Latest stock research reports with share price targets forecast, buy, hold, and sell recommendations along with upside. Search by company or broker name.
Key takeaways : Over CY05-15, while Castrol’s realization improved at 11% CAGR, its volume declined by 1.7% CAGR. This we believe is led by (a) lengthening drain intervals, (b) not aggressively pursuing low margin OEM business and (c) tepid economic activity in recent years, impacting CV segment (45-50% of total volumes). Taking cognizance of the continued volume decline, Castrol management reset its focus on profitable volume growth in the last few quarters.The volume trend has reversed in the last six months – volumes grew 7% in 1HCY16. The growth has been broadbased, with continued high single-digit growth in the personal mobility segment and recovery in the CV segment.India’s economic indicators have improved and the economic recovery should feed turnaround in CV volumes. Seasonally, 2H is usually weaker than 1H, however, management expects volume growth to sustain year-on-year. Of CSTRL's total volumes, CVs contribute ~47%, personal mobility ~40% (v/s 10% a decade back), and industrials ~13%. With personal mobility continuing to grow at high single digits, revival in the CV cycle would help to sustain volume growth.
Valuation :
Maintain Buy: Motilal Oswal assume volume growth at 6%/7% in CY16/CY17 and largely stable realizations. CSTRL’s >80% payout policy, RoE/RoCE of ~100% and FCF to PAT conversion at >80% reflects its superior balance sheet and high quality cash flows, which warrant higher valuation multiples, in our view. The stock is trading at 28x CY17E EPS of INR15.7.Their fair value estimate is INR518 (33x CY17E EPS; in line with last 3-year average), implying 18% upside. Maintain Buy
Key takeaways
from CEO track; introducing merged entity estimates : Hosted Mr Tom Albanese, CEO of Vedanta (VEDL) at our 12 AGIC in Mumbai. Cairn India’s (CAIR) minority shareholders have approved the merger, recently. In this note, we introduce VEDL’s estimates on merged entity basis along with the highlights of Mr Albanese’s presentation.
VEDL’s diversified portfolio of natural resources is witnessing multiple tailwinds, which will drive earnings.They expect attributable EBITDA to grow at a CAGR of 22% over FY16-18 to INR183b.The target price is reduced by INR10 to INR160/share based on FY18E SOTP. And are optimistic about the business, but current stock price has 2% downside. Maintain Neutral.
ICICI Prudential(I-Pru) is the largest Pvt Sector insurance player with a market share of 21.9% in the pvt sector and 11.3% share in the overall industry. The company had a persistency ratio of 82.5% and solvency ratio of 320%, one of the best in the industry.The issue opens on Sep 19,2016 and closes on Sep 21 2016.
Valuations & View: At the price of band of `300-334 the issue is offered at 3.1x and 3.4x its reported FY16 EV. While the company has enough scope for business growth in the future, we believe the issue is fully priced in and hence they have a NEUTRAL rating on the issue.
Escorts Limited recently interacted with Escorts management. Company is in the process of completing its divestment of major part of its Auto Products business. Its focus is increasing on its core business of Agri Machinery (EAM). It also increases its efforts to expand the most profitable railway business. We believe that company’s recent strategic initiatives in terms of reducing exposure in loss making entities, increasing efforts for expansion of profit making business and more focus on cost rationalization would pay off over next 2-3 years. Escorts’ auto ancillary segment has been bleeding since long, particularly its OEM segment. Management has planned sale of OEM and exports division of the segment initially, while retaining after sales with company for a year’s period. However, over a period, it would completely exit from its auto parts business.
It would sell the plant and machinery while retaining land and building assets for future development. This strategic decision strengthens our positive view on the management’s commitment to enhance the returns by focusing on profitable segment and divesting loss making entities.They maintain our volume and financial estimates for FY17E/FY18E. Accordingly, maintain target price of Rs 415/share, valuing it at 12xFY18E EPS and they reiterate “BUY” on Escorts.
Dredging corporation of India (DCI) Q1FY17 operating revenues degrew 21% (down 24% QoQ) to | 132 crore. However, due to write back of repair liability to an extent of | 6 crore accounted in other operating income the de-growth in total revenues moderated to 15% YoY (down 19% QoQ) to | 142 crore (I-direct estimate: | 171.4 crore) . Following the lower execution, EBITDA for the quarter was impacted by higher fixed costs. Subsequently, EBITDA declined by 37% YoY (down 46% QoQ) to | 29 crore (I-direct estimate: | 46.7 crore) . Dismal operating performance coupled with continued higher depreciation resulted a PAT of | 4 crore (I-direct estimate: | 19 crore) as compared to | 46 crore in Q1FY16 and | 54 crore in Q4FY16.
Although, DCI added three new three new maintenance dredgers since 2012, the revenues grew maintenance dredgers since 2012, the revenues grew by mere 8% CAGR by mere 8% CAGR over FY12 to FY16. The over FY12 to FY16. The proceeds from proceeds from proceeds from Sethusamudram project Sethusamudram project Sethusamudram project to the tune of tune of | 300 -400 crore 400 crore 400 crore is taking long time to accrue. I is taking long time to accrue. I is taking long time to accrue. Indigenization of ndigenization of spares for spares from BEML and improved efficiency spares for spares from BEML and improved efficiency due to due to refurbishment of aged dredgers would remain key for margins. margins. Given the Given the incessant deterioration in revenues incessant deterioration in revenues in revenues we revise our esti we revise our esti we revise our estimates downwards mates downwards and reduce our target price to | 425 with a HOLD and reduce target price to | 425 with a HOLD rating. rating.
