JK Lakshmi Cement reported a 21.1% year-over-year growth in net sales for the fourth quarter of fiscal year 2010, driven by a 21% increase in sales volume. However, operating profit declined by 8.7% due to a surge in raw material and other expenses. Net profit decreased by 32.6% to Rs. 70 crore on higher depreciation and interest costs. While sales volume and capacity are increasing, accelerated industry capacity additions may put pressure on prices and profitability going forward. The analyst maintains a "Buy" rating with a target price of Rs. 86 per share based on an EV/EBITDA multiple and estimated replacement cost valuations.
JK Lakshmi Cement (JKLC) reported a 1,663bp year-over-year decline in operating margin to 17.4% in the first quarter of fiscal year 2011 due to an 8.7% fall in realizations and a 36% increase in power and fuel costs. Net profit declined 78.6% year-over-year to Rs. 17 crore. The analyst maintains a "Buy" rating on JKLC, revising the target price to Rs. 92, expecting the company to face relatively less pricing pressure due to its concentration in high-growth northern and eastern regions and benefit from increasing captive power capacity.
Inox Leisure posted strong revenue growth in the fourth quarter aided by seat additions and a big budget movie lineup. However, higher expenses and film distribution shares led to a decline in operating margins. While profits grew on a recurring basis, margins contracted. The analyst maintains a 'Buy' rating, seeing upside from the Fame India acquisition, but lowers earnings estimates to account for higher interest costs.
Shoppers stop result update 4 qfy2010 040510Angel Broking
Shoppers' Stop reported a 23.1% year-over-year growth in net sales to Rs388.8 crore for the fourth quarter of FY2010. Operating margins expanded substantially by 490 basis points to 6.2% due to cost rationalization measures. Net profit was Rs12.6 crore compared to a loss of Rs24.5 crore in the prior year quarter. For the full year FY2010, net sales grew 11.4% while operating margins improved 600 basis points and the company reported a profit versus a loss in the previous year. While growth prospects remain positive, the analyst recommends a Neutral rating given rich valuations.
1) Nestle reported a 16.9% increase in top-line to Rs1,480cr, slightly below estimates, due to higher volumes and limited price increases. Bottom-line grew only 2.3%, significantly below expectations, due to a spike in input costs.
2) Gross margins contracted 263bps and EBITDA margins fell 397bps as input costs rose substantially. Higher brand investments and other expenses also weighed on profits.
3) The analyst downgrades Nestle to Neutral and lowers earnings estimates due to higher input costs and competitive pressures. Valuations leave little upside potential given cost pressures.
Lupin reported in-line results for the first quarter of fiscal year 2011, with net sales of Rs1,312 crore, operating profit margin of 20%, and net profit of Rs196 crore. Key drivers of growth included strong sales of generic drugs in the US market, as well as expansion of Lupin's domestic field force in India. While the company saw a delay in FDA approval for oral contraceptive drugs, management does not expect this to impact its competitive position. The analyst maintains an 'Accumulate' rating for Lupin based on its scale in key markets like the US and India, as well as its pipeline of generic drug approvals.
Bajaj Electricals reported a 35.2% year-over-year growth in net sales for the first quarter of fiscal year 2011, driven by strong growth in lighting and consumer durables. However, operating margins declined to 8.4% from 10% in the previous year due to higher raw material costs. Net profit increased 37.3% despite a decline in operating margins, aided by lower interest costs. Management expects sales growth of over 20% for fiscal year 2011 but anticipates pressure on margins to continue in the next quarter before improving in the second half of the year.
JK Tyre reported net sales growth of 23% year-over-year for the quarter, but profit was below expectations due to a substantial increase in raw material costs. Raw material prices increased significantly both quarter-over-quarter and year-over-year, squeezing operating margins. The company has plans to expand capacity across segments to capitalize on demand growth and offset rising input costs, with most new capacity coming online in 2011-2012.
Sterlite Industries reported net revenue of Rs7,111cr for 4QFY2010, in line with estimates. Net profit was also in line with estimates at Rs1,381cr. Revenue growth was driven by higher metal prices, strong zinc and lead business performance, and higher by-product prices. Sterlite is well positioned to capitalize on strong metal demand through expansion plans and cost reductions. The company also announced a 1:1 bonus issue and stock split.
JK Lakshmi Cement (JKLC) reported a 1,663bp year-over-year decline in operating margin to 17.4% in the first quarter of fiscal year 2011 due to an 8.7% fall in realizations and a 36% increase in power and fuel costs. Net profit declined 78.6% year-over-year to Rs. 17 crore. The analyst maintains a "Buy" rating on JKLC, revising the target price to Rs. 92, expecting the company to face relatively less pricing pressure due to its concentration in high-growth northern and eastern regions and benefit from increasing captive power capacity.
Inox Leisure posted strong revenue growth in the fourth quarter aided by seat additions and a big budget movie lineup. However, higher expenses and film distribution shares led to a decline in operating margins. While profits grew on a recurring basis, margins contracted. The analyst maintains a 'Buy' rating, seeing upside from the Fame India acquisition, but lowers earnings estimates to account for higher interest costs.
Shoppers stop result update 4 qfy2010 040510Angel Broking
Shoppers' Stop reported a 23.1% year-over-year growth in net sales to Rs388.8 crore for the fourth quarter of FY2010. Operating margins expanded substantially by 490 basis points to 6.2% due to cost rationalization measures. Net profit was Rs12.6 crore compared to a loss of Rs24.5 crore in the prior year quarter. For the full year FY2010, net sales grew 11.4% while operating margins improved 600 basis points and the company reported a profit versus a loss in the previous year. While growth prospects remain positive, the analyst recommends a Neutral rating given rich valuations.
1) Nestle reported a 16.9% increase in top-line to Rs1,480cr, slightly below estimates, due to higher volumes and limited price increases. Bottom-line grew only 2.3%, significantly below expectations, due to a spike in input costs.
2) Gross margins contracted 263bps and EBITDA margins fell 397bps as input costs rose substantially. Higher brand investments and other expenses also weighed on profits.
3) The analyst downgrades Nestle to Neutral and lowers earnings estimates due to higher input costs and competitive pressures. Valuations leave little upside potential given cost pressures.
Lupin reported in-line results for the first quarter of fiscal year 2011, with net sales of Rs1,312 crore, operating profit margin of 20%, and net profit of Rs196 crore. Key drivers of growth included strong sales of generic drugs in the US market, as well as expansion of Lupin's domestic field force in India. While the company saw a delay in FDA approval for oral contraceptive drugs, management does not expect this to impact its competitive position. The analyst maintains an 'Accumulate' rating for Lupin based on its scale in key markets like the US and India, as well as its pipeline of generic drug approvals.
Bajaj Electricals reported a 35.2% year-over-year growth in net sales for the first quarter of fiscal year 2011, driven by strong growth in lighting and consumer durables. However, operating margins declined to 8.4% from 10% in the previous year due to higher raw material costs. Net profit increased 37.3% despite a decline in operating margins, aided by lower interest costs. Management expects sales growth of over 20% for fiscal year 2011 but anticipates pressure on margins to continue in the next quarter before improving in the second half of the year.
JK Tyre reported net sales growth of 23% year-over-year for the quarter, but profit was below expectations due to a substantial increase in raw material costs. Raw material prices increased significantly both quarter-over-quarter and year-over-year, squeezing operating margins. The company has plans to expand capacity across segments to capitalize on demand growth and offset rising input costs, with most new capacity coming online in 2011-2012.
