BIG BOSS
VIKAS PARSHURAM SAMWATSARE
TIPS OF EQUTIE MARKT
DATED
3.3.2014
Buy Crompton Greaves Ltd For Target Rs.135.00
Crompton Greaves Ltd (CG) is a global pioneering leader in the management and application of electrical energy.
* The company’s net profit registered a 27.68% increase and stood at a record Rs. 1355.40 mn from Rs. 1061.60 mn in Q3 FY13.
* Revenue for the quarter rose by 6.96% to Rs.18676.50 mn from Rs. 17460.50 mn, when compared with the prior year period.
* During the quarter, EBITDA is increased by 25.36% to Rs. 1987.10 mn against Rs. 1585.10 mn in Q3 FY13.
* CG has declared interim dividend of 20% i.e. Rs.0.40 per share for the year 2013-14.
* Consolidated Net Sales rose by 12.7% to Rs. 33,519.7 mn as against Rs. 29,718.3 mn in Q3 FY13.
* During the quarter, CG consolidated received orders worth Rs. 26,240 mn up by 16% against Q3 last year. The order backlog as on December 31, 2013 stands at Rs. 1,00,740 mn.
* CG launched its state-of-the-art Smart Grid facility at the Global Village, in Bangalore with an investment of Rs. 80 mn.
* CG launched a wide range of energy efficient pumps and SMS savvy devices to operate pumps for residential, agricultural, commercial and industrial applications.
* Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 5% over 2012 to 2015E respectively.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q3 FY14,
Crompton Greaves Limited is one of the India’s largest engineering conglomerates with diversified portfolio of products, solutions & services, reported its financial results for the quarter ended 31st Dec, 2013.
The company’s net profit jumps to Rs. 1355.40 million against Rs. 1061.60 million in the corresponding quarter ending of previous year, an increase of 27.68%. Revenue for the quarter rose by 6.96% to Rs. 18676.50 million from Rs. 17460.50 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 2.15 a share during the quarter, registering 30.19% increase over previous year period. Profit before interest, depreciation and tax is Rs. 1987.10 millions as against Rs. 1585.10 millions in the corresponding period of the previous year
OUTLOOK AND CONCLUSION
* At the current market price of Rs.120.30, the stock P/E ratio is estimated 14.19 x FY14E and 12.87 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 8.48 and Rs. 9.35 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 5% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 9.22 x for FY14E and 8.07 x for FY15E.
* Price to Book Value of the stock is expected to be at 2.11 x and 1.81 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.135.00 for Medium to Long term investment.
Buy Relaxo Footwear Ltd For Target Rs.300
Despite the slowing growth in most consumer segments, Relaxo Footwear (Relaxo) managed to sustain its growth momentum in Q3FY2014 with a revenue growth of 16.2% accompanied by an improvement in the margin and a stupendous growth of 77% in the earnings.
* Our meeting with the management provided us the confidence that Relaxo can potentially sustain its growth momentum. First, the low-cost branded footwear segment is growing at a healthy rate driven by uptrading from the unorganised segment. Moreover, Relaxo is leveraging on its brand strength (advertising push with leading movie stars as brand ambassadors to further increase its market share and grow at higher than industry growth rate). Thus, we are estimating an average annual earnings growth of 30% for FY2013-16.
* While the stock price has doubled in the last 28 months since we initiated our coverage (September 10, 2012) on the company, Relaxo still trades at a 25-30% discount to its peers in spite of the strong earnings growth outlook. Consequently, we are upgrading our rating on the stock from Hold to Buy with a revised price target of Rs300 (valued at a 20% discount to Bata India at 18x FY2016E earnings).
Valuation
* Over the last two years, since we initiated our coverage on the stock, Relaxo has doubled from Rs134 in September 2012 to Rs265 at present on an adjusted basis (during the year the company’s stock was spilt from Rs10 a share into five shares of Rs2 each). Our thesis on the re-rating has played out and generated returns for the shareholders.
* At the current price, the stock is ruling at 16x its FY2016E earnings, which is a 25-30% discount to the other footwear retailer, Bata India. We believe that though Bata India would continue to demand higher valuation (owing to its strong brand patronage and operating efficiency), there still appears scope for Relaxo, given its earnings growth momentum and transition from a promoter driven company to a professional organisation with a strong on its brands. Hence, we upgrade our rating on the stock from Hold to Buy with a revised price target of Rs300.
