 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 19,087 14,372 17,674 32.8 8.0 NA NA

    Interest Expense 12,939 9,287 11,926 39.3 8.5 NA NA

    Net Interest Income 6,148 5,086 5,748 20.9 7.0 NA NA

    Operating Profit 4,576 3,407 4,250 34.3 7.7 NA NA

    Operating Profit (%) 21.4 21.9 21.4 -48 bps -1 bps NA NA

    Reported PAT 1,840 1,079 1,432 70.5 28.5 NA NA

    PAT (%) 8.6 6.9 7.2 168 bps 139 bps NA NA

    EPS 5.34 3.41 4.16 56.60 28.37 NA NA

    Market Cap: 32,720

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 0.8x

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    Axis Bank

    Outook & ValuationAxis bank (Axis) is targeting a credit growth of ~30% in FY12, much higher than 20% system growth anticipated by RBI. On backof branch expansion (250 branches in FY12) the cost-income ratio is expected to gradually move up to 44-45%. In tighter monetarypolicy regime banks NIMs are cushioned with higher CASA ratio. We remain positive on the bank, owing to its attractive CASAfranchise, rapid branch expansion, and multiple sources of sustainable fee income, strong growth outlook. We have BUY rating onthe stock for a target price of INR 1580.

    Allahabad Bank (ALBK)

    Valuation & OutlookAllahabad Bank is in a strong growth trajectory with strong distribution network and vast customer base in CASA-rich states.This provides significant business opportunities in the current rising interest rate scenario. This along with a balanced loanportfolio and high proportion of low-cost funds would help the bank earn better margins compared with other public sectorbanks. The stock trades at 0.9x of its FY12E BV. Maintaining asset quality would be a key challenge for the bank going ahead, butcheap valuations offer a good buying opportunity. We maintain BUY rating on the stock for target price of INR 304.

    CMP: 1,293 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 45,850 33,256 43,667 37.9 5.0 NA NA

    Interest Expense 27,723 18,118 26,657 53.0 4.0 NA NA

    Net Interest Income 18,127 15,138 17,010 19.7 6.6 NA NA

    Operating Profit 19,711 14,825 18,208 33.0 8.3 NA NA

    Operating Profit (%) 43.0 44.6 41.7 -159 bps 129 bps NA NA

    Reported PAT 10,484 7,743 10,201 35.4 2.8 NA NA

    PAT (%) 22.9 23.3 23.4 -41 bps -49 bps NA NA

    EPS 25.55 19.01 24.85 34.42 2.83 NA NA

    Market Cap: 530,836

    * Standalone Financials

    P/BV (FY12E): 2.4x

    (INR in Mn)

    CMP: 196 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 33,988 24,031 31,182 41.4 9.0 NA NA

    Interest Expense 21,253 15,528 19,679 36.9 8.0 NA NA

    Net Interest Income 12,735 8,503 11,503 49.8 10.7 NA NA

    Operating Profit 10,518 7,046 7,791 49.3 35.0 NA NA

    Operating Profit (%) 31.0 29.3 25.0 163 bps 597 bps NA NA

    Reported PAT 4,430 3,471 2,567 27.6 72.6 NA NA

    PAT (%) 13.0 14.4 8.2 -141 bps 480 bps NA NA

    EPS 9.92 7.77 5.39 27.67 84.04 NA NA

    Market Cap: 93,338

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 0.8x

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    Corporation Bank

    Valuation & OutlookCorporation Bank is improving interms of its business. We expect credit growth of ~24% in FY12E. Margin improvement is goingto be a challenge in increasing interest rate cycle; however, margins are likely to be cushioned with higher CASA ratio of ~27% inFY12E. We have BUY rating on the stock for a target of INR 709.

    YES Bank

    Valuation & OutlookYES Bank has been able to register strong business growth, profitability with stable margins & strong asset quality. Additionallythe bank is expanding ~125 branches every year, which would help to improve its CASA ratio to 15% in FY12E. We remainpositive on long term prospects of the bank. We maintain BUY rating on the stock for target price of INR 419.

