BIG BOSS
VIKAS PARSHURAM SAMWATSARE
Buy Dishman Pharmaceuticals & Chemicals Ltd For Target Rs.112
Despite a strong performance on a stand-alone basis, Dishman Pharma disappointed with a weak consolidated performance during Q3FY2014, which is reflected in a 1.3% and 6% decline in the revenues and the adjusted net profits respectively.
* The disappointment mainly came from the foreign subsidiaries including Carbogen Amcis and Dishman Netherlands, which witnessed a sharp fall in the OPM due to the deferment of a certain contract. We observe that Q3 tends to be a sequentially weak for the company traditionally.
* The management maintains the revenue guidance of over Rs1,300 crore and the net profit of Rs110 crore for FY2014, which implies that Q4FY2014 would be better. The subsequent quarters will see a better traction in the Carbogen Amcis and the vitamin-D businesses, which was amiss in Q3FY2014.
* Despite a weak Q3, we believe the long-term growth elements remain intact but with a risk of seasonal fluctuations in the CRAMS business. We cut our price target by 13% to Rs112 to factor in a lower than anticipated performance in Q3. We maintain our Buy rating on the stock (trades at 5.8x FY2014 earnings) purely on the valuations that more than factors in the inconsistency in the company’s performance.
Buy ING Vysya Bank Ltd For Target Rs.580
The Net Profit or PAT of ING Vysya Bank for the quarter ended 31st December 2013 increased by 3% to Rs 1673.4 mn from Rs. 1623.3 mn reported in the corresponding period of the previous year.
* Net Interest Income for the quarter increased to Rs. 4161 mn from Rs. 4029 mn in the corresponding quarter of the previous year. Net Interest Margin was at 3.35% in the current quarter compared to 3.61% in the corresponding quarter of the previous year. Adjusting for interest reversal on restructured accounts NIM stands at 3.55%.
* Provisions and contingencies decreased marginally to Rs. 230 mn from Rs. 246 mn in the corresponding quarter of the previous year. Gross NPA ratio and Net NPA ratio was at 1.68% and 0.21% respectively as on 31st December 2013.
* Operating costs in the quarter increased by 9.2% to Rs. 3564 mn. Operating profit increased to Rs. 2742.80 mn and cost to income ratio stood at 56.5%.
* During the quarter the Bank expanded its network by adding 2 branches and 10 ATMs. As on December 2013, the Bank has 551 branches and extension counters, 25 satellite offices and 628 ATMs.
* CASA ratio was at 34.7%, Core CASA stood at 32.7%. Provision ratio was 87.5%.
* The Capital Adequacy Ratio (CAR) of the Bank as on 31st December 2013 was 16.93% (as per Basel-III).
* Customer Assets grew by 10.1% to Rs. 362970 mn at the end of December 2013 from Rs. 329580 mn at end of December 2012.
* PAT of the company is expected to grow at a CAGR of 18% over 2012 to 2015E respectively.
FINANCIAL HIGHLIGHTS (STANDALONE)
Q3 FY14
Total interest earned by the bank rose by an insignificant 2.77% from Rs. 12388.70 mn to Rs. 12732.70 mn in Q3 FY14. Interest on advances and income on investments, are two main constituents of interest earned. Interest on advances rose by 3.31% whereas income on investments grew by 1.18%. Other income comprises of fees & commission, misc income, foreign exchange revenue and gain/loss on investments increased by 15% in current December quarter. Other income was up at Rs. 2146 mn from Rs. 1866 mn in corresponding quarter of the last fiscal. Provisions and contingencies have declined by 6.4% YOY and stood at Rs. 230 mn in Q3 FY14. Net Interest income, core income of the bank, rose by 3.3% from Rs. 4029 mn to Rs. 4161 mn in Q3 FY14. Net profit was also up by 3% from Rs. 1623 mn to Rs. 1673 mn in current December quarter. CASA rose by 13.20% at Rs. 135280 mn in Q3 FY14. Advances stood at Rs. 345931 mn compared to Rs. 321536 mn in Q3 FY13.
Outlook and Conclusion
* At the current market price of Rs.554.85, the stock P/E ratio is at 14.85 x FY14E and 14.03 x FY15E respectively.
