PARSADAM AND VIKAS PARSHURAM SAMWATSARE
Buy Ultratech Cement Ltd. For Target Rs. 1,944
he management is optimistic on the long-term prospects of the Cement sector. This has been the genesis of its focus on bolstering industry leadership. Its ongoing expansion would increase capacity by 20% over FY14-16 to 64.45MT (including Star Cement).
* In FY13, the 10% escalation in total cost per unit negated the benefit of 4-10% growth in realizations across segments, resulting in a moderate increase in profitability.
* The company believes that modest GDP growth, inflation and regulatory bottlenecks will continue to be near-term hurdles for the industry. It has adopted multiple operating efficiency enhancement measures (fuel mix optimization, greater reliance on renewable energy and alternative fuels, etc) to combat cost pressure.
* It has provided for a capital outlay of INR114b (INR71b over FY14-15), which includes INR44b+ towards improvement in operating efficiencies (energy and logistics) and future growth (land, mines).
* Capital efficiencies (RoCE/RoE) were down 2pp/1.6pp, driven by flattish operating margin trend and deterioration in asset utilization (capacity utilization was down 1.2pp to 83.4%).
* With its 61.5MT of capacity (by FY16) and pan India presence, UTCEM is the best proxy for the Indian Cement industry. The stock trades at 16.4x FY15E EPS, and at an EV of 8.9x FY15E EBITDA and USD137/ton. Maintain Buy with a target price of INR1,944 (EV of 9x FY15E EBITDA).
Buy Hindustan Zinc For Target Rs. 139We have cut down our metals price expectations in line with current weak trend of LME and INR. But there is improved confidence on the company marching towards delivering mining growth led improvement in integrated (relatively much higher margins) metal production in FY14 and beyond. This would cushion earnings to large extent even if present metal price weakness extends throughout FY14. Our EBITDA and EPS estimates for FY14e our moderated by mere c1.5% while we cut our valuation multiple to 5x from 5.5x EV/EBITDA for FY14e. Our fair valuation/target price stands reduced from Rs146/share to Rs139. We estimate net cash & equivalents of Rs. 62.5/share for FY14e which works out to be 61% of present market cap.
Excluding cash component from market cap and other income from PAT, valuation stands at 3.5x P/E for FY14e. Given company has mining reserves of >25years at present run-rate and doesn't have any massive capex lined ahead, we believe present downturn in the stock price offers excellent investment opportunity for both medium and long term investors. Any improvement in metal prices would be icing on the cake triggering further upward rerating potential. We reiterate BUY with TP of Rs139 over 9 month perspective offering 36% upside.
On Friday Rupee Again Hitt Life Time Against Dollar !!!!!!!!!
Yesssssssssssss
WE READY FOR 62---63
Yessssssssss
Cross & Close Above 61.15 !!!
NON STOP RALLY TO 63 EXPECTED
Buy Power Finance Corporation Ltd. For Target Rs . 162
Power Finance Corporation Ltd was set up on 16th July 1986 as a
Financial Institution dedicated to Power Sector financing and committed
to the integrated development of the power and associated sectors. The
Corporation is registered as a NBFC with the RBI. PFC was incorporated
with an objective to provide financial resources and encourage flow of
investments to the power and associated sectors, to work as a catalyst
to bring about institutional improvements in streamlining the functions
of its borrowers in financial, technical and managerial areas to ensure
optimum utilization of available resources and to mobilize various
resources from domestic and international sources at competitive rates.
Investment Rationale
Better Loan growth compared to banks PFC’s overall loan book grew by 23% in FY13 which is comparatively better than banks & also the growth remained stable over the previous year. It’s sanctions grew by 26% in FY13 mainly due to allocation to generation assets. Also the share of state government at 65% continued to rule the loan book.
Sustainable NIMs
The major driver for sustainable NIM at 4.3%+ has been PFC’s diversified borrowing mix favoring foreign currency borrowings & tax free bonds. The company plans to further diversify it’s borrowing mix by issuing even more ECBs, low cost tax free bonds & large medium term
notes in foreign currency. Better yields result in sustaining the Net Interest Margins further.
Asset Quality remains stable
There were no incremental NPAs in FY13 thus keeping the asset quality stable. PFC is also building a non specific provision against standard assets. Acceptance of the company’s SEB restructuring package can lead to a better cash conversion cycle for related private sector infra companies, but the increasing share of projects in the private sector may raise asset quality concerns for the medium term.
Low Cost Model
PFC’s productivity has significantly improved & also it’s cost to income ratio has slipped to 2.3% in FY13 compared to 2.9% in FY12. Hence the lower the cost to income ratio the better efficient it is for the well being of the firm.
Valuation
At CMP of `137.95 the stock is trading at 0.68x & 0.60x it’s FY14E & FY15E Book Value per share which we believe is attractive. We attach an exit P/BV multiple of 0.7x it’s FY15E Book Value of `231.29 per share. Based on our valuation we arrive at the target price of `162 with a
BUY rating & a potential upside of 18%.