    CMP: 312 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Interest Income 13,326 7,392 12,226 80.3 9.0 NA NA

    Interest Expense 9,484 4,771 8,741 98.8 8.5 NA NA

    Net Interest Income 3,842 2,621 3,485 46.6 10.2 NA NA

    Operating Profit 3,976 2,490 3,488 59.7 14.0 NA NA

    Operating Profit (%) 29.8 33.7 28.5 -384 bps 131 bps NA NA

    Reported PAT 2,311 1,564 2,034 47.8 13.6 NA NA

    PAT (%) 17.3 21.2 16.6 -381 bps 71 bps NA NA

    EPS 6.65 4.59 5.86 44.88 13.48 NA NA

    Market Cap: 108,310* Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 2.3x

    CMP: 531 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 27,598 20,278 25,554 36.1 8.0 NA NA

    Interest Expense 19,370 13,302 17,936 45.6 8.0 NA NA

    Net Interest Income 7,868 6,976 7,618 12.8 3.3 NA NA

    Operating Profit 9,210 6,204 7,466 48.5 23.4 NA NA

    Operating Profit (%) 33.4 30.6 29.2 280 bps 420 bps NA NA

    Reported PAT 4,399 3,338 3,453 31.8 27.4 NA NA

    PAT (%) 15.9 16.5 13.5 -60 bps 240 bps NA NA

    EPS 29.70 23.30 23.30 27.47 27.47 NA NA

    Market Cap: 78,658

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 0.9x

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    Indusind Bank

    Outook & ValuationIndusind Bank is planning to increase its branch network thereby aiding growth in CASA ratio ~28-30%, which will help the bankncrease its NIMs ~3.5% further in FY12. Bank is expected to deliver healthy bottomline growth in FY12 and also to expand its

    product suite and services. We have ACCUMULATE rating on the stock with target price of INR 320.

    ICICI Bank

    Outlook & ValuationICICI Bank's growth in the past has been mainly retail-driven, the bank is now looking to grow its large corporate and SMEsegment loan book as well. Progress on the 4C strategy (CASA, capital conservation, cost control and credit charges) hascontinue to improve fundamentals. We have HOLD rating on the stock for a target price of INR 1193.

    CMP: 1,093 HOLD

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 76,574 58,125 71,565 31.7 7.0 NA NA

    Interest Expense 49,209 37,920 46,467 29.8 5.9 NA NA

    Net Interest Income 27,365 19,911 25,097 37.4 9.0 NA NA

    Operating Profit 24,846 21,881 23,049 13.6 7.8 NA NA

    Operating Profit (%) 32.5 37.6 32.2 -519 bps 24 bps NA NA

    Reported PAT 15,559 10,260 14,521 51.6 7.1 NA NA

    PAT (%) 20.3 17.7 20.3 267 bps 3 bps NA NA

    EPS 13.51 10.00 12.61 35.10 7.14 NA NA

    Market Cap: 32,247* Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 2.2x

    CMP: 275 ACCUMULATE

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 11,537 7,715 10,488 49.5 10.0 NA NA

    Interest Expense 7,401 4,759 6,608 55.5 12.0 NA NA

    Net Interest Income 4,137 2,957 3,881 39.9 6.6 NA NA

    Operating Profit 3,282 2,306 2,980 42.3 10.1 NA NA

    Operating Profit (%) 28.5 29.9 28.4 -144 bps 3 bps NA NA

    Reported PAT 1,853 1,186 1,718 56.2 7.9 NA NA

    PAT (%) 16.1 15.4 16.4 69 bps -32 bps NA NA

    EPS 3.98 2.88 3.69 38.19 7.86 NA NA

    Market Cap: 128,088

    * Standalone Financials

    (INR in Mn)

    P/BV (FY12E): 2.9x

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    Indian Bank

    Outook & ValuationIndian Banks loan book is skewed towards high yielding segments such as SME, retail and agriculture, which form about 43% ofthe banks advances. As a result, despite having a moderate CASA ratio of 32%, the banks NIMs are the highest amongst its peerset at around 3.7% as compared to ~3.1% for its peers. Best in class NIMs coupled with sound asset quality and cost efficiencies hased to superior ROAs for the bank ~1.7%. Managements strategy of moderating growth with focus on margins & asset quality

    would be positive for the bank from long term perspective. We have BUY rating on the stock for target price of INR 275.