* Earnings per share (EPS) of the company for FY14E and FY14E are seen at Rs. 37.35 and Rs.39.56 respectively.
* Net Profit or PAT of the company is expected to grow at a CAGR of 18% over 2012 to 2015E respectively.
* Price to Book Value of the stock is expected to be at 1.99 x and 1.74 x for FY14E and FY15E respectively.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs. 580.00 for Medium to Long term investment.
Buy Eros International Media Ltd For Target Rs.220
In Q3FY2014 the consolidated revenues of Eros International Media (Eros) rose by 17% YoY to Rs432.7 crore, led by the box-office success of Hindi movies “Goliyon Ki Raasleela Ram-Leela”, “Krrish 3” (overseas) and “R…Rajkumar”, and a strong growth in the revenues of the subsidiary, Ayngaran International, led by movies (Tamil) like “Arambam”. The total revenues of the subsidiary grew by 66% YoY to Rs124.3 crore during the quarter.
* The EBIT margin improved by 680BPS YoY to 31.6% (the highest ever in reporting history), led by a strong margin improvement in the stand-alone financials (up 940BPS YoY to 29.4%) led by highly profitable movies like “Goliyon Ki Raasleela Ram-Leela” and a strong growth in the high-margin television syndication and catalogue sales (around 14% of revenues, up significantly on a yoy basis). The net income for the quarter rose by 41% YoY and 149% QoQ to Rs92 crore.
* The visibility of Eros’ earnings in FY2015 is promising, with an impressive movie slate led by Rajinikanth starrer "Kochadaiyaan" and also other high-profile releases, such as "Happy Ending", starring Saif Ali Khan, and "Action Jackson", starring Ajay Devgan, among others. The management has plans to release around six to seven “A” category movies in FY2015
* In view of the strong earnings performance in the third quarter and an impressive movie slate for FY2015, we have increased our earnings estimates for FY2014, FY2015 and FY2016 by 17.7%, 8.2% and 6.9% respectively. However, to factor in the volatility in the earnings performance, we have maintained our 12-month price target at Rs220 (a 39% upside) along with the Buy rating. Risk: a poor box-office performance of the forthcoming movies could have a significant impact on our earnings estimates.
Buy PVR Ltd For Target Rs.610
PVR Ltd, largest multiplex operator and one of the prominent film entertainment companies in India announced lackluster December quarterly results with 11% fall in its net profit.
* The company’s net profit declined to Rs. 126.90 million against Rs. 142.20 million in Q3 FY13, a decline of 11%.
* Revenue for the quarter rose by 19% to Rs. 2235.00 million from Rs. 1877.10 million, when compared with the prior year period.
* EBITDA fell by 12.81% to Rs. 330.00 mn against Rs. 378.50 mn in the corresponding period of previous year.
* Finance costs have risen by 67% from Rs. 79.70 mn to Rs. 133.40 mn in current December quarter.
* PVR Ltd has 271 screens with the combined number increased to 408 (including 137 screens of Cinemax India Ltd) at 95 locations across 39 cities in 14 states and 1 union territory.
* PVR proposes to add 20 screens in the next quarter taking the total to 80 screens added in FY13-14.
* Revenues from movie exhibition segment which contributes 93% of the total revenues rose by 73% from Rs. 1825.20 mn to Rs. 3161.80 mn in current December quarter.
* Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 38% over 2012 to 2015E respectively.
QUARTERLY HIGHLIGHTS (STANDALONE)
Q3 FY14
Net sales of the company rose by 19% to Rs. 2235.00 million against Rs. 1877.10 million in the corresponding quarter of previous year. Net profit declined by 11% from Rs. 142.20 mn to Rs. 126.90 mn in current December quarter. Profit before interest, depreciation and tax stood at Rs. 330 mn against Rs. 387.50 mn in the corresponding quarter of the previous year. Other income also fell by 30% at Rs. 7.40 mn in Q3 FY14. Net Profit and EBDITA Margin declined by 189 and 540 basis points respectively in Q3 FY14.
