Buy Shree Cement For Target Rs.4820Company's revenues during Q2FY13 reported a growth of 13% YoY mainly led by improvement in cement volumes on yearly basis while prices declined on both yearly and sequential basis. Power sales also jumped significantly during the quarter.
* Operating margin performance was slightly better than our estimates due to higher revenues and stood at 26% for Q2FY13 as against 26.4% same period last year.
*Net profit growth for Q2FY13 was boosted by healthy revenue growth and lower than expected depreciation. It came better than our estimates
of Rs.2.17 bn.
* At current market price of Rs.4415, stock is trading at 11x and 9x P/CEPS and 8x and 6.4x EV/EBITDA for FY13 and FY14 respectively. We tweak our estimates upwards to factor in improved margins and higher power sales for the company. We continue to recommend BUY with a price target of Rs4820 based on average of 6.2x EV/EBITDA and $130 Ev/Tonne for FY14 and adding valuations from power division. (Rs 4557 earlier)
Valuation and recommendation
* At current market price of Rs 4415, stock is trading at 11x and 9x P/CEPS and 8x and 6.4x EV/EBITDA for FY13 and FY14 respectively.
* We tweak our estimates upwards to factor in improved margins and higher power sales for the company. We continue to recommend BUY with a price target of Rs4820 based on average of 6.2x EV/EBITDA and $130 Ev/Tonne for FY14 and adding valuations from power division. (Rs 4557 earlier)
* Key risk to our estimates would come from lower than expected cement realizations or any adverse ruling from CCI.
Buy Asian Paints Ltd For Target Rs.4633.00SYNOPSIS
* Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs 96.32 billion.
* During the quarter, the robust growth of Net Profit is increased by 14.58% to Rs. 2391.60 million.
* Asian Paints has approved interim dividend of Rs. 9.50 per Equity Share of the face value of Rs. 10 each for the FY- 2013.
* Asian Paints Ltd has decided to explore opportunities in areas of Home Improvement and Decor.
* The company’s Paint segment revenue grew by 25.5% in FY2012.
* The company has expanded its capacity at Rohtak plant in Haryana by 50,000 KL per annum to 2,00,000 KL per annum.
* The company has launched the first branded home painting service under the brand name ‘Asian Paints Home Solutions’.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 15% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q2 FY13,
Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs 96.32 billion, reported its financial results for the quarter ended 30th Sep, 2012. The second quarter witnesses a healthy increase in overall sales as well as profitability on account, an enhanced global network.
The company’s net profit jumps to Rs.2391.60 million against Rs.2087.30 million in the corresponding quarter ending of previous year, an increase of 14.58%. Revenue for the quarter rose 17.13% to Rs.26364.40 million from Rs.22507.80 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.24.93 a share during the quarter, registering 14.58% increase over previous year period. Profit before interest, depreciation and tax is Rs.4033.90 millions as against Rs.3521.20 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.4100.00, the stock P/E ratio is at 34.46 x FY13E and 29.93 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.118.99 and Rs.136.99 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 15% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 20.77 x for FY13E and 17.88 x for FY14E.
* Price to Book Value of the stock is expected to be at 10.01 x and 7.44 x respectively for FY13E and FY14E.
* Good growth seen in Interior and Exterior Emulsions. This financial year shows a Secular growth in all the Divisions. Cumulative price increase for 12months FY12 was 12.28%.
* We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.4633.00 for Medium to Long term investment.
Buy ITC Ltd For Target Rs.340ITC's (ITC IN) 3QFY13 results exceeded expectations, with Adj PAT growth of 21% at INR20.5b (est INR20.2b). Company posted 14th consecutive quarter of 20%+ PAT growth. 3QFY13 performance underscores the predictability and consistency of ITC's business model.
* Cigarette volumes were up ~1.5%, despite 21% excise duty increase in CY12 budget, thus demonstrating the pricing power enjoyed by the company.