Buy Blue Dart Express Ltd. For Target Rs. 3,256
nvestment Rationale
Beats the slowdown – Robust growth despite tough macro-economic conditions Blue Dart Express Limited (BDEL), has reported 20% CAGR growth in volumes handled during CY07 – FY13 and 18% CAGR growth in volumes handled during CY10 - FY13. This demonstrates ability of the company to maneuver the global slowdown very efficiently. Also, revenue growth has been maintained at a robust 17% CAGR over CY07 – FY13 and 22% CAGR over CY10 – FY13. It has the most extensive domestic network covering over 33,742 locations, and service more than 220 countries and territories worldwide through its parent company DHL.
Unbeatable Air express dominance supported by growing ground express concentration
BDEL has seven aircraft in its fold which are leased from its parent, DHL. It has two Boeing 737s and five Boeing 757s. These are leased for a period of five years from the parent, DHL. It holds 48% market share in the air express segment in India and is the largest player in that segment in India. BDEL holds 16% market share in the Ground segment. It has warehouses at 68 locations across the country as well as bonded warehouses at the 7 major metros of Ahmedabad, Bangalore, Chennai, Delhi, Mumbai, Kolkata and Hyderabad. We expect BDEL’s leadership position in the Indian market to continue driven by strong outlook for industries such as ECommerce, BFSI, Pharmaceuticals, Automobiles, etc.
Robust Balance Sheet and Zero Debt status
BDEL is a zero debt company as per its latest financials on 31st March, 2013. It currently has cash of `2.37 bn on its books and is free cash flow positive. BDEL has an asset light model. It has earmarked `1,000 mn capex every year for the next two years which looks comfortable given the cash rich status of the company. Over CY10 - FY13, BDEL has reported 22% CAGR growth in Net Sales and 25% CAGR growth in PAT.
Strong Parentage by way of DHL
BDEL is 75% owned by DHL (DHL Express Singapore Pte Ltd) which is one of the world’s largest courier service companies. DHL is present in over 220 countries and territories across the globe, making it the most international company in the world and has workforce exceeding 285,000 employees. DHL ships 7 mn items around the world every day and has 80,000 vehicles globally. DHL had global revenues of almost $38 bn in 2011 and is the largest logistics company in the world by revenues. On an average, DHL handles more than 15 Lac shipments per day globally.
E-Commerce to provide next boost for revenue growth
BDEL provides logistics services to E-Commerce providers such as prominent shopping and travel portals. Since logistics is a highly capital intensive business, these portals find it inefficient to set up their own network to ship goods to clients, thereby making use of existing, entrenched networks. This sector currently contributes only 9% of BDEL’s consolidated revenues and hence there is further potential to ramp up volumes from the segment. Cash on Delivery (COD) is the preferred mode of payment for 55% - 60% of Indian shoppers who use e-commerce to shop. This is because Indians still do not trust online payment modes and the “payment only after delivery” has a culture affinity in India. Executing COD efficiently and painlessly for the customer is critical to the success of any e-commerce player in the country.
Valuation
BDEL is an acknowledged leader in the air express delivery segment in India, with a market share of 48%. With around 13% market share in ground express cargo segment, it looks to significantly expand in this segment in coming period. We expect BDEL’s revenue and net profit to grow at CAGR of 23% and 26% respectively over FY13-16. We expect increasing share of high margin value-added business and operating leverage are likely to expand BDEL's EBITDA margins from 14.2% in FY13 to 15.3% by FY16. At the CMP of `2,424, BDEL trades at P/E of 15x FY16E EPS of `163. We attach an exit multiple of 20x to arrive at the target price of `3,256. We initiate coverage on BDEL with a BUY rating and target price of `3,256, implying an upside potential of 34%.
Buy Power Finance Corporation Ltd. For Target Rs . 162
Power Finance Corporation Ltd was set up on 16th July 1986 as a
Financial Institution dedicated to Power Sector financing and committed
to the integrated development of the power and associated sectors. The
Corporation is registered as a NBFC with the RBI. PFC was incorporated
with an objective to provide financial resources and encourage flow of
investments to the power and associated sectors, to work as a catalyst
to bring about institutional improvements in streamlining the functions
of its borrowers in financial, technical and managerial areas to ensure
optimum utilization of available resources and to mobilize various
resources from domestic and international sources at competitive rates.Investment Rationale
Better Loan growth compared to banks PFC’s overall loan book grew by 23% in FY13 which is comparatively better than banks & also the growth remained stable over the previous year. It’s sanctions grew by 26% in FY13 mainly due to allocation to generation assets. Also the share of state government at 65% continued to rule the loan book.