OUTLOOK AND CONCLUSION
* At the current market price of Rs.561.40, the stock P/E ratio is at 35.86 x FY14E and 30.12 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs 15.65 and Rs.18.64 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 38% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 16.29 x for FY14E and 13.30 x for FY15E.
* Price to Book Value of the stock is expected to be at 3.17 x and 2.87 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.610.00 for Medium to Long term investment.
Hold State Bank of India For Target Rs.1,675
SBI’s Q3FY2014 performance has shown an improvement on the operational front as its NII grew by 13.3% YoY. However, a higher opex (up 31.4% YoY) and an increase in the effective tax rate (due to the creation of a deferred tax liability of Rs234 crore) marred the earnings growth.
* The addition to the stressed loans were lower on a sequential basis at Rs15,362 crore in Q3FY2014 vs Rs16,950 crore in Q2FY2014, as the fresh restructuring was lower at Rs3,924 crore. However, the slippages of Rs11,438 crore were at the higher end. The bank has indicated for a restructuring pipeline of Rs9,500 crore and the asset quality issues remain a key overhang on the stock.
* We have revised our earnings estimates for FY2014 and FY2015 to factor for higher provisions and opex. In addition, we have also lowered our valuation multiple to 0.8x on FY2015 book value (to factor for subdued return ratios and a potential dilution over the next three years) leading to a SoTP-based price target of Rs1,675. We maintain our Hold rating on the stock (purely based on the valuations).
Valuation and outlook
The Q3FY2014 results show some improvement in the operating performance though the earnings growth remained under pressure. Given the weak economic environment, we believe the bank will continue to face challenges in maintaining its asset quality. In addition, the carry-over of investment losses (due to a rise in the bond yields), provision for pension and NPAs will affect the earnings growth. We have revised our earnings estimates for FY2014 and FY2015 to factor for higher provisions and the opex. In addition, we have also lowered our valuation multiple to 0.8x on FY2015 book value (to factor for subdued return ratios and potential dilution over the next three years) leading to a price target of Rs1,675. We maintain our Hold rating on the stock (purely based on the valuations).
Research Ltd
VIKAS P SAMWATSARE
VIKAS PARSHURAM SAMWATSARE
Buy Dishman Pharmaceuticals & Chemicals Ltd For Target Rs.112 Despite a strong performance on a stand-alone basis, Dishman Pharma disappointed with a weak consolidated performance during Q3FY2014, which is reflected in a 1.3% and 6% decline in the revenues and the adjusted net profits respectively.
* The disappointment mainly came from the foreign subsidiaries including Carbogen Amcis and Dishman Netherlands, which witnessed a sharp fall in the OPM due to the deferment of a certain contract. We observe that Q3 tends to be a sequentially weak for the company traditionally.
* The management maintains the revenue guidance of over Rs1,300 crore and the net profit of Rs110 crore for FY2014, which implies that Q4FY2014 would be better. The subsequent quarters will see a better traction in the Carbogen Amcis and the vitamin-D businesses, which was amiss in Q3FY2014.
* Despite a weak Q3, we believe the long-term growth elements remain intact but with a risk of seasonal fluctuations in the CRAMS business. We cut our price target by 13% to Rs112 to factor in a lower than anticipated performance in Q3. We maintain our Buy rating on the stock (trades at 5.8x FY2014 earnings) purely on the valuations that more than factors in the inconsistency in the company’s performance.
Buy ING Vysya Bank Ltd For Target Rs.580 The Net Profit or PAT of ING Vysya Bank for the quarter ended 31st December 2013 increased by 3% to Rs 1673.4 mn from Rs. 1623.3 mn reported in the corresponding period of the previous year.
* Net Interest Income for the quarter increased to Rs. 4161 mn from Rs. 4029 mn in the corresponding quarter of the previous year. Net Interest Margin was at 3.35% in the current quarter compared to 3.61% in the corresponding quarter of the previous year. Adjusting for interest reversal on restructured accounts NIM stands at 3.55%.
* Provisions and contingencies decreased marginally to Rs. 230 mn from Rs. 246 mn in the corresponding quarter of the previous year. Gross NPA ratio and Net NPA ratio was at 1.68% and 0.21% respectively as on 31st December 2013.