* ITC is likely to gain shares from VST and GPI, in our view. Company has again delivered 20%+ EBIT growth in cigarettes, with 400bp EBIT margin expansion on net basis and 110bp on gross basis. It is gaining good traction in 64mm segment and can offer upsides to our FY14E cigarettes volume estimate.
* EBITDA margins contracted 90bp YoY to 37.1% on account of a steep 510bp YoY increase in material costs due to business mix change; agri segment posted 43% revenue growth. However, EBITDA margins contracted 90bp due to 400bp savings in overheads.
* Non-cigarette FMCG losses halved to INR240m. Revenues posted a strong 30% growth led by mid-teens volume growth and strong traction across all categories. We estimate breakeven in 4QFY13.
* We maintain our estimates and are optimistic on the cigarette volume delta for FY14E due to the successful 64mm foray. We also expect a round of price hike in cigarettes before CY13 budget.
* The stock trades at 30.3x FY13E and 25.9x FY14E EPS. Maintain Buy with a revised target price of INR340 (P/E of 26x FY15E). We expect ITC to sustain the premium valuations due to strong earnings visibility, acceleration in earnings growth trajectory to 20% and cigarette volume outperformance v/s industry. ITC is our top FMCG pick. Speculation on the potential excise duty increase inCY13 budget may keep the stock range-bound in the near term.
Accumulate Zensar Technologies Ltd For Target Rs.310Zensar's results for 3Q were marginally below expectations. Planned and unplanned client shutdowns led to an almost flat revenue growth in USD terms. Akibia's revenues have fallen for the second successive quarter and need to improve QoQ. Management expects the same to rise WEF 4Q. Ex-IMS services revenues grew by 1% QoQ, despite planned shutdowns. However, cost rationalization restricted the impact on margins QoQ. Lower
product revenues (low margin) also helped sustain profitability. The macro scene is uncertain but the management is positive on the pipeline and order bookings. The planned measures like lean execution, improved efficiencies, best practices, etc are targeted at improving the profitability profile of the company in FY14. We view the profitability initiatives positively but will wait for the same to play out, especially as the macro scene is uncertain. Retain ACCUMULATE with a FY14 based DCF - based PT of Rs.310 (Re.305 earlier).
Valuations
*Our DCF based price target is Rs.310 (Rs.305) for the stock, based on FY14E earnings.
* We view the business restructuring exercise with optimism. However, we would like to see atleast the initial gains from this, before becoming more positive on the stock. The uncertain macro may also sustain challenges on the revenue front.
* We, therefore, maintain ACCUMULATE.
* Sustained rise in margins and stable revenue growth profile may lead us to accord higher valuations to the stock.
Update On Cairn India LtdCairn India reported Q3 FY13 numbers (Consolidated) were slightly below our expectation due to lower production and realization. Revenue increased by 38.1% but down 3.7% q-o-q to Rs 42.77 bn (slightly lower than our expectation of Rs 43.11 bn due to lower oil realization and decline in production from Rajasthan fields. Oil price realization declined 1.9% q-o-q to US$ 94.9/bbl (discount to Brent 13.2% vs. 10.8% in Q2FY13). Rajasthan field’s net oil production fell 1.1% Q-o-Q to 118.98 kbopd (Gross production (169.97 boepd).
EBITDA margin stood at 76.2% (contracted 33 bps YoY and 92 bps q-o-q) slightly lower than our estimate of 76.5%. However, Reported PAT increased by 36% to Rs 31.56 bn vs. our estimates of Rs 30.91 bn. The company booked foreign exchange gain of Rs 2.3 bn (vs. loss of 7.85 bn in Q2FY13) on US dollar deposits and receivables. Adjusted PAT (excluding forex loss) comes at Rs. 29.20 bn, higher than our estimates of Rs. 26.76 bn due to lower effective tax rate (1% of PBT vs. our estimate of 10%). However, adjusted PBT comes at Rs. 29.52 bn slightly below our estimates of Rs. 30.17 bn.
