05/04/2013
Buy Thermax Ltd For Target Rs.770
TMX is benefiting from structural trends such as (1) continued energy shortages and higher energy prices, driving demand for energy efficiency products, (2) hunt for alternative energy, given demanding regulations and improving viability, (3) increasing environmental concerns and stringent regulatory intervention, (4) INR depreciation leading to increased possibilities for exports (currently 22% of revenues).
* There are also initial signs that the capex environment in base sectors (like Food Processing, Pharmaceuticals, Textiles, Chemicals, Engineering, etc) is improving. Few large Cement / Refinery projects are likely to be awarded in 1HFY14, improving order intake visibility.
* We expect TMX to report acceleration in revenue growth, driven by improvement in GFCF (particularly in base industries) and interplay of several structural trends. The company's revenues have been largely stagnant over FY11-13, impacted by macroeconomic volatility, and we expect 14% CAGR over FY13-15. While exports would grow at 27% CAGR, the domestic business is likely to grow at 10% CAGR. NWC has been in a tight range of ~15 days (as at September 2012).
* We believe that the key challenge is to sustain double-digit margins, given the constrained environment. The management has stated that while the bid margins remain constrained, it is attempting to improve them over the project execution period through process efficiency, value engineering, cost optimization, etc. Another important challenge is the Power BTG JV with Babcock (51% stake, TMX), as we believe that businesses exposed to heavy products will witness elongated periods of constrained environment. We expect losses of INR1.3b in FY14, and this remains an important overhang.
* We maintain Buy, with a price target of INR770 (18x FY15E EPS, LPA) and 1x BV for investments in subsidiaries.
Buy Tilaknagar Industries Ltd For Target Rs.71.00
TI is in the league of India’s largest liquor companies with a market share of about 5%; Mansion House is the second-largest selling brandy in India.
* The company’s net sales registered a 22.62% increase and stood at a record Rs. 1465.98 million from Rs. 1195.53 million over the corresponding quarter last year.
* The company’s net profit registered an 18.35% increase and stood at a record Rs. 130.42 million from Rs. 110.20 million over the corresponding quarter last year.
* The company has reported an EPS of Rs. 1.08 for the 3rd quarter as against an EPS of Rs. 0.95 in the corresponding quarter of the previous year.
* TI currently holds more than 60 per cent of the brandy market in South India. * Premium brands such as Courrier Napolean Green is now extended to new states such as Karnataka, Kerala, Tamil Nadu, Goa, Sikkim and Puducherry.
* Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 20% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Tilaknagar Industries Ltd. is one of the renowned Indian Made Foreign Liquor players (including whisky, brandy, gin, rum and vodka) with presence across India, reported its financial results for the quarter ended 31 Dec, 2012. The third quarter witnesses a healthy increase in overall sales as well as profitability on account, an enhanced Dealers network and robust infrastructural Support system.
The company’s net profit jumps to Rs.130.42 million against Rs.110.20 million in the corresponding quarter ending of previous year, an increase of 18.35%. Revenue for the quarter rose 22.62% to Rs.1465.98 million from Rs.1195.53 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.08 a share during the quarter, registering 12.57% increase over previous year period. Profit before interest, depreciation and tax is Rs.390.29 millions as against Rs.373.77 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.62.70, the stock P/E ratio is at 15.18 x FY13E and 12.60 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.4.13 and Rs.4.98 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 20% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.97 x for FY13E and 4.41 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.70 x and 1.50 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.71.00 for Medium to Long term investment.
Buy Cummins India Ltd For Target Rs.585
Domestic demand for DG sets has grown 22-25% in FY13, driven by acute power shortages, primarily in South India and also in North and West India. The demand environment could remain buoyant in the medium term, as contentious issues in the Power sector are yet to be addressed and consensus on key reforms is still awaited. Also, growth in FY14 is likely to be driven by the full benefit of 5-6% price increases in FY13 and expected 15-20% increase post implementation of the CPCB norms.
* We believe KKC is amongst the best positioned to benefit from any uptick in the domestic market, as short-cycle products account for most of the revenues (gestation period of 3-6 months).
* In the Industrial business, the key drivers are Mining, Railways and Construction. During 3QFY13, the Industrial/Auto businesses witnessed cyclical uptick, with revenues rising 35%/100% QoQ (YoY decline ~5%). Medium-term growth drivers will be offshore Oil & Gas (QSK 60), Railways (attempt to influence policy for replacing batteries), new OEM business (like SANY, Leigeng), Mining, etc.