* Operating costs in the quarter increased by 9.2% to Rs. 3564 mn. Operating profit increased to Rs. 2742.80 mn and cost to income ratio stood at 56.5%.
* During the quarter the Bank expanded its network by adding 2 branches and 10 ATMs. As on December 2013, the Bank has 551 branches and extension counters, 25 satellite offices and 628 ATMs.
* CASA ratio was at 34.7%, Core CASA stood at 32.7%. Provision ratio was 87.5%.
* The Capital Adequacy Ratio (CAR) of the Bank as on 31st December 2013 was 16.93% (as per Basel-III).
* Customer Assets grew by 10.1% to Rs. 362970 mn at the end of December 2013 from Rs. 329580 mn at end of December 2012.
* PAT of the company is expected to grow at a CAGR of 18% over 2012 to 2015E respectively.
FINANCIAL HIGHLIGHTS (STANDALONE)
Q3 FY14
Total interest earned by the bank rose by an insignificant 2.77% from Rs. 12388.70 mn to Rs. 12732.70 mn in Q3 FY14. Interest on advances and income on investments, are two main constituents of interest earned. Interest on advances rose by 3.31% whereas income on investments grew by 1.18%. Other income comprises of fees & commission, misc income, foreign exchange revenue and gain/loss on investments increased by 15% in current December quarter. Other income was up at Rs. 2146 mn from Rs. 1866 mn in corresponding quarter of the last fiscal. Provisions and contingencies have declined by 6.4% YOY and stood at Rs. 230 mn in Q3 FY14. Net Interest income, core income of the bank, rose by 3.3% from Rs. 4029 mn to Rs. 4161 mn in Q3 FY14. Net profit was also up by 3% from Rs. 1623 mn to Rs. 1673 mn in current December quarter. CASA rose by 13.20% at Rs. 135280 mn in Q3 FY14. Advances stood at Rs. 345931 mn compared to Rs. 321536 mn in Q3 FY13.
Outlook and Conclusion
* At the current market price of Rs.554.85, the stock P/E ratio is at 14.85 x FY14E and 14.03 x FY15E respectively.
* Earnings per share (EPS) of the company for FY14E and FY14E are seen at Rs. 37.35 and Rs.39.56 respectively.
* Net Profit or PAT of the company is expected to grow at a CAGR of 18% over 2012 to 2015E respectively.
* Price to Book Value of the stock is expected to be at 1.99 x and 1.74 x for FY14E and FY15E respectively.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs. 580.00 for Medium to Long term investment.
Buy Eros International Media Ltd For Target Rs.220In Q3FY2014 the consolidated revenues of Eros International Media (Eros) rose by 17% YoY to Rs432.7 crore, led by the box-office success of Hindi movies “Goliyon Ki Raasleela Ram-Leela”, “Krrish 3” (overseas) and “R…Rajkumar”, and a strong growth in the revenues of the subsidiary, Ayngaran International, led by movies (Tamil) like “Arambam”. The total revenues of the subsidiary grew by 66% YoY to Rs124.3 crore during the quarter.
* The EBIT margin improved by 680BPS YoY to 31.6% (the highest ever in reporting history), led by a strong margin improvement in the stand-alone financials (up 940BPS YoY to 29.4%) led by highly profitable movies like “Goliyon Ki Raasleela Ram-Leela” and a strong growth in the high-margin television syndication and catalogue sales (around 14% of revenues, up significantly on a yoy basis). The net income for the quarter rose by 41% YoY and 149% QoQ to Rs92 crore.
* The visibility of Eros’ earnings in FY2015 is promising, with an impressive movie slate led by Rajinikanth starrer "Kochadaiyaan" and also other high-profile releases, such as "Happy Ending", starring Saif Ali Khan, and "Action Jackson", starring Ajay Devgan, among others. The management has plans to release around six to seven “A” category movies in FY2015
* In view of the strong earnings performance in the third quarter and an impressive movie slate for FY2015, we have increased our earnings estimates for FY2014, FY2015 and FY2016 by 17.7%, 8.2% and 6.9% respectively. However, to factor in the volatility in the earnings performance, we have maintained our 12-month price target at Rs220 (a 39% upside) along with the Buy rating. Risk: a poor box-office performance of the forthcoming movies could have a significant impact on our earnings estimates.