Gross production from Rajasthan block stood at 169.97 kbpd vs. 171.8 kbpd in Q2FY13. The company is currently producing 150,000bopd from Mangala and 25,000bopd from Bhagyam. Production from Aishwariya field is delayed and would now commence in Q4FY13, subject to regulatory approvals.
Gross oil production from Ravva stood at 21,481bopd in 3QFY13, down 0.6% QoQ and 18% YoY. Gross gas production stood at 40 mmscfd (1.13 mmscmd), down 4.7% QoQ and 35.4% YoY.
Gross oil production from Cambay stood at 4.585 bopd in 3QFY13, up 6.5% QoQ but down 4.6% YoY. Average daily gas production stood at 13mmscfd in 3QFY13, down 13.33% QoQ and 31.5% YoY.
Valuation
We have valued Cairn on the basis of SOTP methodology, using DCF for Cairn’s producing assets (MBA fields, Ravva and Cambay) and EV/bbl to value other exploratory blocks. Our DCF based valuation of Cairn, based on long term Brent crude price of USD110/bbl and INR/USD of 50. We have buy rating on Cairn India with a target price of Rs. 404.
Buy HCL Technologies Ltdutlook
HCL Technologies’ strategy of first garnering deals as they come up for re‐bid and later focusing on their execution has worked out impressively. This is evident in the commendable up‐tick in margin profile (+400bps) over the past four quarters. We foresee strong revenue visibility for the company backed by a well diversified services portfolio, balanced strategy and continued deal wins that helps it to keep the performance in the top quartile of its peer set. Currently the stock trades at 13.8x and 12.6x of its FY13E and FY14E consensus earnings. We recommend a BUY on the stock
Key Takeaways
• Despite a stronger rupee (+0.5 QoQ), HCL Tech on the back of strong volume growth of 3.0% posted a better than expected topline of Rs 6,274 crore for Q2FY13 (3.0% QoQ). However, on constant currency basis, revenues for the current quarter grew by 3.6% on sequential quarter basis to Rs $ 1,154 mn.
• EBIT margins increased by 40 bps sequentially to 22.6% led by net employee reduction. However, remaining wage hikes in Q2FY13 impacted margins by 90 bps.
• On the industrial front, Energy & Utilities reported a strong growth of +5.1% on a qoq basis, followed by media entertainment (+3.6% qoq). While discretionary services of EAS and Engineering continue to de grew at -1.1% and 0.7% qoq in dollar terms. Europe grew strongest at 5.9% followed by US at 3.5% and ROW at 0.2%. At the same time, financial services reported healthy growth rate at 10.9% qoq basis.
• Strong client addition momentum continued in this quarter as well with 39 new clients being added in the current quarter. During the current quarter HCL signed 12 large deals (total contract value of $1 bn), six of which are large integrated engagements from America and Europe.
• Utilization rate on blended basis grew by 50 bps on sequential quarter basis to 81.9%. This was purely on account of efficiency in terms of the onsite, particularly the BP side. Total employee count declined to 85,194 from 85,335 on a sequential basis. Attrition rates for IT services remained flat on a sequential basis at 13.6%. Nonetheless, the company has been able to balance out the wage hike impact completely using the optimization on the head count.
Reduce India Cements Ltd. For Target Rs.92Result overview: Revenue growth of the company was led by sequential stable cement prices in southern region during Q2FY13 and was in line with
our estimates. Operating margins came lower than our estimates due to increase in variable costs. Net profit growth was impacted by fall in
margins. Though cement prices in southern region continue to remain high, but we maintain negative bias for the company on account of low demand growth in southern region and hence retain REDUCE rating on the stock. Stock would get re-rated once demand improvement commences in southern region.
Valuation and recommendation
* At current market price of Rs 97, stock is trading at 10.7x and 10x P/E and 4.5x and 4.4x EV/EBITDA on FY13 and FY14 respectively.
