Buy Greaves Cotton Ltd For Target Rs.96 Greaves Cotton Limited is one of the leading engineering companies in India with core competencies in diesel/petrol engines, gensets and construction equipment.
* For the quarter ended Q4 FY14, the company’s net profit jumps to Rs. 515.60 mn against Rs. 384.90 mn in Q4 FY13, an increase of 33.96%.
* Revenue for the quarter declines by 12.23% to Rs. 4351.80 mn from Rs. 4958.00 mn, when compared with the prior year period. *
* EBIDTA margin for the quarter stood at 10.6% as against 12.7% reported in Q4 FY13. EBIDTA is Rs. 538.90 mn as against Rs. 669.80 mn in the corresponding period of the previous year.
* EPS of the company stood at Rs. 2.11 a share during the quarter, registering 33.96% increase over previous year period.
* Greaves Cotton has declared a final dividend of 30% i.e., Rs 0.60 on a face value Rs. 2/-. Following this the total dividend for the fiscal including interim dividend stood at 65% i.e., Rs 1.30 on face value of Rs. 2/-.
* The company entered into partnership with TVS Motors for supply of diesel engines for 3W segment.
* The company expanded its global footprint by setting up office in Tanzania and strengthening establishment in UAE to focus on East Africa and the Middle East markets.
* Greaves Cotton is focusing on South East Asia and SAARC regions to increase the contribution of International Business, significantly.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q4 FY14,
Greaves Cotton Ltd, established in 1859, is one of India's leading and well-diversified Engg companies & it manufactures a wide range of industrial products to meet the requirement of core sectors in India and abroad, reported its financial results for the quarter ended 31st March, 2014.
The company’s net profit jumps to Rs. 515.60 million against Rs. 384.90 million in the corresponding quarter ending of previous year, an increase of 33.96%. Revenue for the quarter declines by 12.23% to Rs. 4351.80 million from Rs. 4958.00 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 2.11 a share during the quarter, registering 33.96% increase over previous year period. Profit before interest, depreciation and tax is Rs. 538.90 million as against Rs. 669.80 million in the corresponding period of the previous year.
OUTLOOK AND CONCLUSION
* At the current market price of Rs.81.75, the stock P/E ratio is estimated 15.71 x FY15E and 14.06 x FY16E respectively.
* Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs. 5.20 and Rs. 5.82 respectively.
* On the basis of EV/EBITDA, the stock trades at 8.37 x for FY15E and 7.53 x for FY16E.
* Price to Book Value of the stock is expected to be at 2.19 x and 1.96 x respectively for FY15E and FY16E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.96.00 for Medium to Long term investment.
Buy Mahindra & Mahindra Ltd For Target Rs.1300Founded in 1945 as a steel trading company, over the years the company has diversified into many new businesses and now Mahindra & Mahindra (M&M) is $16.7 billion multinational group with more than 180,000 employees in over 100 countries across the globe. The company's operations span 18 key industries that form the foundation of every modern economy. It operates in automotive, farm equipment, information technology, financial services, steel trading, infrastructure, hospitality, Systech and other segments.
Investment Rationale
* The company management is guiding for 8-10% growth in tractor industry in FY15. Its new Zaheerabad (Andhra Pradesh) facility is producing 100 tractors per day with benefits also flowing in from the facility’s timely commissioning.
* M&M is looking to launch 3 new platforms from CY15 beginning, including 2 platforms for subcompact UV platforms and one for the commercial segment.
* Mahindra & Mahindra is turning to give a big push to the SUV portfolio of its South Korean subsidiary Ssangyong. The duo is currently working on three new engines, to power its new range of sports utility vehicles. M&M has maintained its capex guidance of Rs 75bn over three years and further Rs 25bn in investments in subsidiaries.
* The company’s agri division signed a joint venture agreement with HZPC, Holland (one of the leading innovative companies in the world in potato breeding, seed potato growing and seed potato trading) to offer the best quality seed potatoes to farmers within and outside India.
Outlook
The key value driver of M&M will be the new launches where the company is expected to launch 3 products in CY15 (2 SUVs and 1 CV) and an XUV 500 hybrid. M&M’s two wheeler segment will launch a new scooter in Q1FY15, which is expected to generate incremental sales for the company. Quanto with AMT (automated manual transmission) will also be launched within six months. The company is also planning to launch new products to cater the farm equipment sectors. It plans to double it in two years from Rs 250 crore now. The overall stance on M&M is highly optimistic with new take-offs and under controlled inventory levels.