Sterlite Industries reported net revenue of Rs7,111cr for 4QFY2010, in line with estimates. Net profit was also in line with estimates at Rs1,381cr. Revenue growth was driven by higher metal prices, strong zinc and lead business performance, and higher by-product prices. Sterlite is well positioned to capitalize on strong metal demand through expansion plans and cost reductions. The company also announced a 1:1 bonus issue and stock split.
Marico reported disappointing quarterly results, with top-line growth of only 6% year-over-year and flat earnings growth, below estimates. However, a significant gross margin expansion of 644 basis points year-over-year was a positive surprise. While underlying volume growth remained strong at 14%, top-line growth was constrained by price cuts. The outlook remains neutral given concerns around value growth and slowing growth at Kaya.
Hindalco's subsidiary Novelis reported strong results for 4QFY2010. Top-line grew 24.8% year-over-year to US $2.42 billion as sales volumes increased 16.1% year-over-year. Adjusted EBITDA spiked 336% year-over-year to US $231 million. Novelis is focusing on increasing capacity in emerging markets, announcing plans to expand capacity in Brazil by 50% at a cost of US $300 million. Following the expiration of Novelis's metal price ceiling contracts and expected benefits from price increases and cost savings, the report maintains a "Buy" recommendation on Hindalco.
HDFC Bank reported a 33.9% year-on-year increase in net profit to Rs. 812 crore for the first quarter of FY2011, which was close to analyst estimates. Key highlights included a 40.2% rise in loan advances and an improvement in asset quality. The bank saw robust growth across parameters such as net interest income, deposits, and CASA ratio. While recommending a 'Buy' rating, analysts believe HDFC Bank is well positioned for continued high quality growth driven by its expansion plans and improving economic conditions.
Jyoti Structures reported a 20.3% year-over-year growth in net profit to Rs. 25 crores for the fourth quarter of FY2010, slightly below estimates. Operating margins expanded more than expected by 235 basis points to 12.8% due to lower raw material costs. For the full year, net profit grew 15.3% to Rs. 92 crores on sales of Rs. 2,006 crores. The company maintained its buy recommendation with a target price of Rs. 215, citing the large investments planned for power transmission and the company's position as a top player in the industry.
Deccan Chronicle Holdings reported quarterly results below estimates due to political unrest in Andhra Pradesh. Revenue grew 6.3% year-over-year to Rs191.7 crore, below estimates, due to weak circulation and advertising revenue. Earnings declined 20.2% to Rs6.5 crore due to lower revenue and higher taxes, despite gross margin expansion from lower paper costs. The analyst maintains a Buy rating but lowers revenue and earnings estimates and the target price to Rs193 per share based on discounted valuation of the print business and IPL team.
BGR Energy Systems reported a very strong 4QFY2010 performance, with revenues growing 130.7% and net profit up 130.6% over the previous year. For the full year, revenues grew 59.7% and net profit increased 74.7%. The company maintained a healthy order backlog of Rs10,230cr and expects continued growth in orders. The analyst maintains a Buy recommendation on the stock with a target price of Rs722, noting attractive valuation multiples and expecting revenue and profit to grow at 36.7% and 31.2% CAGR over the next few years.
Steel Authority of India reported a 1.7% decline in EBITDA to Rs. 1,843 cr for the first quarter of FY2011, below Angel Research's estimate, due to lower sales volume and higher staff costs. Net profit declined 11.3% to Rs. 1,177 cr for the same reasons. While steel prices increased, sales volume fell 15.5% from a year ago. Staff costs rose sharply due to additional provisions for employee benefits. Going forward, the company is expected to benefit from strong domestic demand, but capacity expansion benefits will only be seen after FY2012. Angel Research maintains a Neutral rating on the stock.
Bajaj Hindusthan reported lower-than-expected results for the third quarter of 2010, with revenue increasing 82% year-over-year but profit declining. Higher raw material costs and increased sales of levy sugar at a loss impacted margins. While volume increased for both sugar and distillery, realization declined for distillery. The outlook remains challenging due to expected higher sugar production weighing on prices. The company maintained a neutral rating given fair valuation.
1) Finolex Cables reported a 50.4% year-over-year increase in net sales to Rs. 493.1 crore for the first quarter of FY2011, driven by strong growth in the electrical cables segment.
2) Operating margins declined to 8% from 15.2% in the prior year quarter due to higher raw material costs, though margins improved sequentially.
3) Net profit increased 4.5% year-over-year to Rs. 23 crore for the quarter despite margin pressure, with sales growth offsetting higher costs.
McNally Bharat Engineering Co. Ltd. (MBE) reported disappointing financial results for the first quarter of fiscal year 2011, with revenues, earnings, and margins coming in below previous estimates. While MBE's order backlog remains strong at Rs. 4,803 crores, providing high revenue visibility, its subsidiary McNally Sayaji also saw subdued performance. However, analysts maintain a 'Buy' recommendation due to MBE's experience in various sectors, ongoing government infrastructure spending, and significant projected market opportunities over the next few years totaling Rs. 51,600 crores. Estimates have been revised downward to account for the weak quarterly performance.
Reliance Industries reported lower-than-expected earnings for 1QFY2011. While net operating income rose 86.7% year-over-year due to growth in refining revenues, EBITDA was below estimates due to lower petrochemical sales volumes and refining margins. Net profit grew 32.3% year-over-year, meeting estimates. The analyst maintains a 'Buy' rating based on the company's growth outlook and believes it is undervalued relative to its peers.
CESC reported a 33.7% year-over-year growth in revenue for the first quarter of fiscal year 2011, driven by the commissioning of its new 250MW Budge-Budge power plant. However, operating margins declined from the previous quarter due to a 90.6% year-over-year increase in other expenses. While revenue beat estimates, net profit growth was moderate at 4.8% year-over-year due to higher expenditure, growing at a faster pace than revenues. The company continues construction on its 600MW Chandrapur and Haldia power projects.
Hotel Leela Venture reported a 24.9% year-over-year growth in net sales to Rs105.8 crore for the first quarter of FY2011, driven by higher occupancy rates and average room rates. Operating profit was up 67.5% to Rs31.6 crore due to fixed cost absorption, leading to a significant increase in net profit to Rs9.2 crore from Rs0.4 crore in the prior-year period. Going forward, the company expects to benefit from improving industry dynamics, but its current valuation remains higher than peers.
Graphite India reported a 66% year-over-year increase in 4QFY2010 sales, in line with estimates. Full year FY2010 sales fell 10.1%, lower than expected, due to lower production at the company's German facility. However, operating margins increased to a strong 29.4% for FY2010 due to higher realizations. Going forward, the company is well positioned for growth due to increasing demand from the steel industry and its capacity expansion plans. The report maintains a "Buy" recommendation on the stock based on its attractive valuation and growth outlook.
CESC reported a 2.1% year-over-year growth in net sales to Rs770cr in the fourth quarter of fiscal year 2010, aided by a 1.7% increase in sales volume. The company's operating profit margin improved by 409 basis points to 26% during the quarter, helping net profit rise by 6.4% to Rs100cr. For the full fiscal year 2010, CESC's top-line grew by 8% to Rs3,351cr while bottom-line increased 5.6% to Rs433cr. The analyst maintained a "Buy" recommendation on the stock based on its fiscal year 2012 estimated price-to-earnings ratio of 7.4x and price-to-
ABB India reported disappointing 2QCY2010 results with revenues of Rs1,447cr, down 3.9% YoY. Net profit fell 54% YoY to Rs38cr due to higher costs and forex losses. Segment results were weak with the power systems segment reporting a loss compared to a profit last year. Order inflows declined 41% YoY to Rs1,235cr due to delays in large orders and pricing pressures.