Sustainable NIMs
The major driver for sustainable NIM at 4.3%+ has been PFC’s diversified borrowing mix favoring foreign currency borrowings & tax free bonds. The company plans to further diversify it’s borrowing mix by issuing even more ECBs, low cost tax free bonds & large medium term
notes in foreign currency. Better yields result in sustaining the Net Interest Margins further.
Asset Quality remains stable
There were no incremental NPAs in FY13 thus keeping the asset quality stable. PFC is also building a non specific provision against standard assets. Acceptance of the company’s SEB restructuring package can lead to a better cash conversion cycle for related private sector infra companies, but the increasing share of projects in the private sector may raise asset quality concerns for the medium term.
Low Cost Model
PFC’s productivity has significantly improved & also it’s cost to income ratio has slipped to 2.3% in FY13 compared to 2.9% in FY12. Hence the lower the cost to income ratio the better efficient it is for the well being of the firm.
Valuation
At CMP of `137.95 the stock is trading at 0.68x & 0.60x it’s FY14E & FY15E Book Value per share which we believe is attractive. We attach an exit P/BV multiple of 0.7x it’s FY15E Book Value of `231.29 per share. Based on our valuation we arrive at the target price of `162 with a
BUY rating & a potential upside of 18%.
Buy Blue Dart Express Ltd. For Target Rs. 3,256
nvestment Rationale
Beats the slowdown – Robust growth despite tough macro-economic conditions Blue Dart Express Limited (BDEL), has reported 20% CAGR growth in volumes handled during CY07 – FY13 and 18% CAGR growth in volumes handled during CY10 - FY13. This demonstrates ability of the company to maneuver the global slowdown very efficiently. Also, revenue growth has been maintained at a robust 17% CAGR over CY07 – FY13 and 22% CAGR over CY10 – FY13. It has the most extensive domestic network covering over 33,742 locations, and service more than 220 countries and territories worldwide through its parent company DHL.
Unbeatable Air express dominance supported by growing ground express concentration
BDEL has seven aircraft in its fold which are leased from its parent, DHL. It has two Boeing 737s and five Boeing 757s. These are leased for a period of five years from the parent, DHL. It holds 48% market share in the air express segment in India and is the largest player in that segment in India. BDEL holds 16% market share in the Ground segment. It has warehouses at 68 locations across the country as well as bonded warehouses at the 7 major metros of Ahmedabad, Bangalore, Chennai, Delhi, Mumbai, Kolkata and Hyderabad. We expect BDEL’s leadership position in the Indian market to continue driven by strong outlook for industries such as ECommerce, BFSI, Pharmaceuticals, Automobiles, etc.
Robust Balance Sheet and Zero Debt status
BDEL is a zero debt company as per its latest financials on 31st March, 2013. It currently has cash of `2.37 bn on its books and is free cash flow positive. BDEL has an asset light model. It has earmarked `1,000 mn capex every year for the next two years which looks comfortable given the cash rich status of the company. Over CY10 - FY13, BDEL has reported 22% CAGR growth in Net Sales and 25% CAGR growth in PAT.
Strong Parentage by way of DHL
BDEL is 75% owned by DHL (DHL Express Singapore Pte Ltd) which is one of the world’s largest courier service companies. DHL is present in over 220 countries and territories across the globe, making it the most international company in the world and has workforce exceeding 285,000 employees. DHL ships 7 mn items around the world every day and has 80,000 vehicles globally. DHL had global revenues of almost $38 bn in 2011 and is the largest logistics company in the world by revenues. On an average, DHL handles more than 15 Lac shipments per day globally.
E-Commerce to provide next boost for revenue growth
BDEL provides logistics services to E-Commerce providers such as prominent shopping and travel portals. Since logistics is a highly capital intensive business, these portals find it inefficient to set up their own network to ship goods to clients, thereby making use of existing, entrenched networks. This sector currently contributes only 9% of BDEL’s consolidated revenues and hence there is further potential to ramp up volumes from the segment. Cash on Delivery (COD) is the preferred mode of payment for 55% - 60% of Indian shoppers who use e-commerce to shop. This is because Indians still do not trust online payment modes and the “payment only after delivery” has a culture affinity in India. Executing COD efficiently and painlessly for the customer is critical to the success of any e-commerce player in the country.
Valuation
BDEL is an acknowledged leader in the air express delivery segment in India, with a market share of 48%. With around 13% market share in ground express cargo segment, it looks to significantly expand in this segment in coming period. We expect BDEL’s revenue and net profit to grow at CAGR of 23% and 26% respectively over FY13-16. We expect increasing share of high margin value-added business and operating leverage are likely to expand BDEL's EBITDA margins from 14.2% in FY13 to 15.3% by FY16. At the CMP of `2,424, BDEL trades at P/E of 15x FY16E EPS of `163. We attach an exit multiple of 20x to arrive at the target price of `3,256. We initiate coverage on BDEL with a BUY rating and target price of `3,256, implying an upside potential of 34%.
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