Buy PVR Ltd For Target Rs.610PVR Ltd, largest multiplex operator and one of the prominent film entertainment companies in India announced lackluster December quarterly results with 11% fall in its net profit.
* The company’s net profit declined to Rs. 126.90 million against Rs. 142.20 million in Q3 FY13, a decline of 11%.
* Revenue for the quarter rose by 19% to Rs. 2235.00 million from Rs. 1877.10 million, when compared with the prior year period.
* EBITDA fell by 12.81% to Rs. 330.00 mn against Rs. 378.50 mn in the corresponding period of previous year.
* Finance costs have risen by 67% from Rs. 79.70 mn to Rs. 133.40 mn in current December quarter.
* PVR Ltd has 271 screens with the combined number increased to 408 (including 137 screens of Cinemax India Ltd) at 95 locations across 39 cities in 14 states and 1 union territory.
* PVR proposes to add 20 screens in the next quarter taking the total to 80 screens added in FY13-14.
* Revenues from movie exhibition segment which contributes 93% of the total revenues rose by 73% from Rs. 1825.20 mn to Rs. 3161.80 mn in current December quarter.
* Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 38% over 2012 to 2015E respectively.
QUARTERLY HIGHLIGHTS (STANDALONE)
Q3 FY14
Net sales of the company rose by 19% to Rs. 2235.00 million against Rs. 1877.10 million in the corresponding quarter of previous year. Net profit declined by 11% from Rs. 142.20 mn to Rs. 126.90 mn in current December quarter. Profit before interest, depreciation and tax stood at Rs. 330 mn against Rs. 387.50 mn in the corresponding quarter of the previous year. Other income also fell by 30% at Rs. 7.40 mn in Q3 FY14. Net Profit and EBDITA Margin declined by 189 and 540 basis points respectively in Q3 FY14.
OUTLOOK AND CONCLUSION
* At the current market price of Rs.561.40, the stock P/E ratio is at 35.86 x FY14E and 30.12 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs 15.65 and Rs.18.64 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 38% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 16.29 x for FY14E and 13.30 x for FY15E.
* Price to Book Value of the stock is expected to be at 3.17 x and 2.87 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.610.00 for Medium to Long term investment.
Hold State Bank of India For Target Rs.1,675SBI’s Q3FY2014 performance has shown an improvement on the operational front as its NII grew by 13.3% YoY. However, a higher opex (up 31.4% YoY) and an increase in the effective tax rate (due to the creation of a deferred tax liability of Rs234 crore) marred the earnings growth.
* The addition to the stressed loans were lower on a sequential basis at Rs15,362 crore in Q3FY2014 vs Rs16,950 crore in Q2FY2014, as the fresh restructuring was lower at Rs3,924 crore. However, the slippages of Rs11,438 crore were at the higher end. The bank has indicated for a restructuring pipeline of Rs9,500 crore and the asset quality issues remain a key overhang on the stock.
* We have revised our earnings estimates for FY2014 and FY2015 to factor for higher provisions and opex. In addition, we have also lowered our valuation multiple to 0.8x on FY2015 book value (to factor for subdued return ratios and a potential dilution over the next three years) leading to a SoTP-based price target of Rs1,675. We maintain our Hold rating on the stock (purely based on the valuations).
Valuation and outlook
The Q3FY2014 results show some improvement in the operating performance though the earnings growth remained under pressure. Given the weak economic environment, we believe the bank will continue to face challenges in maintaining its asset quality. In addition, the carry-over of investment losses (due to a rise in the bond yields), provision for pension and NPAs will affect the earnings growth. We have revised our earnings estimates for FY2014 and FY2015 to factor for higher provisions and the opex. In addition, we have also lowered our valuation multiple to 0.8x on FY2015 book value (to factor for subdued return ratios and potential dilution over the next three years) leading to a price target of Rs1,675. We maintain our Hold rating on the stock (purely based on the valuations).
Research Ltd
VIKAS P SAMWATSARE
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