Buy Sesa Goa For Target Rs. 208Adjusted PAT down 41%:
Adjusted PAT declined 41% YoY to INR5.1b (v/s our estimate of INR6b) due to higher than expected losses from core operations. Against our expectation of INR463m, adjusted loss after tax from core operations was INR1.7b, due to higher losses in iron ore and coke segment. The income tax dept has raised a demand of INR15b, disallowing EoU benefits pertaining to FY10-12. Based on legal opinion, Sesa has made no provisions.
* Iron ore operations remain suspended;
uncertainties persist: Iron ore operations remain suspended due to ban on mining in Goa and Karnataka. In 3QFY13, there was sale (E-auction) of only 30k tons of iron ore from inventories at Karnataka mines. Though the CEC has recommended approval of 2.29mtpa capacity of Sesa's mines in Karnataka, the Supreme Court has not yet granted permissions. For its Goa mining operations, the Supreme Court hearings are yet to commence.
* Expect first shipments from Liberia by 4QFY14:
Sesa has acquired the remaining 49% stake in WCL, Liberia at INR1.84b, as announced earlier. Capital expenditure and R&R will be announced by the end of FY13. The company will start transportation by road to get early cash flows (by 4QFY14).
* Merged entity valuations attractive; maintain Buy:
Though uncertainties regarding the iron ore business persist, the impact on valuations is minor in view of the imminent merger with Sterlite Industries. High Court approvals are expected by the end of February 2013. On merged entity basis, stock is trading at 5.4x FY15E EPS and 0.6x FY15E BV, and an EV of 4.8x FY15E EBITDA. Buy with an SOTP-based target price of INR208 - 17% upside.
Buy Grindwell Norton Limited For Target Rs.298.00Grindwell Norton Limited (GNO) is one of the subsidiaries of Compagnie de Saint- Gobain (Saint-Gobain), a transnational Group, with its headquarters in Paris and with sales of € 42.1 billion in 2011.
* During the quarter, the robust growth of Net Sales is increased by 4.06% to Rs. 2360.40 millions.
* The construction of a new plant for High Performance Refractories near Vadodara in Gujarat made considerable progress during the year. The plant has commenced the commercial production on Sep 07, 2012.
* The Operations of Company’s subsidiary in Bhutan improved and the plant achieved capacity utilization of about 83%.
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 13% over 2011 to 2014E respectively.
* During the year, a project for the manufacture of mine grids (part of the ADFORS’ Technical Fabrics business of Saint- Gobain) was initiated and completed.
Outlook and Conclusion
* At the current market price of Rs.266.05, the stock P/E ratio is at 13.36 x FY13E and 11.90 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.19.91 and Rs.22.37 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 13% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 7.86 x for FY13E and 6.92 x for FY14E.
* Price to Book Value of the stock is expected to be at 2.78 x and 2.45 x respectively for FY13E and FY14E.
The Company’s management is focus on improving price realization and operating performance (implementation of the World Class Manufacturing programme) and containing costs and working capital. At the same time, investments will continue to be made in developing new products and new markets in order to sustain growth.
The first quarter witness a healthy increase in overall sales as well as profitability on account of global network and exports of products. 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.298.00 for Medium to Long term investment.
Buy Era Infra Engineering Ltd. For Target Rs.155.00 Era Infra Engineering Ltd. is a world class engineering, construction and services conglomerate well integrated & present across the entire spectrum of infrastructure development.
* The company has Bagged DMRC section of Jama Masjid, Kashmere Gate and the Rampur, Kathgodam Highways project from NHAI.
* Era Infra Engineering Ltd has secured a contract for Construction of Heritage Institute of Medical Sciences at NH-2.
* Era Infra Engineering Ltd has demonstrated the results during the quarter; it’s originate the growth of Net Profit is stands up by 96.05% to Rs.485.11 million.
* The company has recommended the final dividend @ Rs.0.40/- share i.e.20%.
* Net Sales and operating profit of the company are expected to grow at a CAGR of 11% and 13% over 2011 to 2014E respectively.
* The Company proposes to raise funds for an amount of Rs.1,000 crore by issue of equity shares and or other financial instruments convertible into equity through Qualified Institutional Placement by way of FCCBs/ ADRs/ GDRs.
Outlook and Conclusion
* At the current market price of Rs.137.50, the stock P/E ratio is at 12.55 x FY13E and 11.21 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.10.95 and Rs.12.27 respectively.
* Net Sales and operating profit of the company are expected to grow at a CAGR of 11% and 13% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 6.06 x for FY13E and 5.64 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.25 x and 1.13 x respectively for FY13E and FY14E.