JSW Steel reported lower than expected results for 1QFY2011 with net revenue of Rs4,779cr, down 12.2% quarter-over-quarter due to a decline in sales volume. EBITDA grew 64.7% year-over-year to Rs1,134cr but the margin increased only 646bps to 23.7% due to higher staff costs and other expenses. Net profit was Rs295cr, a 26.2% increase from a year ago but below estimates. JSW Steel finalized a strategic investment deal with JFE Steel worth Rs4,800cr that will help reduce debt and provide access to new technologies. Management expects sales volume and profitability to improve in the coming
HUL reported disappointing 1QFY2011 results, with profits declining 4% due to a 34% rise in advertising spending. While revenue grew 7% driven by 11% volume growth, operating margins contracted significantly by 289 basis points. Higher competitive intensity in categories like detergents and soaps drove the increase in advertising. Weak profit growth and uncertain earnings outlook despite modest revenue growth lead us to maintain a reduce rating on the stock.
India Cements' net sales and profits declined significantly in the first quarter of fiscal year 2011 compared to the same period last year. Net sales decreased 8.1% and operating profit declined 71.2% due to a substantial decline in cement prices in Andhra Pradesh, which accounts for around 45% of the company's revenues. Net profit dropped 82.7% to Rs25cr as a result of the poor operating performance, despite a profit from selling shares in another company. The company expects pricing pressure to continue in the southern region in the coming quarters due to excess capacity.
Balaji Telefilms posted disappointing quarterly results, with its top-line declining 32% year-over-year and 14% quarter-over-quarter due to a decrease in total programming hours as three shows went off air. While average programming rates increased sequentially, the company reported an operating loss for the quarter. Going forward, the company expects financial performance to remain under pressure due to low visibility in its programming slate and reduced programming hours.
Hindalco reported strong results for the first quarter of fiscal year 2011. Revenue grew 29.2% year-over-year to Rs. 2,533 crore, driven by a 12.7% increase in aluminum shipments. Adjusted EBITDA more than doubled to Rs. 263 crore, resulting in adjusted EBITDA margins of 10.4%. However, net profit declined 65% to Rs. 50 crore due to higher interest and tax expenses. Management expects continued growth in demand and benefits from capacity expansions. The stock currently trades at attractive valuations and the analyst maintains a Buy rating with a target price of Rs. 204.
SAIL's 4QFY2010 results were in line with estimates. Revenues grew 1.8% to Rs11,955cr due to higher sales volumes and average realization. EBITDA margins expanded significantly to 25.9% due to lower raw material costs and consumption, leading to a 40.2% rise in net income to Rs2,085cr. While demand is expected to remain strong, the company maintains a neutral outlook given rich valuations and plans for a public offering limiting further upside.
Marico reported disappointing quarterly results, with top-line growth of only 6% year-over-year and flat earnings growth, below estimates. However, a significant gross margin expansion of 644 basis points year-over-year was a positive surprise. While underlying volume growth remained strong at 14%, top-line growth was constrained by price cuts. The outlook remains neutral given concerns around value growth and slowing growth at Kaya.
Hindalco's subsidiary Novelis reported strong results for 4QFY2010. Top-line grew 24.8% year-over-year to US $2.42 billion as sales volumes increased 16.1% year-over-year. Adjusted EBITDA spiked 336% year-over-year to US $231 million. Novelis is focusing on increasing capacity in emerging markets, announcing plans to expand capacity in Brazil by 50% at a cost of US $300 million. Following the expiration of Novelis's metal price ceiling contracts and expected benefits from price increases and cost savings, the report maintains a "Buy" recommendation on Hindalco.
HDFC Bank reported a 33.9% year-on-year increase in net profit to Rs. 812 crore for the first quarter of FY2011, which was close to analyst estimates. Key highlights included a 40.2% rise in loan advances and an improvement in asset quality. The bank saw robust growth across parameters such as net interest income, deposits, and CASA ratio. While recommending a 'Buy' rating, analysts believe HDFC Bank is well positioned for continued high quality growth driven by its expansion plans and improving economic conditions.
Jyoti Structures reported a 20.3% year-over-year growth in net profit to Rs. 25 crores for the fourth quarter of FY2010, slightly below estimates. Operating margins expanded more than expected by 235 basis points to 12.8% due to lower raw material costs. For the full year, net profit grew 15.3% to Rs. 92 crores on sales of Rs. 2,006 crores. The company maintained its buy recommendation with a target price of Rs. 215, citing the large investments planned for power transmission and the company's position as a top player in the industry.
Deccan Chronicle Holdings reported quarterly results below estimates due to political unrest in Andhra Pradesh. Revenue grew 6.3% year-over-year to Rs191.7 crore, below estimates, due to weak circulation and advertising revenue. Earnings declined 20.2% to Rs6.5 crore due to lower revenue and higher taxes, despite gross margin expansion from lower paper costs. The analyst maintains a Buy rating but lowers revenue and earnings estimates and the target price to Rs193 per share based on discounted valuation of the print business and IPL team.
BGR Energy Systems reported a very strong 4QFY2010 performance, with revenues growing 130.7% and net profit up 130.6% over the previous year. For the full year, revenues grew 59.7% and net profit increased 74.7%. The company maintained a healthy order backlog of Rs10,230cr and expects continued growth in orders. The analyst maintains a Buy recommendation on the stock with a target price of Rs722, noting attractive valuation multiples and expecting revenue and profit to grow at 36.7% and 31.2% CAGR over the next few years.
Steel Authority of India reported a 1.7% decline in EBITDA to Rs. 1,843 cr for the first quarter of FY2011, below Angel Research's estimate, due to lower sales volume and higher staff costs. Net profit declined 11.3% to Rs. 1,177 cr for the same reasons. While steel prices increased, sales volume fell 15.5% from a year ago. Staff costs rose sharply due to additional provisions for employee benefits. Going forward, the company is expected to benefit from strong domestic demand, but capacity expansion benefits will only be seen after FY2012. Angel Research maintains a Neutral rating on the stock.
Bajaj Hindusthan reported lower-than-expected results for the third quarter of 2010, with revenue increasing 82% year-over-year but profit declining. Higher raw material costs and increased sales of levy sugar at a loss impacted margins. While volume increased for both sugar and distillery, realization declined for distillery. The outlook remains challenging due to expected higher sugar production weighing on prices. The company maintained a neutral rating given fair valuation.
1) Finolex Cables reported a 50.4% year-over-year increase in net sales to Rs. 493.1 crore for the first quarter of FY2011, driven by strong growth in the electrical cables segment.
2) Operating margins declined to 8% from 15.2% in the prior year quarter due to higher raw material costs, though margins improved sequentially.
3) Net profit increased 4.5% year-over-year to Rs. 23 crore for the quarter despite margin pressure, with sales growth offsetting higher costs.
McNally Bharat Engineering Co. Ltd. (MBE) reported disappointing financial results for the first quarter of fiscal year 2011, with revenues, earnings, and margins coming in below previous estimates. While MBE's order backlog remains strong at Rs. 4,803 crores, providing high revenue visibility, its subsidiary McNally Sayaji also saw subdued performance. However, analysts maintain a 'Buy' recommendation due to MBE's experience in various sectors, ongoing government infrastructure spending, and significant projected market opportunities over the next few years totaling Rs. 51,600 crores. Estimates have been revised downward to account for the weak quarterly performance.