Buy Cadila Healthcare Ltd For Target Rs.1,080For 4QFY2014, Cadila Healthcare (Cadila) posted lower-than-expected numbers on the sales and OPM front, while the net profit came in higher than expected. The company posted a 22.4% yoy growth in net sales to `1,916cr (lower than our expectation of `1,979cr). Exports grew by 38.3% yoy, driven by US markets, which grew by 74.7% yoy. Other markets posted a lackluster growth during the period. The Indian formulations market grew by 9.4% yoy. The OPM for the quarter stood at 16.0% (V/s an expected 17.0%), expanding by 63bp yoy; a dip in R&D expenses by 25.0% yoy aided operating margin expansion during the period. The gross margin dipped by 100bp yoy. The adjusted net profit came in at `251cr V/s an expected `198cr, on back of lower-than-expected tax and depreciation expense. We maintain our Buy recommendation with a price target of `1,080.
Net profit better than expectation:
Cadila’s net profit for the quarter came in higher than expected while sales and OPM came in lower than expected. The company posted a strong quarter with a 22.4% yoy growth in net sales to `1,916cr V/s an expected `1,979cr. Exports grew by 38.3% yoy, driven by the US markets, which grew by 74.7% yoy. Other markets posted a lackluster growth during the period. The Indian formulations market grew by 9.4% yoy. The OPM for the quarter stood at 16.0% V/s an expected 17.0%, expanding by 63bp yoy; a dip in R&D expenses by 25.0% yoy aided operating margin expansion during the period. Gross margins dipped by 100bp yoy. The adj. net profit came in at `251cr V/s an expected `198cr, on back of lower-than-expected tax and depreciation expense.
Outlook and valuation:
We expect Cadila’s net sales to post an 18.4% CAGR to `9,905cr and EPS to report a 16.2% CAGR to `54.0 over FY2014–16E. The stock is currently trading at a discount to its peers, even after factoring a conservative expansion in the OPM. Hence, we maintain Buy on the stock with a price target of `1,080.
Buy Ajanta Pharma Ltd For Target Rs.1188Ajanta Pharma Ltd is a specialty pharmaceutical formutation company, having leading brands in therapeutic segments of Ophthatmotogy, Dermatotogy and Cardiology in India.
* During Q4 FY14, revenue from operations at Rs. 3110.5 mn compared to Rs. 2494.4 mn in Q4 FY13, registered a growth of 25%.
* For the quarter, EBITDA stood at Rs. 1135.9 mn (Rs. 747.1 mn), growth of 52% over Q4 last year.
* During Q4 FY14, PAT ramps up by 158.73% and stood at Rs. 700.9 mn against Rs. 270.9 mn in Q4 FY13.
* Exports contributed 66% of the total operating income for the quarter.
* India formulations business was Rs. 950 mn for the fourth quarter, up 33% over Q4 last year.
* Formulation sales in emerging markets accounted for Rs. 2060 mn in Q4 FY'14 registering a growth of 16% over last year Q4.
* Company filed 1 more ANDA with US FDA during the quarter taking total tally to 23 ANDAs (filed 9 in FY'14), with 2 approved and 21 awaiting approval.
* R&D expenses for FY'14 was Rs. 500 mn or 4.50% of revenue, against Rs. 370 mn or 4.41% of revenue last year same period.
* Ajanta Pharma has recommended dividend of Rs. 10/- per share on the face value of Rs. 5/- each for the financial year ended 31 March, 2014. The Company has launched 24 new products during the financial year 2014 (5 in Q4).
* Ajanta's overall ranking stood at 39th as per IMSMAT Mar'14, with growth of 32% for the year against 10% of industry.
* Net Sales and PAT of the company are expected to grow at a CAGR of 23% and 46% over 2013 to 2016E respectively.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q4 FY14,
The company’s net profit jumps to Rs. 700.90 million against Rs. 270.90 million in the corresponding quarter ending of previous year, an increase of 158.73%. Revenue for the quarter rose by 24.70% to Rs. 3110.50 million from Rs. 2494.40 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 19.83 a share during the quarter, registering 72.78% increase over previous year period. Profit before interest, depreciation and tax is Rs. 1135.90 million as against Rs. 747.10 million in the corresponding period of the previous year.
OUTLOOK AND CONCLUSION
* At the current market price of Rs. 1080.30, the stock P/E ratio is at 13.66 x FY15E and 12.19 x FY16E respectively.
* Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.79.09 and Rs.88.61 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 23% and 46% over 2013 to 2016E respectively.
* On the basis of EV/EBITDA, the stock trades at 8.44 x for FY15E and 7.23 x for FY16E.
* Price to Book Value of the stock is expected to be at 5.60 x and 4.69 x respectively for FY15E and FY16E.
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