* We value company at an average of EV/Tonne of $80 per tonne and 4.8x EV/ EBITDA and roll it forward on FY14 estimates and arrive at revised price target of Rs 92 (Rs 82 earlier).
* We continue to maintain REDUCE on the stock.Stock would get re-rated once demand improvement sustains in southern region.
Weekly Stock Market Prediction 28th Jan 2013
Weekly planetary position: During the week, Moon will be transiting in Cancer, Leo & Virgo. Lord Saturn & Rahu in Libra. Jupiter in Taurus. Venus & Pluto in Sagittarius. Sun & Mercury in Capricorn. Mars & Neptune in Aquarius. Ketu in Aries. Uranus in Pisces.Venus will be changing the house in the after noon of 28th January 2013.
Rahu & Ketu, which are the main planets responsible for speculation / trading in stock market, have changed their houses (Rashi) on 23rd December 2012. They stay in one house for 18 months. Trade cautiously, many sectors, which were receiving astrological support due to their placement in existing houses (Rashi), will now stop getting support & the stocks from those sectors will start coming down gradually. To Many Investors/ Traders, to whom current placement was favorable, may not be beneficial in future, due to this change. It is advise able to consult your financial astrologer.
As predicted last Friday, market behavior was on the lines, caused by the deceptive combination of certain planets as indicated by us. This time deception was so severe, that nifty came down from high by about 100 points & certain stocks were butchered / affected by over 10%.
Next week the position will be somewhat better.
Following sectors will be getting astrological support & buying may be initiated on down days.
BANKING & FINANCIAL sector will continue receiving very strong astrological support. Buy Canara Bank, Bank of India, Bank of Baroda & PNB, Kotak Bank, Indusind Bank etc in Banking & HDFC, LIC Housing, REC, PFC, Muthoot Finance, IFCI & GIC Housing in Financial sector.
TECHNOLOGY sector will be receiving astrological support. Accumulate - Tech Mahindra, TCS, Wipro & Infosys etc on dips.
AUTO sector will also be getting strong astrological support. Buy Tata Motor, Mahindra & Mahindra, Ashok Leyland & Maruti etc on dips.
MEDIA / ENTERTAINMENT sector will be receiving strong astrological support. Buy Sun TV, Zee Entertainme,nt, Dish, TV 18 & NDTV etc on decline.
PERSONAL CARE sector too will be getting astrological support.
With the change in Planetary position, PHARMA sector will be receiving very strong astrological support for next one month. Accumulate – Dr Reddy, Stride Arco, Wockhardt, Aurobindo Pharma, Glenmark, Lupin, Biocon & Cipla etc on decline.
LIQUOR & PAINTS sectors will continue receiving astrological support. Buy United Spirit, TilakNagar & Asian Paints on down days.
Accumulate Bata & Colgate on dips.
Every year, with commencement of new Samvat, astrologically, based on planetary position, some new sectors start out performing, while others remain laggard. According to our experience of last more than 12 years, stocks of such sectors outperform resulting in exorbitant gains, irrespective of the behavior of Market. To know which stocks/ sectors will outperform in current Samvat & to achieve maximum gains please contact us.
Always be very cautious, when some main planets i.e. Rahu, Ketu, Jupiter & Lord Saturn are changing their houses. It may be that certain sectors which were continue sly getting support for long time may stop receiving support due to change in position by above planets & stocks of those sectors starts coming down, resulting in losses. This is common reason, why most people loss money.
New Samvat have started from 14th November 2012. Whenever New Samvat starts, based on planetary position / conjunction & aspect among planets, some new sectors commence out performing & many sectors, which were in momentum during last Samvat start underperforming.
It has been observed many times that investors / traders (not knowing this fact) keep investing /trading in such sectors,( whose astrological support is over) – resulting in losses. It is suggested to consult your Financial Astrologer to know about the sectors.
One should trade only in the stocks of that sectors which are getting very strong astrologically support,
Sectors which get very strong ASTROLOGICAL support are not normally affected by downfall in the market.
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