Reliance Industries reported lower-than-expected earnings for 1QFY2011. While net operating income rose 86.7% year-over-year due to growth in refining revenues, EBITDA was below estimates due to lower petrochemical sales volumes and refining margins. Net profit grew 32.3% year-over-year, meeting estimates. The analyst maintains a 'Buy' rating based on the company's growth outlook and believes it is undervalued relative to its peers.
CESC reported a 33.7% year-over-year growth in revenue for the first quarter of fiscal year 2011, driven by the commissioning of its new 250MW Budge-Budge power plant. However, operating margins declined from the previous quarter due to a 90.6% year-over-year increase in other expenses. While revenue beat estimates, net profit growth was moderate at 4.8% year-over-year due to higher expenditure, growing at a faster pace than revenues. The company continues construction on its 600MW Chandrapur and Haldia power projects.
Hotel Leela Venture reported a 24.9% year-over-year growth in net sales to Rs105.8 crore for the first quarter of FY2011, driven by higher occupancy rates and average room rates. Operating profit was up 67.5% to Rs31.6 crore due to fixed cost absorption, leading to a significant increase in net profit to Rs9.2 crore from Rs0.4 crore in the prior-year period. Going forward, the company expects to benefit from improving industry dynamics, but its current valuation remains higher than peers.
Graphite India reported a 66% year-over-year increase in 4QFY2010 sales, in line with estimates. Full year FY2010 sales fell 10.1%, lower than expected, due to lower production at the company's German facility. However, operating margins increased to a strong 29.4% for FY2010 due to higher realizations. Going forward, the company is well positioned for growth due to increasing demand from the steel industry and its capacity expansion plans. The report maintains a "Buy" recommendation on the stock based on its attractive valuation and growth outlook.
CESC reported a 2.1% year-over-year growth in net sales to Rs770cr in the fourth quarter of fiscal year 2010, aided by a 1.7% increase in sales volume. The company's operating profit margin improved by 409 basis points to 26% during the quarter, helping net profit rise by 6.4% to Rs100cr. For the full fiscal year 2010, CESC's top-line grew by 8% to Rs3,351cr while bottom-line increased 5.6% to Rs433cr. The analyst maintained a "Buy" recommendation on the stock based on its fiscal year 2012 estimated price-to-earnings ratio of 7.4x and price-to-
ABB India reported disappointing 2QCY2010 results with revenues of Rs1,447cr, down 3.9% YoY. Net profit fell 54% YoY to Rs38cr due to higher costs and forex losses. Segment results were weak with the power systems segment reporting a loss compared to a profit last year. Order inflows declined 41% YoY to Rs1,235cr due to delays in large orders and pricing pressures.
JSW Steel reported lower than expected results for 1QFY2011 with net revenue of Rs4,779cr, down 12.2% quarter-over-quarter due to a decline in sales volume. EBITDA grew 64.7% year-over-year to Rs1,134cr but the margin increased only 646bps to 23.7% due to higher staff costs and other expenses. Net profit was Rs295cr, a 26.2% increase from a year ago but below estimates. JSW Steel finalized a strategic investment deal with JFE Steel worth Rs4,800cr that will help reduce debt and provide access to new technologies. Management expects sales volume and profitability to improve in the coming
HUL reported disappointing 1QFY2011 results, with profits declining 4% due to a 34% rise in advertising spending. While revenue grew 7% driven by 11% volume growth, operating margins contracted significantly by 289 basis points. Higher competitive intensity in categories like detergents and soaps drove the increase in advertising. Weak profit growth and uncertain earnings outlook despite modest revenue growth lead us to maintain a reduce rating on the stock.
India Cements' net sales and profits declined significantly in the first quarter of fiscal year 2011 compared to the same period last year. Net sales decreased 8.1% and operating profit declined 71.2% due to a substantial decline in cement prices in Andhra Pradesh, which accounts for around 45% of the company's revenues. Net profit dropped 82.7% to Rs25cr as a result of the poor operating performance, despite a profit from selling shares in another company. The company expects pricing pressure to continue in the southern region in the coming quarters due to excess capacity.
Balaji Telefilms posted disappointing quarterly results, with its top-line declining 32% year-over-year and 14% quarter-over-quarter due to a decrease in total programming hours as three shows went off air. While average programming rates increased sequentially, the company reported an operating loss for the quarter. Going forward, the company expects financial performance to remain under pressure due to low visibility in its programming slate and reduced programming hours.
Hindalco reported strong results for the first quarter of fiscal year 2011. Revenue grew 29.2% year-over-year to Rs. 2,533 crore, driven by a 12.7% increase in aluminum shipments. Adjusted EBITDA more than doubled to Rs. 263 crore, resulting in adjusted EBITDA margins of 10.4%. However, net profit declined 65% to Rs. 50 crore due to higher interest and tax expenses. Management expects continued growth in demand and benefits from capacity expansions. The stock currently trades at attractive valuations and the analyst maintains a Buy rating with a target price of Rs. 204.
SAIL's 4QFY2010 results were in line with estimates. Revenues grew 1.8% to Rs11,955cr due to higher sales volumes and average realization. EBITDA margins expanded significantly to 25.9% due to lower raw material costs and consumption, leading to a 40.2% rise in net income to Rs2,085cr. While demand is expected to remain strong, the company maintains a neutral outlook given rich valuations and plans for a public offering limiting further upside.
Ashok Leyland reported a 141.3% year-over-year growth in net sales to Rs2,939 crore for the fourth quarter of fiscal year 2010, in line with expectations. Net profit grew 317.6% year-over-year to Rs222.7 crore, higher than expected due to better operating margins and a change in depreciation policy. Operating margins increased 345 basis points due to price hikes, lower raw material prices, and cost reduction efforts. The company expects commercial vehicle industry volumes to grow 15-18% in fiscal year 2011.
Hindalco reported financial results for the first quarter of fiscal year 2011. Net revenue increased 32.9% year-over-year to Rs. 5,146 crore, driven by higher aluminum and copper volumes and prices. EBITDA grew 9.9% to Rs. 832 crore while net profit increased 11.2% to Rs. 534 crore. Hindalco is expanding aluminum production capacity significantly over the next few years, which is expected to drive further revenue and profit growth. The analyst maintains a Buy recommendation on Hindalco shares.
GIPCL posted a 23.1% year-over-year increase in net profit to Rs36cr for the fourth quarter of fiscal year 2010, in line with estimates. The growth was aided by a 15.5% decline in fuel costs due to increased gas availability and lower interest and tax expenses. While net sales declined 12.4% to Rs254cr, operating profit fell 13.3% to Rs62cr. The company maintained its expansion plans and guidance. At a share price of Rs110, GIPCL is trading at an attractive valuation compared to its peers.
For 1QFY2011, NMDC reported a 97% increase in net sales to Rs2,518cr driven by higher iron ore realizations and sales volume. Net profit grew 94.4% to Rs1,504cr due to strong top-line growth. EBITDA margin expanded significantly by 726bps to 81.5% despite higher royalty charges. The company aims to increase production capacity to 50mn tonnes by FY2014-15 through mine expansion projects, however volume growth faces risks from ongoing Naxal activities in its mine areas. At the current market price, the stock trades at lower multiples compared to its historical averages.
