Buy Rajesh Exports Limited For Target Rs.136.00jesh Exports Limited was established in the year 1990 as a gold jewellery manufacturing company and has grown to be the largest gold jewellery manufacturing company in the world.
* Rajesh Exports Ltd has welcomed the Government’s decision to make Hallmarking mandatory on Gold Jewellery.
* The order book position as on 31st Dec 2012 is Rs. 67624 Million.
* Net profit for Q3FY13 was up 14.55% to Rs. 1314.68 mn as compared to Rs. 1147.65 mn for Q3FY12 driven primarily by sustained & diversified revenue growth.
* During the two festive weeks of Diwali and Christmas of 2012 the 75 retail stores of SHUBH Jewellers recorded sales in excess of Rs. 90 crores,wherein more than 330 kilos of jewellery was sold in a retail area of about 45000 sq ft.
* SHUBH Jewellers has emerged as a household and the number one retail jewellery brand in the state of Karnataka.
* The company has plans to open 500 SHUBH Jewellery showrooms by the year 2014. Presently the company has 75 SHUBH Jewelers, retail showrooms.
* Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 30% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Rajesh Exports Ltd has set up world’s largest jewellery manufacturing unit which is spread across 10 acres of land. The unit processes 250 tonnes of gold per annum. It is also capable of producing hand-made jewellery, casting jewellery, machine chains, stamped jewellery, studded jewellery, tube jewellery and electro-formed jewellery, reported its financial results for the quarter ended 31 Dec, 2012.
The company’s net profit jumps to Rs.1314.68 million against Rs.1147.65 million in the corresponding quarter ending of previous year, an increase of 14.55%. Revenue for the quarter rose by 20.02% to Rs.78231.64 million from Rs.65182.32 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.4.45 a share during the quarter, registering at 14.55% increase over previous year period. Profit before interest, depreciation and tax is Rs.1900.21 millions as against Rs.2232.60 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.120.25, the stock P/E ratio is at 7.37 x FY13E and 6.57 x FY14Erespectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.16.32 and Rs.18.29 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 30% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at (1.24) x for FY13E and (0.97) x for FY14E.
* Price to Book Value of the stock is expected to be at 1.44 x and 1.18 x respectively for FY13E and FY14E.
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.136.00 for Medium to Long term investment.
Buy Jaiprakash Associates For Target Rs.115Jaiprakash Associates reported 3QFY13 standalone PAT of INR1.1b, lower than our estimate of INR1.3b. Key deviation has been higher interest cost at INR5.3b v/s estimate of INR4.8b.
* Higher interest cost is due to ECB/FCCB fund raising, higher finance charges and higher interest cost on capitalization of cement capacity. Other income for the quarter was higher due to EPC work carried out for an associate company (Heavy Engineering Work) as also due to income received on waste management project.
* Performance across division remained divergent. Higher revenues for real estate division was a key positive (INR6.1b v/s est of INR4.8b), while cost absorption restricted the decline in EBIT/ton (by INR95/ton) for cement division despite a steep fall in realization (by INR250/ton). EPC division revenues remained muted, while margins continued to remain healthy at 22% (v/s est of 19%).
* Consolidated net debt as at Mar-12 stood at INR440b, entailing DER of 3.8x. Divestment of stake in Jaypee Cement would enable JPA to raise funds and de-leverage the balance sheet.
* We cut FY13E earnings by ~17% to factor the higher interest cost and realigning assumption across the division. We expect JPA to report net profit of INR6.1b in FY13E (down 40% YoY) and INR9.8b in FY14E (up 60% YoY). The stock trades at FY14E PER of 15.8x and P/B of 1.3x on FY14E. Buy.
Buy KEI Industries Limited For Target Rs.15.00KEI is among leading players in Electrical Cable industry that enable industrial & domestic customers with one stop shop for electrical cabling solutions.
* During the second quarter, the robust growth of Net Profit is increased by 3.38% to Rs. 58.18 million.
* Kei Industries Ltd has introduced the new product development of the Silicone FS Cable.
* The company having addition of 100,000 MW generation capacities in next 5-7 years. KEI Industries setting up network of Dealers in United Kingdom for General purpose Projects and for Oil & Gas sector Projects.
* The company having Joint Venture/ Technical Collaboration for EHV Power Cables.
* KEI successfully entered into the plans of climbing up the value chain & emerging as a quality service player by entering the EPC space for power cable projects.
