Update On Hindustan Unilever Ltd.

 
Key Takeaways
* Hindustan Unilever Ltd reported revenues of Rs.6654.8 crore in Q3 FY13 v/s market expectations of Rs.6828 crore.
* EBITDA is Rs.1088.8 crore in Q3 FY13 v/s Rs.970.5 crore in Q3 FY12.
* The company posted a net profit of Rs.871.4 crore v/s market expectations of Rs.900 crore.
* PAT margins increased by 40 bps from 12.7% in Q3 FY12 to 13.1% in Q3 FY13.Buy M&M Finance Service For Target 1131


M&M Finance has been delivering robust business growth during last couple of quarters, in an environment, when other financial players have been witnessing subdued business momentum. Although its tractor and CV segments have reported marginal growth, it was more than  compensated by the strong traction in Auto/Utility vehicle, Cars and Pre-owned vehicles segments.
Asset quality saw some pressure on back of delayed monsoon as well as one SME account worth Rs.150 mn slipping into NPA. However, management has indicated earlier that this SME account is expected to be recovered in Q3FY13. We do expect M&M Finance's asset quality to improve during H2FY13, as collection tends to improve during latter part of the financial year (seasonal factor). We expect M&M Finance to report
 We ealthy earnings growth of 25.4% CAGR over FY12-14E and strong return profile (RoA: ~4.1%; RoE: 22-23% during FY13/14E). At CMP,  stock is trading reasonable at 10.5x its FY14E earnings and 2.2x its FY14E ABV; we maintain BUY rating on the stock with revised TP of Rs.1131 (Rs.830 earlier) based on 2.5x its FY14 ABV.
M&M Finance is well placed in the rural financing with its multiproduct and multi-geography strategy.

Valuation and recommendations
We opine that rural market behaviour is still buoyant and driven more by the cash  flows and not by the movement in interest rate. With a  reasonable monsoon and likely parliamentary election in next 12-18 months, rural cash flows and their consumption pattern could sustain. Hence, we believe, M&M Finance is better placed to deliver superior growth during FY13/14E.
We expect M&M Finance to report healthy earnings growth of 25.4% CAGR over FY12-14E and strong return profile (RoA: ~4.1%; RoE: 22-23% during FY13/14E).
At CMP, stock is trading reasonable at 10.5x its FY14E earnings and 2.2x its FY14E ABV; we maintain BUY rating on the stock with revised TP of Rs.1131 (Rs.830 earlier) based on 2.5x its FY14 ABV.
  Buy IFCI For Target Rs.43-48


Special points of interest:
* Stock price given weekly breakout with volume.
* Roc showing Descending triangle break-out diversion..
* Accumulation showing in volume in last many week.
* Stock price Given weekly and long term down trend breakout with volume, now price maintain the 37 level than possible rally till 1st 43 and  2nd rally possible 48 level for next coming week. And if consolidation near 48 level than more upside possible in next coming future.
* In the volume chart showing some accumulation from last many weeks.
* ROC also showing descending triangle break-out.
  Buy Jagran Prakashan For Target Rs.136

Undisputed leader in UP
We upgrade Jagran Prakashan from Neutral to Buy with a target price of INR136 (18x FY15 P/E), implying 34% upside. Jagran has strong  regional franchise in large states like Uttar Pradesh and Bihar. Valuation at ~16x FY14E P/E is attractive considering expected earnings CAGR  of 16% over FY13E-15E along with high return ratios (20%+ RoE in downcycle), attractive dividend payout (~70%) and yield (3.5%).
Undisputed leader in UP, the largest Hindi market; top 3 position in all large Hindi markets, except Rajasthan:
'Dainik Jagran' (DJ) is the highest-read daily in India, with an average issue readership of 16m and circulation of ~3.5m. DJ has a pan- India  Hindi readership share of ~21%; its readership is relatively concentrated, with Bihar and UP accounting for ~65%, though they  constitute only ~40% of Hindi market readership. DJ's relative readership share in UP remains strong at 42% despite a decline from ~50%  over CY05-12 due to increased competition, mainly from 'Hindustan'. In Bihar, DJ has a No.2 rank with ~30% readership share, compared
to 50% for 'Hindustan'. Jagran (including 'Nai Duniya') is among the top 3 newspapers in all large Hindi markets, except Rajasthan.
Ad revenues: impressive track record; FY13 worst year in past decade;
expect 12% ad revenue CAGR over FY13E-15E: During FY03-12, Jagran's ad revenues clocked 22% CAGR, with only a year of sub-15%  (FY09) growth and no year of single-digit growth. However, proforma ad growth (excluding 'Nai Duniya' acquisition) is expected to decline to  ~7% YoY in FY13E led by macro slowdown. We expect the ad growth to bounce back to 11% in FY14E and 14% in FY15E as the macro environment stabilizes.
Investing back in circulation for future monetization:
DJ reported circulation CAGR of just 3% during FY06-10, compared to 20% during FY03-06, as it focused on monetizing the expanded  coverage. Jagran started investing back in circulation, with an estimated 11% increase during FY11 and 7% CAGR over FY11-13E. This should ensure healthy yield improvement over the medium term as benefits of increased readership start accruing after 2-3 years.
MP entry through 'Nai Duniya' acquisition; synergy benefits to restrict impact on consolidated earnings:
Over past few years, Jagran took several diversification initiatives by launching 'I Next' (bilingual daily) and 'City Plus' (English weekly), entry  into outdoor and event management business, acquisition of Mid-day Infomedia which publishes 'Mid-Day' (afternoon daily) and 'Inquilab'  (Urdu daily) and recent acquisition of 'Nai Duniya' (ND) to expand its footprint into MP and Chhattisgarh. Though the acquisition would  impact proforma earnings, initial trends post-acquisition were encouraging. National advertising for ND is set to double in FY13E and net  loss from ND could be restricted to ~INR100m, compared to >INR300m loss in FY12 (before Jagran took over operations).
 