* The initial traction in LHP exports has been encouraging and the revised expectations are that revenues could increase to INR20b per year in the next 4-5 years (v/s peak HHP export revenues of INR13b in FY09). The key markets are the Middle East and South Africa, and India is being established as a global hub for such products. The Powergen factory (for Urja Gensets) will be commissioned in April/May 2013.
* KKC has been showing robust margin performance ( EBITDA margins at 19.1% in 3QFY13) largely driven by value engineering, cost rationalization programs, etc. However, given the volatility in commodity prices, unfavorable currency movement, etc, the company expects that EBITDA margin could decline by 50bp, going forward. We believe profitabiltiy performance continue to remain strong , supported by (i) twin trends of INR depreciation and lower commodity prices, and (ii) benefits accruing from 2.5-3% price hike from June 2012. In our view, further 3% price increase taken in January 2013 will again support margins and expect 4QFY13 EBITDA margin at 19.3%.
* We expect KKC to report 17% revenue CAGR over FY13-15, and this will be driven by 25% CAGR in export revenues, while growth in the domestic powergen business is likely to be muted at 11%. Maintain Buy with a price target of INR585.
Buy Omkar Specialty Chemicals Ltd For Target Rs.142.00
Omkar Specialty Chemicals Ltd is mainly engaged in the manufacture and sale of Specialty Chemicals and Intermediates for Chemical and Allied Industries.
* During the quarter, the robust growth of Net Profit is increased by 59.89% to Rs. 57.85 million.
* Revenue for the quarter rose 22.43% to Rs.480.42 million from Rs.392.39 million, when compared with the prior year period.
* Omkar Speciality Chemicals Ltd has entered the active pharmaceutical ingredient (API) business with the acquisition of Lasa Laboratory P. Ltd.
* OSCL has announced the commissioning of the plant of its Wholly Owned Subsidiary - Urdhwa Chemicals Co. Pvt. Ltd at Chiplun, Maharashtra with a capacity of 2800 MTs per annum.
* OSCL gets Star Export House status from Ministry of Commerce and Industry.
* Net Sales and PAT of the company are expected to grow at a CAGR of 36% and 41% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.127.00, the stock P/E ratio is at 10.93 x FY13E and 8.73 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.11.62 and Rs.14.54 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 36% and 41% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.01 x for FY13E and 4.14 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.94 x and 1.59 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.142.00 for Medium to Long term investment.
Buy Thermax Ltd For Target Rs.770TMX is benefiting from structural trends such as (1) continued energy shortages and higher energy prices, driving demand for energy efficiency products, (2) hunt for alternative energy, given demanding regulations and improving viability, (3) increasing environmental concerns and stringent regulatory intervention, (4) INR depreciation leading to increased possibilities for exports (currently 22% of revenues).
* There are also initial signs that the capex environment in base sectors (like Food Processing, Pharmaceuticals, Textiles, Chemicals, Engineering, etc) is improving. Few large Cement / Refinery projects are likely to be awarded in 1HFY14, improving order intake visibility.
* We expect TMX to report acceleration in revenue growth, driven by improvement in GFCF (particularly in base industries) and interplay of several structural trends. The company's revenues have been largely stagnant over FY11-13, impacted by macroeconomic volatility, and we expect 14% CAGR over FY13-15. While exports would grow at 27% CAGR, the domestic business is likely to grow at 10% CAGR. NWC has been in a tight range of ~15 days (as at September 2012).
* We believe that the key challenge is to sustain double-digit margins, given the constrained environment. The management has stated that while the bid margins remain constrained, it is attempting to improve them over the project execution period through process efficiency, value engineering, cost optimization, etc. Another important challenge is the Power BTG JV with Babcock (51% stake, TMX), as we believe that businesses exposed to heavy products will witness elongated periods of constrained environment. We expect losses of INR1.3b in FY14, and this remains an important overhang.
* We maintain Buy, with a price target of INR770 (18x FY15E EPS, LPA) and 1x BV for investments in subsidiaries.
Buy Tilaknagar Industries Ltd For Target Rs.71.00TI is in the league of India’s largest liquor companies with a market share of about 5%; Mansion House is the second-largest selling brandy in India.
* The company’s net sales registered a 22.62% increase and stood at a record Rs. 1465.98 million from Rs. 1195.53 million over the corresponding quarter last year.
* The company’s net profit registered an 18.35% increase and stood at a record Rs. 130.42 million from Rs. 110.20 million over the corresponding quarter last year.
* The company has reported an EPS of Rs. 1.08 for the 3rd quarter as against an EPS of Rs. 0.95 in the corresponding quarter of the previous year.