Elecon Engineering reported a 15% increase in revenue for the first quarter of fiscal year 2011. While operating margins declined slightly, net profits increased 57% due to a 32% decrease in interest costs. The company maintains a strong order backlog of Rs1,582 crore, providing revenue visibility. Recovery in the industrial sector and opportunities in material handling equipment are expected to drive continued growth for Elecon Engineering.
Elecon Engineering reported a 15% rise in revenue for the first quarter of fiscal year 2011. While operating margins declined slightly, profit grew 57% due to a 32% drop in interest costs. The company has a robust order backlog of Rs1,582 crore, offering high revenue visibility. Going forward, recovery in the industrial sector and opportunities in material handling equipment are expected to drive continued growth for Elecon Engineering.
National Aluminium reported a 47.3% year-over-year increase in net revenue to Rs. 1,604 crore for the fourth quarter of fiscal year 2010, exceeding estimates. EBITDA margins expanded substantially by 2,496 basis points year-over-year to 33.7% due to lower raw material, power, and staff costs. As a result, net profit increased 371.5% year-over-year and 152.3% quarter-over-quarter to Rs. 392 crore. However, the analyst maintains a "Sell" rating due to rich valuations compared to peers.
Bharat Forge (BFL) reported a 92.8% year-over-year growth in standalone net sales for the fourth quarter of fiscal year 2010, exceeding expectations. Operating margins improved substantially to 22.8% due to lower raw material costs and operating leverage. BFL recorded a net profit of Rs. 61.3 crore for the quarter, above estimates. At the consolidated level, BFL reported a 46.7% year-over-year increase in revenues for the fourth quarter and completed the process of restructuring its global subsidiaries.
Bharat Forge reported strong results for 1QFY2011 with net sales growing 75.7% year-over-year to Rs 630.1 crore, beating estimates. Operating margins improved significantly to 25.2% due to lower raw material costs and higher utilization levels. Net profit was Rs 59.4 crore, exceeding expectations due to improved volumes and operating leverage. The analyst recommends accumulating the stock given the better-than-expected performance and revised upward estimates.
Deccan Chronicle Holdings (DCHL) reported a 7% year-over-year increase in revenue and an 18.4% increase in profits for the first quarter of fiscal year 2011. Revenue was in line with expectations at Rs231.8 crore, driven by a 7% increase in advertising revenue. Profits increased due to a 281 basis point expansion in operating margins and a lower effective tax rate of 14%. The company continued to benefit from low newsprint prices. While advertising revenue growth was driven by higher rates, management expects advertising volumes to recover going forward. DCHL maintained its buy rating based on attractive valuations and growth prospects.
Bajaj Electricals reported a 19.3% year-over-year increase in quarterly revenue to Rs. 784 crore, slightly ahead of estimates. Revenue growth was driven primarily by the consumer durables division which saw 35.6% growth. However, net profit declined 21.1% to Rs. 37 crore due to additional taxes and a loan write-off. The company maintained a strong order backlog of Rs. 932 crore. While growth outlook remains positive, the analyst maintains a neutral rating given the recent run-up in stock price and expects the stock to trade around 10-12 times estimated earnings.
Consolidated Construction Consortium (CCCL) reported net sales of Rs.508 crore for 1QFY2011, in line with expectations. Operating margins of 8.3% and net profits of Rs.18.8 crore were also as expected. Order inflows grew 152% year-over-year to Rs.1,706 crore, indicating a revival in commercial and infrastructure segments. CCCL maintains an order backlog of Rs.4,527 crore, providing visibility for the next few years. While margins and profits met estimates this quarter, analysts maintain an 'Accumulate' rating given strong order backlog and expected 20% earnings growth over FY2010-12.
Exide Industries reported a 35.1% increase in net profit for the first quarter of fiscal year 2011. Net sales grew 27.5% due to a substantial increase in both original equipment and replacement auto battery sales. While raw material costs increased, operating margins improved on a quarter-over-quarter basis due to a decline in other expenditures and average lead prices. The analyst maintains an "Accumulate" rating for Exide Industries due to reasonable valuations and expectations for continued double-digit revenue and earnings growth over the next two fiscal years.
JP Associates reported a 51.8% year-over-year increase in net sales for the first quarter of FY2011, driven by strong growth in the cement, construction, and real estate verticals. However, operating margins declined significantly from 28% to 21.2% due to margin pressure, resulting in a 57.6% decrease in recurring earnings. While reported profits were up 5% due to exceptional gains, underlying earnings were down. The analyst maintains a buy rating but expects margins to recover, and forecasts JP Associates will become one of the fastest growing conglomerates in cement, power, and real estate.
All cargo result update 1 qcy2010 050510Angel Broking
Allcargo Global Logistics' 1QCY2010 consolidated results were above expectations due to strong pick-up in volumes across segments. While revenues grew by 21.9% year-over-year, operating profit grew by a mere 2.7% due to inability to fully pass on increased freight rates in the ECU line, resulting in margin erosion. However, lower interest expenses and tax rate led to a 23.2% jump in net profit. The company maintained a neutral outlook while being well positioned in container segments.
GE Shipping (Gesco) reported strong fourth quarter fiscal year 2010 results that exceeded expectations. Revenue grew 126.1% year-over-year in the offshore segment due to increased operating days. Overall operating profit increased 139.2% year-over-year, driven by lower expenses. Gesco intends to list its offshore subsidiary Greatship to unlock value and plans to add more offshore vessels. The analyst maintains a 'Buy' rating based on Gesco trading at a discount to global peers and expectations that accelerated phase-out of single hull tankers will support freight rates.
NTPC reported a 7.9% year-over-year increase in net sales for the fourth quarter of fiscal year 2010, slightly ahead of estimates. Operating profit grew 1.9% year-over-year due to a 2.3% increase in sales volumes from commissioning new plants and higher plant load factors, though margins declined. Net profit declined 4.5% due to one-time provisions and lower interest rates. The analyst maintains an "Accumulate" rating and target price of Rs230, seeing continued growth from NTPC's regulated business model and expansion plans offset by potential project delays.
Prakash Industries reported a 27.3% year-over-year increase in net sales to Rs464 crore for the first quarter of FY2011, though sales were flat sequentially. EBITDA grew 16.5% to Rs93 crore despite a 185 basis point drop in margins to 20% due to higher raw material costs. Net profit increased 18.9% to Rs70 crore, boosted by a 54.9% decline in interest expenses. The company is expanding its steel production capacity and plans to become self-sufficient in power generation as it develops coal mines.
The Indian markets are expected to open higher, tracking gains in most Asian markets. Spain has asked for a bailout of up to €100 billion for its banking system. Chinese exports grew more than expected in May. In India, shares extended gains for a fifth session despite weak global cues as major central banks held off on additional stimulus. The key support and resistance levels for the Nifty are 5,023 and 5,114 respectively. L&T has bagged orders worth Rs. 483 crore to build commercial vessels in Qatar. Vedanta Resources has acquired a 24.5% stake in Raykal Aluminium for Rs. 201 crore.
Axis Bank reported a 27.0% year-over-year increase in net profit to Rs. 942 crore for the first quarter of fiscal year 2012, in line with analyst estimates. Business growth momentum slowed as advances declined 7.4% quarter-over-quarter and deposits fell 3.0% quarter-over-quarter, moderating the bank's cash-deposit ratio to 40.5% from 41.1% last quarter. However, asset quality remained healthy with slippage ratio declining to 0.8% and gross and net NPA ratios stable.
1) For 1QFY2012, Electrosteel Castings reported 16.4% sales growth but margins declined due to higher raw material costs. EBITDA fell 18.2% and net profit declined 7.2%.