Food inflation decelerated sharply to 5.83% form 7.46% on the back of significant fall in Vegetables prices. Vegetables index, which has a weightage of 6.04% in CPI fell to 1.08% in August as compared to 14.06% in July 2016. Pulses also declined sharply both on account of...
The board of Ashok Leyland (ALL) approved the amalgamation of Hinduja Foundries (HFL), a Hinduja group company (in the business of grey iron castings & supply of automotive components) with Ashok Leyland, subject to statutory approvals. Based on the swap ratio, the amalgamation will result in dilution of ~2.8% for Ashok Leyland, and increase promoter stake from 50.4% to 51.3%. HFL is one of the largest producers of cylindrical blocks & heads, with tractor segment contributing 55% of company’s revenues & ALL contributing ~35%. As of FY16 (12 month), HFL’s revenues stood at | 577 crore, EBITDA loss of | 155 crore & PAT loss of | | 171 crore. Although the impact of the deal might be low (equity dilution offset by tax saving resulting from accumulated loss of ~| 1046 crore of Hinduja Foundries), the deal is a deviation from managements’ recent years practice of strengthening balance sheet. Assuming, the deal gets all the regulatory/ statutory approvals, the impact of the deal will be EPS accretive in FY18 due to tax shield provided by accumulated loss of Hinduja Foundries. However, if the turnaround in HFL is not as per management outlook, the deal could be a drag on ALL’s earnings & return ratios in FY19E.
Valuation : Although, the deal does not fit into the company’s strategy of improving balance sheet, we believe the growth triggers outweigh the potential negative impact of the deal. We value core business at 8x EV/EBITDA (earlier 9x) to factor in the negative potential drag on earnings & return ratios post FY18E. Based on SOTP valuation, we arrive at a target price of | 95. We have a BUY recommendation on the stock. The upside risk to our estimates could be the implementation of the scrappage policy to discard 15+ year vehicles
ICICI Prudential Life Insurance Company Limited (ICICIPru) is a joint venture between ICICI Bank Limited and Prudential Corporation Holdings Limited. It has commenced operations in fiscal 2001 and currently is the largest private sector life insurer in India by total premium in FY16 and AUM as on 31 March 2016. ICICIPru offers a vast product basket to customers which includes life insurance, health insurance and pension products and services.
With a large distribution network comprising of 124155 individual agents and 4500 bank partner branches, ICICIPru has attained 11.3% market share among all insurance companies in India, on a retail weighted received premium basis (RWRP) and 21.9% market share among private sector life insurers. RWRP has increased at 15.2% CAGR in FY12-16. As of 30 June 2016, AUM stood at |1.09 trillion. PAT was at |1653 crore in FY16, with return on equity exceeding 30% for each year since FY12. Capital position remained strong with solvency ratio at 320.5% at 30 June 2016 compared to the IRDAI prescribed level of 150%.
For Q1FY17, Maharashtra Seamless reported a topline, EBIDTA and PAT below our estimate primarily on account of muted sales volume.Seamless pipes sales volume came in at ~44000 tonne (our estimate: 44688 tonne) while ERW sales volume came in at ~13500 tonne (our estimate: 18750 tonne). The total pipes sales volume came in at 57500 tonne, lower than our estimate of 63438 tonnes.Gross income from operations came in at | 317.6 crore. After adjusting for excise duty, net operating income stood at | 288.4 crore, significantly lower than our estimate of | 321.1 crore. EBITDA came in at | 29.2 crore lower than our estimate of | 37.3 crore. EBITDA margins came in at 10.1% (our estimate: 11.6%). The resulting blended EBITDA/tonne came in at | 5083/tonne (our estimate: | 5883/tonne).
Valuation : MSL reported a subdued performance for Q1FY17 on account of lowerthan-expected ERW sales volume. Going forward, we believe the imposition of anti-dumping duty augurs well for the company as it would aid in improving capacity utilisation levels for MSL. We value the company on an SOTP basis and subsequently arrive at a target price of | 215. They have a HOLD recommendation on the stock.
Net sales grew 14.3% YoY to | 1245.2 crore driven by growth in PMC division (grew 20.7% YoY to | 1171.1 crore). However, sales was below our estimate of | 1363.0 crore mainly on account of lower than expected revenues in PMC division (| 1171.1 crore in Q1FY17 vs. our expectation of | 1259.5 crore) and real estate division (| 17.3 crore in Q1FY17 vs. our expectation of | 51.8 crore) • The EBITDA margin contracted 40 bps YoY to 3.5% and was below our estimate of 4.5% mainly due to higher un-allocable expenses (| 21.0 crore in Q1FY17 vs. our expectation of | 12.6 crore) • PAT grew 14.4% YoY to | 45.4 crore. However, it was below our expectation of | 59.4 crore mainly on account of higher effective tax rate (34.5% in Q1FY17 vs. 30.3% in Q1FY16) and EBITDA margin miss.
They are positive on NBCC’s business model given the huge set of opportunities, going ahead and expect its revenues/earnings to grow at of 34.4%/27.5% CAGR over FY16-FY18E. We also like NBCC given its negative working capital, cash rich balance sheet (| 1133.5 crore as on FY16) and strong return ratios (RoE of 26.3% & RoCE of 40.7% in FY18E), going ahead. Consequently,they maintain BUY recommendation with revised SOTP based target price of | 281 (implying 33.5x FY18E EPS).