* TI currently holds more than 60 per cent of the brandy market in South India. * Premium brands such as Courrier Napolean Green is now extended to new states such as Karnataka, Kerala, Tamil Nadu, Goa, Sikkim and Puducherry.
* Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 20% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Tilaknagar Industries Ltd. is one of the renowned Indian Made Foreign Liquor players (including whisky, brandy, gin, rum and vodka) with presence across India, reported its financial results for the quarter ended 31 Dec, 2012. The third quarter witnesses a healthy increase in overall sales as well as profitability on account, an enhanced Dealers network and robust infrastructural Support system.
The company’s net profit jumps to Rs.130.42 million against Rs.110.20 million in the corresponding quarter ending of previous year, an increase of 18.35%. Revenue for the quarter rose 22.62% to Rs.1465.98 million from Rs.1195.53 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.08 a share during the quarter, registering 12.57% increase over previous year period. Profit before interest, depreciation and tax is Rs.390.29 millions as against Rs.373.77 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.62.70, the stock P/E ratio is at 15.18 x FY13E and 12.60 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.4.13 and Rs.4.98 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 22% and 20% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.97 x for FY13E and 4.41 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.70 x and 1.50 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.71.00 for Medium to Long term investment.
Buy Cummins India Ltd For Target Rs.585Domestic demand for DG sets has grown 22-25% in FY13, driven by acute power shortages, primarily in South India and also in North and West India. The demand environment could remain buoyant in the medium term, as contentious issues in the Power sector are yet to be addressed and consensus on key reforms is still awaited. Also, growth in FY14 is likely to be driven by the full benefit of 5-6% price increases in FY13 and expected 15-20% increase post implementation of the CPCB norms.
* We believe KKC is amongst the best positioned to benefit from any uptick in the domestic market, as short-cycle products account for most of the revenues (gestation period of 3-6 months).
* In the Industrial business, the key drivers are Mining, Railways and Construction. During 3QFY13, the Industrial/Auto businesses witnessed cyclical uptick, with revenues rising 35%/100% QoQ (YoY decline ~5%). Medium-term growth drivers will be offshore Oil & Gas (QSK 60), Railways (attempt to influence policy for replacing batteries), new OEM business (like SANY, Leigeng), Mining, etc.
* The initial traction in LHP exports has been encouraging and the revised expectations are that revenues could increase to INR20b per year in the next 4-5 years (v/s peak HHP export revenues of INR13b in FY09). The key markets are the Middle East and South Africa, and India is being established as a global hub for such products. The Powergen factory (for Urja Gensets) will be commissioned in April/May 2013.
* KKC has been showing robust margin performance ( EBITDA margins at 19.1% in 3QFY13) largely driven by value engineering, cost rationalization programs, etc. However, given the volatility in commodity prices, unfavorable currency movement, etc, the company expects that EBITDA margin could decline by 50bp, going forward. We believe profitabiltiy performance continue to remain strong , supported by (i) twin trends of INR depreciation and lower commodity prices, and (ii) benefits accruing from 2.5-3% price hike from June 2012. In our view, further 3% price increase taken in January 2013 will again support margins and expect 4QFY13 EBITDA margin at 19.3%.
* We expect KKC to report 17% revenue CAGR over FY13-15, and this will be driven by 25% CAGR in export revenues, while growth in the domestic powergen business is likely to be muted at 11%. Maintain Buy with a price target of INR585.
Buy Omkar Specialty Chemicals Ltd For Target Rs.142.00Omkar Specialty Chemicals Ltd is mainly engaged in the manufacture and sale of Specialty Chemicals and Intermediates for Chemical and Allied Industries.
* During the quarter, the robust growth of Net Profit is increased by 59.89% to Rs. 57.85 million.
* Revenue for the quarter rose 22.43% to Rs.480.42 million from Rs.392.39 million, when compared with the prior year period.
* Omkar Speciality Chemicals Ltd has entered the active pharmaceutical ingredient (API) business with the acquisition of Lasa Laboratory P. Ltd.
* OSCL has announced the commissioning of the plant of its Wholly Owned Subsidiary - Urdhwa Chemicals Co. Pvt. Ltd at Chiplun, Maharashtra with a capacity of 2800 MTs per annum.
* OSCL gets Star Export House status from Ministry of Commerce and Industry.
* Net Sales and PAT of the company are expected to grow at a CAGR of 36% and 41% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.127.00, the stock P/E ratio is at 10.93 x FY13E and 8.73 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.11.62 and Rs.14.54 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 36% and 41% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.01 x for FY13E and 4.14 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.94 x and 1.59 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.142.00 for Medium to Long term investment.
No comments:
Post a Comment