    CMP: 214 BUY

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Interest Income 28,017 21,218 25,942 32.0 8.0 NA NA

    Interest Expense 16,167 11,951 14,832 35.3 9.0 NA NA

    Net Interest Income 11,851 9,267 11,110 27.9 6.7 NA NA

    Operating Profit 9,803 8,378 9,030 17.0 8.6 NA NA

    Operating Profit (%) 24.6 27.5 24.4 -289 bps 22 bps NA NA

    Reported PAT 4,697 3,681 4,389 27.6 7.0 NA NA

    PAT (%) 11.8 12.1 11.8 -30 bps -6 bps NA NA

    EPS 10.93 8.57 10.21 27.54 7.05 NA NA

    Market Cap: 91,971

    * Standalone Financials

    P/BV (FY12E): 0.9x

    (INR in Mn)

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    Media and Entertainment

    The overall sentiment in media and entertainment industry are expected to remain positive in coming quarters. FMCG andconsumer durable companies are expected to increase there advertising budget to tab the rural market in lieu of good monsoon.

    Print media companies are expected to report robust ad revenue growth but could witness pressure on the cost side due tofirming up of newsprint prices and increasing competition. Broadcasting companies are expected to witness surge in theirsubscription revenue due to positive regulatory development towards digitization. For movie production companies, there hasbeen growing demand from broadcasters to acquire satellite rights for new movies helping then to de-risk and generate higheryields. As per FICCI-KPMG India, Media and Entertainment Industry is expected to grow at CAGR of 14% to reach INR 1275 bnn 2015 backed by growing media consumption and increasing penetration and growing digitization.

    Zee Entertainment Enterprises Ltd

    Valuation & OutlookWith increasing digitalization, growing penetration of DTH and increasing declaration with star zee deal is expected to acceleratesubscription revenue. ZEE TV remains in the top 3 channels in the GEC space which will help to garner better advertisingrevenue. Moreover, the losses in the sports business were limited to INR 152 mn against a loss of INR 1,030 mn in Q3FY11.However, company is planning to launch its golf sport channel in addition to re-branding exercise which can affect the marginsgoing forward. We recommend Accumulate on the stock with a price target of INR 160.

    CMP: 140 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 7,413 6,770 7,980 9.5 (7.1) 7,613 (2.6)Operating Expenses 5,397 4,900 5,711 10.2 (5.5) 5,485 (1.6)

    EBITDA 2,016 1,870 2,268 7.8 (11.1) 2,128 (5.3)

    EBITDA (%) 27 27.6 28.4 -43 bps -123 bps 28.0 28 bps

    Reported PAT 1,483 1463 1,882 1.4 (21.2) 1,607 (7.7)

    PAT (%) 20 21.6 23.6 -161 bps -359 bps 21.1 21 bps

    EPS 1.52 1.51 1.92 0.4 (21.0) 1.6 (7.7)

    Market Cap: 136920 P/E (FY12E): 20.7x

    * Consolidated Financials

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    D.B.Corp Ltd.

    Valuation & OutlookDB Corp flagship Hindi daily Dainik Bhaskar (DB) posted steady performance and maintained it second position with 14.1 mnAverage Issue Readership in Q12011. It maintained number one position in Chandigarh, Chattisgarh, and Haryana. With theaunch of its Marathi news paper DB corp has become the most regionally diversified print media company. The company focus

    continues to be on Tier II/ III cities, rather than the likes of Mumbai & Pune (large English markets) as they will be the drivers ofthe next phase of growth with improving literacy rate and strong economic growth (GDP) of the country. However the marginswill be affected due to the higher newsprint prices and launch expenses. We have accumulate rating on the stock with targetprice of INR 280.

    HT Media Ltd

    Valuation & OutlookHT Media continued with its strong performance in Hindi & English segments, outperforming peers. According to IRS Q1 2011,HTML Average Issue Readership (AIR) grew by ~3% QoQ basis. In Delhi, HT regained a growth of ~2% QoQ whereas The Timesof India (ToI) registered very marginal de-growth. In Mumbai, it registered 12% on QoQ basis maintaining its position. Hindidaily, Hindi Hindustan (HH) consolidated its leadership position in key market (Bihar-Jharkhand) market though competitionalso gained driven by cover price action across the market. HT Medias strong presence in key metros and diversified businessmodel with radio and internet segments make the company uniquely positioned in Indian media industry. We Hold on the stockwith a target price of INR 185.