Buy Gujarat Pipavav Port Ltd For Target Rs.89.7
A series of positives are coming together for Gujarat Pipavav Port Ltd. (GPPL), which lead us to believe that its revenue and earnings could grow at CAGR of 21.5% and 19.2%, respectively, over the period CY12-15. At these rates, the company should achieve revenues of `746.7 crore and earnings of `272.4 crore by CY15E.
Our optimism regarding the company’s prospects is based on the following:
* Being a leading port, located on the west coast, GPPL is expected to benefit from the increasing container volume traffic and capacity constraints at major ports in the region. We expect container volumes at GPPL to grow at a CAGR of 12.0% (from 661K TEUs in CY13) to 829K TEUs by CY15 and revenues to grow at a faster clip of 16.5% CAGR to `476.6 crore over the same period.
* By CY14, the company’s 65 meter liquid jetty is slated to be operational. With the introduction of high margin liquid handling business to the company’s profile, we expect revenues from this segment to grow to `63.4 crore by CY15. This should contribute `43.1 crore to its EBITDA (68% margin).
* After much ado, GPPL has received MoEF approval to expand its container handling capacity. The company expects to complete this expansion by CY16E. Once operational, the cash flows generated should see a spurt from current levels of ~ `50 crore per quarter.
* Further, GPPL’s close proximity to JNPT port (Jawaharlal Nehru Port Trust), good connectivity by road and rail to industrial hinterlands and efficient operations give the company significant advantages, enabling it to compare favorably to its peers – JNPT and Mundra ports.
* We initiate coverage on GPPL as a BUY with a price objective of `89.7 (15.9x CY15 earnings). This represents a potential upside of ~27% over a period of 24 months. At the CMP of `70.6, the stock is trading at 16.0x and 12.5x its estimated earnings for CY14E and CY15E, respectively.
* Valuation
We initiate coverage on Gujarat Pipavav Port Ltd. as a BUY with a Price Objective of `89.7 representing a potential upside of ~27% over a period of 24 months. At the CMP of `70.6, the stock is trading at 16.0x and 12.5x its estimated earnings for CY14E and CY15E respectively. However, on a conservative basis we have valued the company at a PE of 15.9x, which is at a 20% discount to its historical PE.
VIKAS PARSHURAM SAMWATSARE
TIPS OF EQUTIE MARKT
DATED
3.3.2014
Buy Crompton Greaves Ltd For Target Rs.135.00Crompton Greaves Ltd (CG) is a global pioneering leader in the management and application of electrical energy.
* The company’s net profit registered a 27.68% increase and stood at a record Rs. 1355.40 mn from Rs. 1061.60 mn in Q3 FY13.
* Revenue for the quarter rose by 6.96% to Rs.18676.50 mn from Rs. 17460.50 mn, when compared with the prior year period.
* During the quarter, EBITDA is increased by 25.36% to Rs. 1987.10 mn against Rs. 1585.10 mn in Q3 FY13.
* CG has declared interim dividend of 20% i.e. Rs.0.40 per share for the year 2013-14.
* Consolidated Net Sales rose by 12.7% to Rs. 33,519.7 mn as against Rs. 29,718.3 mn in Q3 FY13.
* During the quarter, CG consolidated received orders worth Rs. 26,240 mn up by 16% against Q3 last year. The order backlog as on December 31, 2013 stands at Rs. 1,00,740 mn.
* CG launched its state-of-the-art Smart Grid facility at the Global Village, in Bangalore with an investment of Rs. 80 mn.
* CG launched a wide range of energy efficient pumps and SMS savvy devices to operate pumps for residential, agricultural, commercial and industrial applications.
* Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 5% over 2012 to 2015E respectively.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q3 FY14,
Crompton Greaves Limited is one of the India’s largest engineering conglomerates with diversified portfolio of products, solutions & services, reported its financial results for the quarter ended 31st Dec, 2013.
The company’s net profit jumps to Rs. 1355.40 million against Rs. 1061.60 million in the corresponding quarter ending of previous year, an increase of 27.68%. Revenue for the quarter rose by 6.96% to Rs. 18676.50 million from Rs. 17460.50 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 2.15 a share during the quarter, registering 30.19% increase over previous year period. Profit before interest, depreciation and tax is Rs. 1987.10 millions as against Rs. 1585.10 millions in the corresponding period of the previous year
OUTLOOK AND CONCLUSION
* At the current market price of Rs.120.30, the stock P/E ratio is estimated 14.19 x FY14E and 12.87 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 8.48 and Rs. 9.35 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 5% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 9.22 x for FY14E and 8.07 x for FY15E.