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 45% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,-
KEI Industries Ltd is India’s leading Power Cables and Wires Manufacturer, reported its financial results for the quarter ended 31st DEC, 2012.
The company’s net profit jumps to Rs.58.18 million against Rs.56.28 million in the corresponding quarter ending of previous year, an increase of 3.38%. Revenue for the quarter fell 19.28% to Rs.3690.18 million from Rs.4571.44 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.0.83 a share during the quarter, registering 1.48% decrease over previous year period. Profit before interest, depreciation and tax is Rs.413.81 millions as against Rs.399.59 millions in the corresponding period of
the previous year.
Outlook and Conclusion
* At the current market price of Rs.13.55, the stock P/E ratio is at 3.34 x FY13E and 2.98 x FY14E respectively.
* Earnings per share (EPS) of the company for the earnings for FY13E and FY14E are seen at Rs.4.05 and Rs.4.55 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 45% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 3.03 x for FY13E and 2.90 x for FY14E.
* Price to Book Value of the stock is expected to be at 0.37 x and 0.33 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.15.00 for Medium to Long term investment.
Buy Cipla LtdOutlook
Low contribution of ARV volumes, higher Lexapro supply, and operational efficiency has helped Cipla post strong earnings this quarter. On the export formulations front the company is exploring M&A opportunities (front end in particular) and will be going aggressive in its own US filings. This augurs well in the long run, however we expect near term pressure on its base business margins. Scale up in Dymista supplies and monetizations over generic opportunities are anticipated to be near term growth drivers. At the CMP of Rs 393, the stock is currently trading at 18.5x and 15.9x of its FY14 and FY15E. We recommend a BUY on the stock.
Key Takeaways
• Cipla’s revenues increased by 17.8% YoY to Rs. 2070.5 crore in Q3FY13. Operating margins increased on account of lower material cost to 23.8% over the same period. Net Profit has shown growth of 23.5%YoY at Rs. 338.8 crore in Q3FY13.
• During Q3FY13, Cipla's domestic formulation reported a muted growth of 10.2% YoY to Rs 960 crore mainly due to industry slow down. Management expects this business to maintain the growth of 14-15% going forward on the account of its strong field force of ~7,500 and entry into new therapeutic areas such as CNS and oncology. However it expects the new pricing policy to have a negative impact and considers this to be a short-term issue.
• Over the same period formulation exports witnessed a strong growth of 38.2% YoY to Rs 1040 crore. Cipla has 5 filings in US (Indore facility) of its own that is expected to be launched in the forthcoming years. During the quarter, the company has clocked Rs 100 crore of sales from the Indore SEZ plant and anticipates FY13E sales from the unit at Rs 600 crore. Further, the company has entered into an agreement with Meda to supply API for Dymista (azelastine HCL and fluticasone proprionate) nasal spray for treatment of seasonal
allergic rhinitis (SAR) in 2009. The US FDA approved Dymista in May ’12 and the company received approval from the EU during the current quarter. While dispatches to the US have begun, the management indicated that these were not significant. A launch in the EU is likely in early FY14.
• The company has indicated its plans for new joint ventures and acquisitions in key markets like Turkey, Morocco, Brazil and Nigeria. Further, it has acquired over-the-counter and pharmaceutical divisions of Australian drug maker Sigma Pharmaceuticals for $800 mn.
• Led by healthy contribution from formulations business compared to API business, change in products mix & supply of Dymista & Lexapro to US, the company's gross margins increased 250 bps YoY to 60.7% level in Q3FY13. However on QoQ basis it declined by 250 bps due to 180 days exclusivity of Lexapro in Q2FY13. Despite higher sales and increased gross margins, Cipla's EBITDA margins expanded by 23.8% on a YoY basis primarily due to higher employee cost at 38% YoY.
• During Q3FY13, other expenditure declined by 140 bps YoY but increased 315 bps QoQ to 25.7% level mainly due to increase in travel expenses & professional charges. As a result, company’s EBITDA grew 26% y-o-y (declined 27% QoQ) to Rs 4930 crore in Q3FY13. Due to going away of the tax benefits, company’s tax rate stood at 27.3% in Q3FY13 compared to 21.5% in Q3FY12 (25.4% in Q2FY13). Over the same period the company's adj net profit grew 21% y-o-y (declined 33% q-o-q) to Rs 3200 crore in Q3FY13. The company's reported adj EPS were Rs 4.0 in Q3 FY13 compared to Rs 3.3 in Q2 FY12 (Rs 5.9 in Q2FY13).