 Buy Cholamandalam Investment & Finance For Target Rs.298





Scaling new heights
Cholamandalam Investment & Finance Company (CIFC), a part of the southbased Murugappa Group, operates as a pure asset finance player (AFC) offering vehicle finance, home equity loans and business finance. It has a network of 484 branches across India with an AUM of Rs 15,631 cr as on September 2012. The company has built a scalable and sustainable business model with attractive NIMs, strong loan growth, control over asset quality and widespread reach.
Management aims to maintain growth but does not wish to compromise on the asset quality front for the sake of growth. Adopting a pro active approach management has avoided the gold loan portfolio considering lots of regulatory hurdles with RBI. Moreover, the company has been focusing more on the high yielding Used CVs and LCVs segment which will ensure that the company continues to witness the growth momentum going forward. With most of the branch network expansion in place, CIFC now intends to focus on improving the productivity of these branches which will lower the cost to income ratio.
We believe that the above initiatives with a revamped business model will lead 1to a sustainable and profitable growth in CIFC’s business. We expect earnings to grow at a CAGR of 46.7% over FY12-FY14E. We expect the company to report an improvement in its RoE from 14.0% in FY12 to 19.9% in FY14E and RoA (post tax) to improve from 1.5% in FY12 to 1.9% in FY14E. At CMP the stock is trading at 1.9x FY13E and 1.54x FY14E ABV and 11.08x FY13E and 8.22x FY14E EPS. Based on our estimated BV of Rs.149 per share for FY14E and P/ABV target multiple of 2.0x we arrive at a target price of Rs.298. We recommend BUY on the stock indicating a potential upside of 25.3%.
* CIFC is well positioned to deliver 30% CAGR growth in AUM over FY12-FY14E driven by the growth in vehicle finance segment. In the Vehicle Finance segment particularly the company’s strategy to target high growth business segments like Used CVs, less cyclical LCV segment and entering into new tractor financing will lead to sustainable growth going forward.
* We believe that CIFC will continue to maintain its growth momentum aided by the new products launched, increasing market share in high yielding segments and benefit of network expansion. We expect disbursements to witness a CAGR growth of 30.3% over FY12-FY14E.
* The significant branch expansion made by the company in the last 2-3 years will start yielding results and CIFC will witness improvement in overall productivity of the branches leading to lower cost to income ratio leading to improvement in the company’s bottom line. We expect C/I ratio to improve from 56.1% in FY12 to 51.5% in FY14E.
* CIFC has managed to reduce its gross NPA from historic high of 5.5% in FY10 resulting from its personal loan portfolio to nearly 0.8% in FY12 which suggest strong command of the management to keep a check on the rising concern over NPAs. Going forward although we expect NPA to slightly increase from current levels to 1.1% in FY13E it will still be well under control.
Buy Mahindra Lifespace Developers Ltd For Target Rs. 466.00


Mahindra Lifespace Developers Ltd named as ‘India’s Top 10 Builders’ by Construction World and CW Interiors for the second  consecutive year.
* Mahindra World City has signed of an agreement with JCB India, to set up a manufacturing plant in 70 acres within Mahindra World City,  Jaipur with an investment of Rs. 500 crores.
* Mahindra Lifespace Developers launched a new project of ‘Ashvita’ a premium residential project in Hyderabad.
* During the quarter, the company has launched its phase-I of Antheia project in Pune. The project will comprise 1400 residential units with  saleable area of 1.60 mn sq ft.
* During the quarter the company Sale of residential units (MLDL + subsidiaries) is Rs. 862.50 millions.
* During the quarter, the company also acquired a land parcel in Alibaug under joint development basis to develop exclusive villas.
* Operating Profit and PAT of the company are expected to grow at a CAGR of 12% and 12% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.412.00, the stock P/E ratio is at 12.68 x FY13E and 11.58 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.32.48 and Rs.35.57 respectively.
* Operating Profit and PAT of the company are expected to grow at a CAGR of 12% and 12% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 8.76 x for FY13E and 7.93 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.34 x and 1.20 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.466.00 for Medium to Long term investment.
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