* Price to Book Value of the stock is expected to be at 2.11 x and 1.81 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.135.00 for Medium to Long term investment.
Buy Relaxo Footwear Ltd For Target Rs.300Despite the slowing growth in most consumer segments, Relaxo Footwear (Relaxo) managed to sustain its growth momentum in Q3FY2014 with a revenue growth of 16.2% accompanied by an improvement in the margin and a stupendous growth of 77% in the earnings.
* Our meeting with the management provided us the confidence that Relaxo can potentially sustain its growth momentum. First, the low-cost branded footwear segment is growing at a healthy rate driven by uptrading from the unorganised segment. Moreover, Relaxo is leveraging on its brand strength (advertising push with leading movie stars as brand ambassadors to further increase its market share and grow at higher than industry growth rate). Thus, we are estimating an average annual earnings growth of 30% for FY2013-16.
* While the stock price has doubled in the last 28 months since we initiated our coverage (September 10, 2012) on the company, Relaxo still trades at a 25-30% discount to its peers in spite of the strong earnings growth outlook. Consequently, we are upgrading our rating on the stock from Hold to Buy with a revised price target of Rs300 (valued at a 20% discount to Bata India at 18x FY2016E earnings).
Valuation
* Over the last two years, since we initiated our coverage on the stock, Relaxo has doubled from Rs134 in September 2012 to Rs265 at present on an adjusted basis (during the year the company’s stock was spilt from Rs10 a share into five shares of Rs2 each). Our thesis on the re-rating has played out and generated returns for the shareholders.
* At the current price, the stock is ruling at 16x its FY2016E earnings, which is a 25-30% discount to the other footwear retailer, Bata India. We believe that though Bata India would continue to demand higher valuation (owing to its strong brand patronage and operating efficiency), there still appears scope for Relaxo, given its earnings growth momentum and transition from a promoter driven company to a professional organisation with a strong on its brands. Hence, we upgrade our rating on the stock from Hold to Buy with a revised price target of Rs300.
Buy Gujarat Pipavav Port Ltd For Target Rs.89.7A series of positives are coming together for Gujarat Pipavav Port Ltd. (GPPL), which lead us to believe that its revenue and earnings could grow at CAGR of 21.5% and 19.2%, respectively, over the period CY12-15. At these rates, the company should achieve revenues of `746.7 crore and earnings of `272.4 crore by CY15E.
Our optimism regarding the company’s prospects is based on the following:
* Being a leading port, located on the west coast, GPPL is expected to benefit from the increasing container volume traffic and capacity constraints at major ports in the region. We expect container volumes at GPPL to grow at a CAGR of 12.0% (from 661K TEUs in CY13) to 829K TEUs by CY15 and revenues to grow at a faster clip of 16.5% CAGR to `476.6 crore over the same period.
* By CY14, the company’s 65 meter liquid jetty is slated to be operational. With the introduction of high margin liquid handling business to the company’s profile, we expect revenues from this segment to grow to `63.4 crore by CY15. This should contribute `43.1 crore to its EBITDA (68% margin).
* After much ado, GPPL has received MoEF approval to expand its container handling capacity. The company expects to complete this expansion by CY16E. Once operational, the cash flows generated should see a spurt from current levels of ~ `50 crore per quarter.
* Further, GPPL’s close proximity to JNPT port (Jawaharlal Nehru Port Trust), good connectivity by road and rail to industrial hinterlands and efficient operations give the company significant advantages, enabling it to compare favorably to its peers – JNPT and Mundra ports.
* We initiate coverage on GPPL as a BUY with a price objective of `89.7 (15.9x CY15 earnings). This represents a potential upside of ~27% over a period of 24 months. At the CMP of `70.6, the stock is trading at 16.0x and 12.5x its estimated earnings for CY14E and CY15E, respectively.
* Valuation
We initiate coverage on Gujarat Pipavav Port Ltd. as a BUY with a Price Objective of `89.7 representing a potential upside of ~27% over a period of 24 months. At the CMP of `70.6, the stock is trading at 16.0x and 12.5x its estimated earnings for CY14E and CY15E respectively. However, on a conservative basis we have valued the company at a PE of 15.9x, which is at a 20% discount to its historical PE.
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