• The management has upped its capex guidance for FY13 to Rs 650-700 crore (from earlier capex guidance of Rs 4-5 billion) due to office expansion for Rs 2700 crore. While other capex for API facility & R&D is likely to be Rs 400-500 crore. Capex for FY14E is likely to be Rs 300-400 crore.
Buy Pfizer Ltd For Target 1300.00Pfizer Ltd provides prescription medicines for humans and animals in India & internationally.
During the first quarter ended the robust growth in the Net Profit of the company and it is rose by 11.26% to Rs. 522.80 million.
Pfizer has launched 26 Branded Value Offerings (BVOs) during the year mainly in anti infective, analgesic, CNS, CVS & diabetes segment.
Pfizer made clinical research investments of US$ 1.18 million in pharmaceutical R&D is one of the highest spenders in India.
Pfizer has approved the sale of its wholly owned subsidiary Pfizer Animal Pharma Pvt Ltd to Pfizer Animal Health India Ltd, a 100 percent indirect subsidiary of Pfizer Inc, USA for Rs 471.60 crore.
Pfizer entered into chronic segments such as neuroscience which is one of the fastest growing markets in addition to new products in India.
Pfizer Ltd (India) has a turnover of US$ 184.96 million (March 2012).
Outlook and Conclusion
At the current market price of Rs.1150.00, the stock P/E ratio is at 15.10 x FY13E and 13.70 x FY14E respectively.
Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.76.14 and Rs.83.95 respectively.
On the basis of EV/EBITDA, the stock trades at 6.71 x for FY13E and 5.57 x for FY14E.
Price to Book Value of the stock is expected to be at 2.24 x and 1.93 x respectively for FY13E and FY14E.
We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.1300.00 for Medium to Long term investment.
Buy ONGC For Target Rs.402ONGC reported net sales at INR210b (v/s est of INR199b, adj. for subsidy), EBITDA at INR112b (v/s est of INR103b, adj. for subsidy), and PAT at INR56b (v/s est of INR52b, adj. for subsidy), up 20% YoY and down 6% QoQ.
* Reported numbers were above estimates primarily due to (a) higher standalone oil sales at 4.9mmt (v/s est 4.7mmt) due to reduction in BS&W (basin sediments and water) content and (b) higher VAP realizations.
* 3QFY13 gross realization stood at USD110/bbl (flat QoQ and v/s USD111.7/bbl in 3QFY12). Subsidy was below estimate at USD62.2/bbl (v/s est of USD64.4/ bbl; USD63 in 2QFY13 and USD66.8 in 3QFY12), lower by ~USD2/bbl than our estimate, primarily due to higher oil sales (used in denominator to calculate per bbl subsidy) and resulting in higher net realization at USD48/bbl (v/s USD46.8/bbl in 2QFY13 and USD45 in 3QFY12). Subsidy sharing for the quarter in absolute terms stood at INR124.3b, largely flat on a YoY and QoQ basis.
* D,D&A at INR44b was marginally higher, while other income was marginally lower than estimate at INR14b (est INR15b).
* FY14 oil production guidance higher than our estimate: ONGC expects FY14 domestic oil production at 29.1mmt (standalone: 25.8 and JV: 3.3) and gas production at 26.5bcm (standalone: 24.6 and JV: 1.8) v/s our estimate of domestic oil production at 28.1mmt and gas production at 26.6bcm.
* Upstream sharing in 9MFY13 at 36%; we model 40% in FY13: ONGC's 3QFY13 subsidy stood at INR124b and its share in upstream stood at 82.4% (v/s 82% in 9MFY13 and 80.8% in FY12). With FY13E under-recoveries at >INR1.6t (v/s INR1.4t in FY12) and given the precarious government financials, we believe FY13 upstream will be higher and model upstream subsidy sharing at 40%.
Valuation and view: We estimate gas price of USD7/mmbtu from FY15E for ONGC. Also, in line with the announced reforms, we model a diesel price hike of INR0.45/ lt/month and thus estimate a 30% and 50% reduction in under-recoveries in FY14E and FY15E respectively from the FY13 base. However, we have conservatively assumed a higher upstream sharing of 50%/60% in FY14E/15E to compensate for increased earnings. The stock trades at 9.7x FY14E EPS of INR31.7. Our SOTP-based target price for ONGC stands at INR402/sh. Buy.
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