2) While sales volumes grew, costs increased more due to a rise in raw material costs as a percentage of sales.
3) The company maintains a buy recommendation due to initiatives in steelmaking and backward integration that should lower costs starting in FY2013 and valuation remains attractive.
1) For 1QFY2012, Persistent Systems reported revenues of ₹224 crore, up 5.2% over the previous quarter and 23.6% over the same period last year.
2) EBITDA was ₹40 crore, up 5.3% over the previous quarter but margins declined.
3) PAT was ₹28 crore, down 16.8% over the previous quarter due to higher taxes.
4) Management maintained revenue guidance of 29% growth for FY2012 and expects PAT to remain flat despite higher tax rates.
HT Media reported a 22.7% year-over-year increase in revenue to ₹494 crore for the first quarter of FY2012. Revenue was also up 5.8% quarter-over-quarter. Advertising revenue grew 17% year-over-year, with 18% growth in English and 15% growth in Hindi. Operating profit rose 11.8% year-over-year to ₹87.8 crore due to higher other income and lower tax rates, although operating margins contracted by 174 basis points. The company maintained its Accumulate rating based on expectations of continued revenue growth and margin expansion.
The summary is:
1) The derivative report analyzes the performance of the Nifty futures, options, and key stocks from the previous trading session on July 18, 2011.
2) It provides details on changes in open interest, premium levels, volatility, and turnover for various derivatives contracts.
3) Trading strategies and technical analysis is also given for some stocks along with risk-reward profiles of sample spreads trades for the Nifty.
The market ended lower, with the Sensex and Nifty closing down 0.3%. Mid- and small-cap indices closed higher. Select heavyweights like Hindalco Industries and BHEL gained 1-3%, while TCS and Tata Motors lost 1-2%. In corporate news, Motherson Sumi Systems agreed to acquire an 80% stake in Peguform for €141.5 million. HDFC Bank, Cadila Healthcare, Crompton Greaves, and Ashok Leyland are scheduled to announce their quarterly results. The trend for the day will be decided by whether Nifty trades above or below the levels of 18,533/5,572 in early trade.
- GSM subscriber additions in India continued their declining trend in June 2011, with net additions of 9.6 million, down 10% from the previous month.
- All major operators except BSNL reported a drop in subscriber additions. Bharti and Vodafone each added 2.1 million subscribers.
- The total GSM subscriber base reached 598.8 million in June 2011, with Bharti, Vodafone, Idea and BSNL maintaining their major market shares.
The document provides a technical analysis of the Indian stock market indices Sensex and Nifty for the week of July 16, 2011. It summarizes that the indices declined over 1.5% for the week and are currently trading in a range between 18,326/5496 on the downside and 19,132/5740 on the upside. It notes that a break above or below this range would dictate the direction of the upcoming trend. The analysis also lists pivot levels for 50 Nifty stocks to watch in the coming week.
The document provides a summary of derivative market activity in India for July 18, 2011. Key points include:
- Nifty futures open interest increased 0.67% while Mini Nifty increased 3.48% as the market closed at 5581.10
- Nifty July futures closed at a premium of 5.85 points and August futures at a premium of 22.60 points
- Implied volatility of at-the-money options decreased from 18% to 17.3%
- Total open interest in the market was Rs. 135,158 crore with stock futures open interest at Rs. 34,675 crore.
The indices opened flat but traded choppily throughout the day. Metal, auto and realty stocks declined while IT stocks gained. The indices are currently trading in a range between 18,326-18,810/5496-5653 on the downside and 19,132-19,094/5740-5700 on the upside. A break above these resistance levels could lead to further gains while a break below support could result in losses extending to 17,805-17,950/5350-5400. Pivot levels for 50 Nifty stocks are provided.
- The key Indian stock indices declined slightly, with the Sensex and Nifty closing down 0.3%.
- GSM subscriber additions in India continued their declining trend in June across most major operators such as Idea, Bharti Airtel, and Vodafone. Total GSM subscriber addition was 9.6 million, down 10% from the previous month.
- Tata Motors reported flat annual global sales growth in June 2011 compared to the previous year.
- South Indian Bank reported a 41.2% year-over-year increase in net profit to Rs. 82 crores for the first quarter of fiscal year 2012, slightly below analyst estimates.
- Business growth remained strong, with advances growth of 31.2% and deposits growth of 35.5% year-over-year. However, net interest margins compressed by 29 basis points sequentially to 2.8% due to a sharp rise in the bank's cost of deposits.
- Non-interest income was boosted by treasury gains, but fee income growth was modest. Asset quality was stable with gross and net NPAs rising marginally, and provision coverage at a comfortable 73.1%.
Bajaj Auto reported marginally lower-than-expected results for the first quarter of fiscal year 2012, with net sales growth of 22.8% year-over-year driven by a 17.7% increase in volumes. However, operating margins contracted by 145 basis points quarter-over-quarter to 19.1% due to a 150 basis point increase in raw material costs. As a result, net profit grew by 20.5% year-over-year to ₹711 crore, which was slightly below analyst estimates. Going forward, the analyst expects further margin pressure and has revised downward its earnings estimates for fiscal years 2012 and 2013 to factor in higher raw material costs and changes to export incentives.
1) Tata Consultancy Services (TCS) reported strong results for the first quarter of fiscal year 2012, outperforming expectations with revenue growth of 6.3% over the previous quarter and 31.4% over the same quarter of the previous fiscal year.
2) A key highlight was 7.4% quarter-over-quarter growth in business volumes. While profit margins declined due to wage hikes, net profit remained flat due to foreign exchange gains.
3) Management maintained a positive outlook, highlighting strong demand environment and deal pipeline, and expects pricing increases later in the fiscal year.
The document summarizes the Indian stock market outlook and performance on July 15, 2011. It reports that domestic indices closed with modest gains of 0.1-0.4%, while global indices declined. Wholesale price inflation in India rose to 9.44% in June 2011, above estimates and persisting above 9% for seven months, driven by increases in primary articles and fuel costs. Key benchmark levels are identified for determining if the market may continue rallying or correct in the near term.
The summary is:
1) The derivative report analyzes the movement in Nifty futures, options, and individual stocks between July 14-15, 2011.
2) Nifty futures open interest decreased while mini Nifty open interest increased as the market closed at 5599.80.
3) Implied volatility of at-the-money options increased from 17.6% to 18%.
The Sensex and Nifty indices opened lower and traded with volatility, closing marginally lower. On the sectoral front, Realty, Banks and Healthcare gained while IT and FMCG fell. The advance-decline ratio favored advancing stocks. On the daily chart, prices tested but did not close above the downward gap area of 18,679-18,589/5,601-5,580 levels. Immediate resistance is seen at 18,735/5,633, while 18,449/5,541 is crucial support.
1) Infosys reported modest revenue growth of 3.2% qoq for 1QFY2012. EBITDA and margins declined due to wage hikes.
2) Guidance for 2QFY2012 revenue growth was lower than expected at 3.5-5% qoq. Annual revenue growth guidance was unchanged.
3) The analyst revised EPS estimates down and cut the target price to INR 3,200 due to macro concerns and muted guidance.
This document summarizes a derivative report from India Research dated July 13, 2011. Some key points:
- The Nifty futures open interest increased 0.51% while Minifty futures open interest rose 8.2% as the market closed at 5526.15.
- Implied volatility of at-the-money options increased from 18% to 19.75%. PCR-OI decreased from 1.20 to 1.15.