The second quarter witnesses a healthy increase in overall sales as well as profitability on account of the Company has received repeat orders from reputed clients like NTPC, Gujarat Ambuja, Rajasthan Spinning, Birla Tyres, Indian Glycols, National Dairy Development Board, Bharat Heavy Electrical Limited etc. We recommend ‘BUY’ in this particular scrip with a target price of Rs.155.00 for Medium to Long term investment.
BUY RENUKA CMP For Target Rs. 44 48 and 52
Buy Bliss GVS Pharma Limited For Target Rs.46.00Bliss GVS Pharma Limited has the most modern plant to manufacture Female Contraceptives, Soft Pessaries and Suppositories.
* During the quarter, the robust growth of Net Profit is increased by 8.67% to Rs. 246.94 million.
* Revenue for the quarter rose 32.24% to Rs.1048.66 million from Rs.793.00 million, when compared with the prior year period.
* During the year, the Company has had declared Interim Dividend at the rate of Rs.0.35 per Equity Share. (i.e. 35.00%) Equity share of Rs. 1/- each for the year ended 31st March 2012.
* The Company plans to set up local manufacturing units and Joint Venture and by relating its subsidiary to do better business.
* The company also plans to set up R&D lab to develop newer formulations and support Analytical Development.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 18% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.41.30, the stock P/E ratio is at 7.01 x FY13E and 6.33 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.89 and Rs.6.52 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 18% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.29 x for FY13E and 3.87 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.57 x and 1.26 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.46.00 for Medium to Long term investment.
Buy HDFC For Target Rs.919HDFC reported PAT of INR11.4b for 3QFY13, in line with our estimate. While core operating performance was better than expected (NII 5% higher than our estimate), lower than estimated trading profits and dividend income led to marginal deviation in profitability. Key highlights:
* AUM grew 21.5% YoY and 3.6% QoQ to INR1.77t. Corporate loans were flat QoQ; the entire quarterly increase in AUM came from retail (individual) loans. The AUM mix remains skewed in favor of retail loans, which constituted 69% of AUM (v/s 67% a quarter ago).
* Muted corporate loan growth (+7% YoY in 9MFY13 v/s 19% retail and 14% overall) not only impacted disbursement growth (+10% YoY in 9MFY13) but also fee income growth (down 25% YoY in 9MFY13). * Reported overall spread was largely stable (9M v/s 1H) at 2.28%, with
individual spread at 1.95% (1.96% in 1H) and corporate spread at 2.79% (2.72%in 1H).
* GNPA on 90-day overdue basis declined to 75bp from 77bp QoQ. Segmentwise, GNPA was 62bp (65bp a quarter ago) in the individual segment and 91bp (89bp a quarter ago) in the corporate segment.
* Other highlights: (1) In 3QFY13, HDFC routed interest on zero coupon NCDs through reserves to the tune of INR870m v/s INR1.2b in 2QFY13, and (2) Outstanding provisions including standard asset provisions stood at INR17.8b (110bp of outstanding loans) at the end of 3QFY13.
Valuation and view: We believe valuations are reasonable, considering HDFC's growth potential, sound business fundamentals, and substantially improved subsidiaries' performance (Life Insurance has turned profitable). Maintain Buy with an SOTP-based target price of INR919.
Buy NTPC Ltd For Target Rs.191Adjusted PAT in line with estimate: For 3QFY13, NTPC's recurring PAT was INR24.7b, after adjusting for INR1b of reversal/write-back of variable pay (included in staff cost) and for INR0.3b prior-period sales. The PAT, however, includes the benefit on tax gross-up. We estimate adjusted PAT at INR23.1b, in line with our forecast. Staff cost was INR6.9b, down 23% QoQ and 4% YoY, even after adjusting for write-back of variable pay. The decline in staff cost is substantial, considering the utility nature of the business and fixed cost structure.
* Sales growth muted: Revenue was muted (lower than our estimate) due to lower fuel cost (on higher usage of domestic coal) and lower contribution of gas projects. Realization declined from INR3.30/unit in 2QFY13 to INR2.83/ unit in 3QFY13, as fuel cost declined from INR2.03/unit to INR1.81/unit.
* Operational performance robust: Overall generation growth during 3QFY13 was robust at 6.6% YoY. While coal-based generation grew 9.5% YoY, gasbased generation declined 16.5% YoY. Average PLF for coal-based plants was 84.7% (v/s 83.8% in 3QFY12 and 74.8% in 2QFY13). In YTD FY13, NTPC added capacity of 2.66GW (v/s 2.82GW in FY12 and 2.5GW in FY11) and commercialized capacity of 3.82GW (v/s 1.2GW in FY12 and 1.5GW in FY11).
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