    CMP: 236 Accumulate

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 3,489 2,987 3,174 16.8 9.9 3,315 5.2

    Operating Expenses 2,477 1,851 2,378 33.8 4.2 2,372 4.4

    EBITDA 1,012 1,136 796 (10.9) 27.1 943 7.3

    EBITDA (%) 29 38.0 25.1 -903 bps 392 bps 28.4 56 bps

    Reported PAT 628 695 450 (9.7) 39.6 536 17.2

    PAT (%) 18 23.3 14.2 -528 bps 382 bps 16.2 183 bps

    EPS 3.37 3.74 2.42 (9.7) 39.6 2.9 15.2

    Market Cap: 43920 P/E (FY12E): 16.6x

    * Consolidated Financials

    CMP: 169.8 Hold

    (INR in Mn)Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 5,128 4,042 4,704 26.9 9.0 5,056 1.4

    Operating Expenses 4,169 3,243 3,828 28.5 8.9 4,037 3.3

    EBITDA 959 799 876 20.0 9.4 1,019 (5.9)

    EBITDA (%) 19 19.8 18.6 -107 bps 8 bps 20.2 -145 bps

    Reported PAT 523 414 529 26.4 (1.2) 558 (6.3)

    PAT (%) 10 10.2 11.3 -4 bps -105 bps 11.0 -84 bps

    EPS 2.23 1.76 2.25 26.4 (1.2) 2.4 (6.3)

    Market Cap: 39903 P/E (FY12E): 18.2x

    * Consolidated Financials

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    35

    UTV Software Communications Ltd

    Valuation & OutlookUTV movie segment is expected to register a strong performance given the 10 movie slate in FY12, within the budget of INR 100mn to INR 450 mn. The company is planning to invest up to INR 5 bn this year to launch two new broad based channel whichcan put some pressure on the earnings. Moreover, games segment continues to see delays. We maintain hold on the stock atcurrent levels.

    Jagran Prakashan Ltd

    Valuation & Outlook

    Dainik Jagran the flagship newspaper of Jagran Prakashan Ltd (JPL) posted a decline of ~2% YoY basis in 2011Q1 IRS survey interms of Average Issue Readership (AIR). However, the fruits of the reinvestment which the company started in its core marketare expected to flow in coming IRS survey. Increase in the newsprint prices and print order is expected to affect the earningsgoing forward. We believe that the company is well placed to capture the high growth story in the existing Hindi/Regional printmarkets given its leadership position. We maintain BUY on the stock with a target price of INR 150.

    CMP: 813.5 Hold

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 3,215 2,082 2,427 54.4 32.5 3,321.0 (3.2)

    Operating Expenses 2,566 1,597 2,128 60.6 20.6 2,711.0 (5.4)

    EBITDA 649 485 300 33.8 116.7 610.0 6.5

    EBITDA (%) 20 23.3 12.3 -310 bps 786 bps 18.4 183 bps

    Reported PAT 418 412 141 1.5 196.0 445.0 (6.1)

    PAT (%) 13 19.8 5.8 -678 bps 718 bps 13.4 -40 bps

    EPS 10.29 10.15 3.48 1.5 196.0 11.0 (6.1)

    Market Cap: 33028 P/E (FY12E): 16.2x

    * Consolidated Financials

    CMP: 126 BUY

    (INR in Mn)

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg Variance

    Revenue from Operations 2,655 2,698 2,826 (1.6) (6.1) 2,988.0 (11.1)

    Operating Expenses 1,965 1,796 2,112 9.4 (7.0) 2,109.0 (6.8)

    EBITDA 690 902 714 (23.4) (3.3) 879.0 (21.5)

    EBITDA (%) 26 33.4 25.3 -742 bps 73 bps 29.4 -342 bps

    Reported PAT 430 556 421 (22.6) 2.2 499.0 (13.8)

    PAT (%) 16 20.6 14.9 -441 bps 131 bps 16.7 -50 bps

    EPS 1.36 1.76 1.33 (22.6) 2.2 #DIV/0! #DIV/0!