- Total open interest of the market is Rs. 125,816 crore and stock futures open interest is Rs. 33,500 crore.
- FII were net sellers of Rs. 969 crore in the cash market segment. Put-call
1. 4QFY2010 Result Update I Cement
May 19, 2010
JK Lakshmi Cement BUY
CMP Rs65
Performance Highlights Target Price Rs86
JK Lakshmi Cement (JKLC) reported a healthy 21.1% yoy growth in its net Investment Period 12 Months
sales to Rs441cr, primarily on account of an impressive growth in the sales
volume during the quarter. The company’s sales volume during the quarter Stock Info
rose by 21% yoy to 1.41mn tonnes, aided by a capacity increase and robust
Sector Cement
demand. However, on the operating front, the company’s margins declined
by 756bp yoy, on account of a surge in raw material costs (up 48.3% yoy) Market Cap (Rs cr) 793
and other expenses (up 72.8% yoy). The company reported a 32.6% decline
in its Bottom-line to Rs70cr, on account of higher depreciation and interest Beta 0.8
costs. The stock trades at a P/E of 4.1x, at an EV/EBITDA of 3.9x and at an 52 WK High / Low 85/40
EV/tonne of US $65/tonne, according to its FY2012E estimates. We maintain
a Buy on the stock. Avg. Daily Volume 116722
Face Value (Rs) 5
Higher raw material and interest costs drag Net Profit down by 32.6% yoy:
JKLC’s operating profit declined by 8.7% yoy to Rs102.3cr, despite a 21.1% BSE Sensex 16,408
growth in net sales to Rs441.3cr. The operating profit was marred by an Nifty 4,920
increase in raw material, freight and other expenses, although the realisations
remained flat yoy. The company had also purchased high cost clinker from Reuters Code JKLC.BO
external sources during the quarter. The interest and depreciation costs rose
Bloomberg Code JKLC@IN
substantially during the quarter on a yoy basis, and stood at Rs10.7cr (net
interest income of Rs2.1cr) and Rs21.3cr (Rs14.1cr), respectively. Shareholding Pattern (%)
Promoters 44.2
Outlook and Valuation
MF/Banks/Indian FIs 23.0
The stock trades at a P/E of 4.1x, at an EV/EBITDA of 3.9x and at an
FII/NRIs/OCBs 9.9
EV/tonne of US $65/tonne, according to its FY2012E estimates. On the
valuation front, we have valued JK Lakshmi Cements at an average of a Indian Public 22.9
Target EV/EBITDA of 4x and an EV/tonne of US $60/tonne, which is at a
discount to the replacement cost, to arrive at a fair value of Rs86. We Abs. (%) 3m 1yr 3yr
maintain a Buy recommendation on the stock. Sensex 1.3 14.7 14.7
JKLC (11.2) 54.2 5.1
Key Financials
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 1,225 1,491 1,376 1,570
% chg 10.6 21.7 (7.7) 14.1
Net Profit 179 241 154 192
% chg (20.2) 35.0 (36.3) 25.1
OPM (%) 25.4 28.5 24.4 26.1
EPS (Rs) 14.6 19.7 12.5 15.7
P/E (x) 4.4 3.3 5.2 4.1
P/BV (x) 1.0 0.8 0.7 0.6 Rupesh Sankhe
RoE (%) 24.2 25.7 13.9 15.4 Tel: 022 – 4040 3800 Ext: 319
RoCE (%) 16.6 21.2 13.0 13.7 E-mail: rupeshd.sankhe@angeltrade.com
EV/Sales (x) 1.0 0.8 1.0 1.0
V Srinivasan
EV/EBITDA (x) 3.7 2.9 4.1 3.9
Tel: 022 – 4040 3800 Ext: 330
EV/Tonnes (US $) 55 57 64 65
E-mail: v.srinivasan@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
2. JK Lakshmi Cement I 4QFY2010 Result Update
Exhibit 1: 4QFY10 Performance
Y/E March (Rs cr) 4QFY10 4QFY09 % chg FY10 FY09 % chg
Net Sales 441.3 364.6 21.1 1,491 1,225 21.6
Net Raw Material Costs 92.9 62.6 48.3 233.6 182.4 28.1
(% of Sales) 21.1 17.2 15.7 14.9
Power & Fuel 80.1 72.8 10.0 290.4 306.3 (5.2)
(% of Sales) 18.2 20.0 19.5 25.0
Staff Costs 27.1 20.0 35.8 85.4 69.2 23.5
(% of Sales) 6.1 5.5 5.7 5.6
Freight & Forwarding 68.5 56.4 21.6 252.5 202.2 24.9
(% of Sales) 15.5 15.5 16.9 16.5
Other Expenses 70.3 40.7 72.8 204.0 153.9 32.5
(% of Sales) 15.9 11.2 13.7 12.6
Total Expenditure 339.0 252.5 34.3 1,066 914.0 16.6
Operating Profit 102.3 112.1 (8.7) 425.0 311.8 36.3
OPM 23.2 30.8 28.5 25.4
Interest 10.7 (2.1) 23.0 20.9 10.1
Depreciation 21.3 14.1 50.6 80.0 69.1 15.8
Other Income 1.5 4.4 (65) 8.9 4.9 82.2
PBT (incl. Extr. Items) 71.9 104.4 (31.1) 330.9 226.7 46.0
Provision for Taxation 1.8 0.3 89.7 48.1 87
(% of PBT) 2.5 0.3 27.1 21.2
Reported PAT 70.1 104.1 (32.6) 241.1 178.6 35.0
PATM 15.9 28.6 16.2 14.6
EPS (Rs) 5.7 8.5 19.7 14.6
Source: Company, Angel Research
Operational Highlights
The company’s per tonne cement realisation was flat yoy during the quarter,
although it was up by 3% qoq. The company’s average realisation during the
quarter stood at Rs3,130/tonne. The company’s key markets in Western and
Northern India experienced robust demand during the quarter, which resulted in the
prices remaining at healthy levels. The raw material costs per tonne were up by
22.5% yoy and stood at Rs659. The raw material costs were impacted by stock
adjustment of Rs22cr carried out during the quarter. Operating profit per tonne
stood at Rs726 during the quarter, down by 24.7% yoy and by 5.2% qoq.
Exhibit 2: Per tonne analysis (Rs)
yoy chg qoq
4QFY10 3QFY10 4QFY09
(%) chg (%)
Realisation/tonne 3,130 3,038 3,132 (0.1) 3.0
Raw Material Cost/tonne 658.9 416.2 537.8 22.5 58.3
Power & Fuel Cost /tonne 568.1 664.7 625.4 (9.2) (14.5)
Freight & Forwarding
Cost/tonne 485.8 591.6 484.5 0.3 (17.9)
Operating Profit/tonne 725.5 765.3 963.1 (24.7) (5.2)
Depreciation/tonne 151.1 153.1 121.1 24.7 (1.3)
Net Profit/tonne 497.2 390.4 894.3 (44.4) 27.4
Source: Company, Angel Research
May 19, 2010 2
3. JK Lakshmi Cement I 4QFY2010 Result Update
Capacity addition on track
The company is in the process of expanding its cement and power capacities. JKLC,
which currently has a capacity of 5.4mtpa, is setting up a 2.7mtpa green-field
cement plant in Chattisgarh, at a cost of Rs1,200cr. The Chattisgarh plant is
expected to be operational by December 2012, and will take the company’s total
cement capacity to 8mtpa. It is also planning to increase its total captive power
capacity from 36MW to 66MW by FY2012E, which will be sufficient to meet close to
90% of its power requirement on the expanded capacity of 8mtpa. The company
expects to sell 25MW (including the 21MW procured from VS Lignite power) of
surplus power from FY2011E onwards.
Exhibit 3: Installed Capacity
6
5.4 5.4
5 4.8 4.8
4 3.7
3.4
(mtpa)
3
2.4
2
1
0
FY06 FY07 FY08 FY09 FY10 FY11E FY12E
Source: Company, Angel Research
Outlook and Valuation
In the northern market, the capacity utilisation remained healthy at 86% in April
2010, due to Commonwealth-related spending. All the frontline states in the
southern region, like Andhra Pradesh, Tamil Nadu and Karnataka, had been
witnessing low demand in the recent months. The industry had also witnessed
aggressive inter-regional stock movement, pending the expansions in the other
regions, which exerted pressure on the prices and profitability. Overall, the cement
companies have been reporting strong sales volumes, on the back of new capacities
coming on stream, which has enabled most of the cement manufacturers to increase
their total cement production. Cement capacity addition in India during FY2010
stood at 27mn tonnes, taking the total capacity of the sector to around 252mtpa at
the end of FY2010. Going ahead, we expect the industry to add around 41mn
tonnes of capacity through FY2011-12E.
All-India demand is expected to remain robust, but accelerated capacity additions
and the stabilisation of new capacities would exert pressure on prices.
Exhibit 4: Valuation based on EV/EBITDA multiple and Asset Replacement (FY12E)
Target EV/EBITDA (x) 4 Target EV/tonne (US $) 60
EV (Rs cr) 1,738 EV (Rs cr) 1,457
Market Cap (Rs cr) 1,026 CPP(87 MW) 348
Market Cap (Rs cr) 1,092
No. of shares (cr) 12.2 No. of shares (cr) 12.2
Fair Price (Rs) 84 Fair Price (Rs) 89
Source: Company, Angel Research
May 19, 2010 3
4. JK Lakshmi Cement I 4QFY2010 Result Update
On the valuation front, we have valued JK Lakshmi Cements at an average of a
Target EV/EBITDA of 4x and an EV/tonne of US $60/tonne, to arrive at a fair value
of Rs86, which is at a discount to the replacement cost.
The stock trades at a P/E of 4.1x, at an EV/EBITDA of 3.9x and at an EV/tonne of US
$65/tonne, according to its FY2012E estimates. We maintain a Buy on the stock,
with a Target Price of Rs86.
Exhibit 5: 1-year forward EV/EBITDA band
(Rs cr)
3,000
2,500
2,000
5.5x
1,500
4x
1,000
2.5x
500
1x
0
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Company, Angel Research
Exhibit 6: 1-year forward EV/tonne band
3,000
2,500
2,000 $90
EV (Rs cr)
1,500 $70
$50
1,000
$30
500
0
Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Source: Company, Angel Research
May 19, 2010 4
5. JK Lakshmi Cement I 4QFY2010 Result Update
Profit & Loss Statement (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Net Sales 844 1,108 1,225 1,491 1,376 1,570
Other operating income
Total operating income 844 1,108 1,225 1,491 1,376 1,570
% chg
Total Expenditure 588 756 914 1,066 1,041 1,161
Net Raw Materials 81 123 170 234 221 246
Other Mfg costs 219 246 306 290 316 354
Personnel 35 56 69 85 82 91
Other 253 331 369 457 422 470
EBITDA 256 351 311 425 335 409
% chg 111.8 37.2 (11.6) 36.7 (21.1) 22.1
(% of Net Sales) 30.3 31.7 25.4 28.5 24.4 26.1
Depreciation& Amortisation 44 59 69 80 95 108
EBIT 212 293 241 345 240 301
% chg 212.1 38.3 (17.5) 42.7 (30.3) 25.2
(% of Net Sales) 25.1 26.4 19.7 23.1 17.4 19.1
Interest & other Charges 36 28 21 23 35 43
Other Income 3 7 6 9 8 9
(% of PBT) 1.8 2.7 2.7 2.8 3.9 3.5
Share in profit of Associates
Recurring PBT 179 272 227 331 213 267
% chg 217.9 51.9 (16.5) 46.0 (35.5) 25.1
Extraordinary Expense/(Inc.) - 21.0 - - - -
PBT (reported) 179 251 227 331 213 267
Tax 1 27 48 90 60 75
(% of PBT) 0.4 10.7 21.2 27.1 28.0 28.0
PAT (reported) 178 224 179 241 154 192
ADJ. PAT 178 245 179 241 154 192
% chg 221.2 37.4 (27.0) 35.0 (36.3) 25.1
(% of Net Sales) 21.1 22.1 14.6 16.2 11.2 12.2
Basic EPS (Rs) 16 18 15 20 13 16
Fully Diluted EPS (Rs) 16 18 15 20 13 16
% chg 180.1 17.2 (20.2) 35.0 (36.3) 25.1
May 19, 2010 5
6. JK Lakshmi Cement I 4QFY2010 Result Update
Balance Sheet (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 57 61 61 61 61 61
Preference Capital
Reserves& Surplus 353 581 770 983 1,108 1,271
Shareholders Funds 410 642 831 1,044 1,169 1,332
Minority Interest
Total Loans 734 708 703 603 803 1,003
Deferred Tax Liability (38) (12) 35 35 35 35
Total Liabilities 1,105 1,338 1,569 1,682 2,006 2,370
APPLICATION OF FUNDS
Gross Block 1,341 1,474 1,760 1,910 2,110 2,410
Less: Acc. Depreciation 595 663 747 827 922 1,031
Net Block 746 811 1,013 1,083 1,188 1,380
Capital Work-in-Progress 77 101 97 297 497 697
Goodwill - - - - - -
Investments 58 13 89 89 89 89
Current Assets 342 590 632 501 531 534
Cash 151 348 327 171 210 201
Loans & Advances 118 162 216 216 216 216
Other 74 81 89 114 105 117
Current liabilities 117 177 262 288 299 329
Net Current Assets 225 413 370 213 232 204
Mis. Exp. not written off - - - - - -
Total Assets 1,105 1,338 1,569 1,682 2,006 2,370
Cash Flow Statement (Standalone) (Rs cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit before tax 179 251 227 331 213 267
Depreciation 44 59 69 80 95 108
Change in Working Capital 133 95 144 24 55 62
Less: Other income 3 7 6 9 8 9
Direct taxes paid 1 27 48 90 60 75
Cash Flow from Operations 352 371 386 336 295 353
(Inc)/ Decin Fixed Assets (154) (158) (282) (350) (400) (500)
(Inc)/ Dec in Investments (58) 45 (76) - - -
(Inc)/ Dec in loans and advances
Other income 3 7 6 9 8 9
Cash Flow from Investing (208) (106) (352) (341) (392) (491)
Issue of Equity
Inc./(Dec.) in loans 38 (22) (5) (100) 200 200
Dividend Paid (Incl. Tax) 7 18 29 29 29 29
Others 36 28 21 23 35 43
Cash Flow from Financing (5) (68) (55) (152) 136 128
Inc./(Dec.) in Cash 139 197 (21) (156) 40 (9)
Opening Cash balances 12 151 348 327 171 210
Closing Cash balances 151 348 327 171 210 201
May 19, 2010 6
8. JK Lakshmi Cement I 4QFY2010 Result Update
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May 19, 2010 8