    Market Cap: 39879 P/E (FY12E): 16.8x

    * Standalone Financials

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    Pharma

    The domestic pharmaceutical industry continues to grow at 11-12%, dwarfing the global average of five-six percent. Goodtraction in US, Japan and other developed markets along with product approvals and marketing alliances continue to bring

    traction in the sector. Strong domestic sales continue to act as a major catalyst in the growth of this sector. The quarter observedhealthy sales growth despite inflationary headwinds. The government has chalked a 'Vision 2015' statement for thepharmaceutical sector, which indicates an 18% plus CAGR over next five years- translating to a doubling of revenues to USD40bn. Growth will be driven by all verticals: domestic formulations, generics exports, and outsourcing (CRAMS). The governmenthas also announced an installation of venture fund to target the infusion of INR 20 bn into the sector.

    Aurobindo Pharma

    Valuation & OutlookAurobindo (APL) would continue to face pressure due to alert on US import and slowdown in Pfizer offtake. The company hasundertaken or transformation on its way of becoming a formulation player from a API manufacturer. Besides increase incapacities, strong ANDA pipeline and MNC deals (AstraZeneca) would support APL's growth trajectory. Stock is trading at7.9x its FY12E earnings. We downgrade the stock to ACCUMULATE with a reduced price target of INR 203.

    CMP: INR 178

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 11,908 9,223 11,544 29.1 3.2 NA NA

    Operating Expenses 9,277 7,505 9,000 23.6 3.1 NA NA

    EBITDA 2,632 1,717 2,544 53.2 3.4 NA NA

    EBITDA (%) 22.1 18.6 22.0 348 bps 6 bps NA NA

    Reported PAT 1,337 515 1,250 159.6 7.0 NA NA

    PAT (%) 11.2 5.6 10.8 564 bps 40 bps NA NA

    EPS 4.6 1.6 4.3 187.4 7.0 NA NA

    Market Cap: 51,800

    * Consolidated Financials

    (INR in Mn)

    ACCUMULATE

    P/E (FY12E): 7.9x

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    Biocon Ltd

    Valuation & OutlookWe remain positive on Biocon considering the value unlocking of its R&D pipeline, possible deals in research services and strongdeal with Pfizer. We expect Biocon to post a strong revenue growth of ~16% till FY13E based on a growth of 18-20% till FY13E indomestic branded formulations. Launch of Pfizer products would further support revenues. Stock is trading at 17.1x its FY12Eearnings. We recommend ACCUMULATE with a long term price target of INR 409.

    Dr. Reddy's Lab

    Valuation & OutlookDr. Reddy's Lab is expected to post strong growth trajectory till FY13 with USD 3bn in revenue. The company would increase themarket share in backward integrated products in US market. DRL's growth would arrive from the strong pipeline of existingproducts, launch of limited competition products in US, strong traction in US, Indian & Russian formulation market andpotential upside from GSK alliance. Stock is trading at 18.2x its FY12E earnings. We recommend ACCUMULATE with a reducedprice target of INR 1770.

    CMP: INR 1561

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 20,657 16,831 20,173 22.7 2.4 NA NA

    Operating Expenses 16,127 13,416 15,785 20.2 2.2 NA NA

    EBITDA 4,530 3,415 4,388 32.6 3.2 NA NA

    EBITDA (%) 21.9 20.3 21.8 164 bps 18 bps NA NA

    Reported PAT 3,229 2,091 3,349 54.5 -3.6 NA NA

    PAT (%) 15.6 12.4 16.6 321 bps -97 bps NA NA

    EPS 19.1 12.4 19.8 54.0 -3.4 NA NA

    Market Cap: 264,080

    * Consolidated Financials

    P/E (FY12E): 18.2x

    ACCUMULATE

    (INR in Mn)

    CMP: INR 355

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 5,504 6,623 7,016 -16.9 -21.5 8,001 -31.2

    Operating Expenses 4,153 5,296 5,565 -21.6 -25.4 6,489 -36.0

    EBITDA 1,351 1,327 1,451 1.8 -6.9 1,512 -10.6

    EBITDA (%) 24.5 20.0 20.7 451 bps 386 bps 18.9 565 bps

    Reported PAT 934 767 1,008 21.7 -7.3 952 -1.9

    PAT (%) 17.0 11.6 14.4 539 bps 261 bps 11.9 508 bps

    EPS 4.7 3.9 5.1 20.4 -8.6 4.8 -3.2

    Market Cap: 71,030

    * Consolidated Financials

    (INR in Mn)

    P/E (FY12E): 17.1x

    ACCUMULATE

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    Food Processing

    Shree Renuka Sugars Ltd (SHRS)

    Valuation & OutlookShree Renuka Sugars (SHRS) would benefit from stable sugar prices, around INR 28-29 per kg, in domestic markets. EGoM'sapproval for export of additional 5 lakh tonne sugar would also support earning growth. In global markets, sugar and ethanolare trading around INR 36 per unit (Indian ethanol price is fixed at INR 27 per litre). SHRS's Brazilian operation is expected to

    show traction, despite low production. Growth in Brazilian volume, increase in ethanol price and higher sugar realisationwould trigger future growth. At CMP of INR 66, the stock is trading at 8.3x its SY12E earnings. We recommend ACCUMULATEon the stock with a reduced price target of INR 74.

    Opto Circuits (India) Ltd

    Valuation & OutlookOpto Circuits (OPTC) has successfully restructured its Cardiac Science business. The management expects significant revenuecontribution from this business starting FY12. OPTC's subsidiary Eurocor recently launched various drug eluting ballons likeTaxcor Plus, Dior, Freeway and Magical. We expect these prodcuts to register a growth of 25-30% in next three years. In non-nvasives business growth would be maintained by increasing penetration of products. Stock is trading at 12.3x its FY12E

    earnings. Considering the prospects of organic and inorganic growth in OPTC we recommend ACCUMULATE on the stock witha price target of INR 330.

    CMP: INR 295

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%) QoQ(%) Bloomberg* Dev (%)Revenue from Operations 5,390 2,920 5,445 84.6 -1.0 NA NA

    Operating Expenses 3,975 1,949 4,255 104.0 -6.6 NA NA

    EBITDA 1,415 971 1,190 45.7 18.9 NA NA

    EBITDA (%) 26.2 33.2 21.9 -700 bps 439 bps NA NA

    Reported PAT 1,035 831 1,111 24.5 -6.8 NA NA

    PAT (%) 19.2 28.5 20.4 -927 bps -120 bps NA NA

    EPS 5.6 4.5 6.0 23.1 -6.8 NA NA

    Market Cap: 54,890

    * Consolidated Financials

    ACCUMULATE

    (INR in Mn)

    P/E (FY12E): 12.3x

    CMP: INR 66

    Particulars Q3SY12E Q3SY11 Q2SY12 YoY(%) QoQ(%) Bloomberg* Dev (%)

    Revenue from Operations 16,776 19,995 18,403 -16.1 -8.8 NA NA

    Operating Expenses 13,051 17,943 14,716 -27.3 -11.3 NA NA

    EBITDA 3,725 2,052 3,687 81.5 1.0 NA NA

    EBITDA (%) 22.2 10.3 20.0 1194 bps 217 bps NA NA

    Reported PAT 1,171 903 582 29.7 101.2 NA NA

    PAT (%) 7.0 4.5 3.2 246 bps 382 bps NA NA

    EPS 1.7 1.3 0.9 30.2 96.0 NA NA

    Market Cap: 44,370

    * Consolidated Financials, SY- Sugar Year

    ACCUMULATE

    (INR in Mn)

    P/E (FY12E): 8.3x

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    Valuation & OutlookRuchi Soya (RS) is the largest edible oil manufacturer in the country. The company is expanding its oil processing capacitythrough installation of new units at AP, Karnataka and Orissa. It is also acquiring palm plantations to address the growingrequirement of raw material. High capacity utilisation and focus on exports would aid company's growth. RS is trading at 10.3xts FY12E earnings. We downgrade the stock to ACCUMULATE with a reduced price target of INR 109.

    Ruchi Soya

    Valuation & OutlookBasmati industry is set to post a strong growth trajectory on account of rapid increase in production, healthy demand innternational markets and possibility of realisation improvement. REI Agro, the leader in Basmati processing, is positioningtself to capitalize the growth opportunity by increasing its processing capacities, improving the operational efficiencies and

    better positioning of its brands. Stock is trading at 7.3x its FY12E earnings. We recommend BUY on the stock with a reduced pricetarget of INR 32.

    REI Agro

    CMP: INR 97

    Particulars Q1FY12E Q1FY11 Q4FY11 YoY(%


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