Top takeaways from Q1FY17 : Recurring PAT (Rs 803mn, +50% yoy) was 42% above our estimate, led by margin expansion.Gross margin (86.2% vs. 56.9% yoy) surprised due to change in sales mix to the high? margin consultancy segment (79% of sales vs. 57% yoy). EIL achieved its FY17 order inflow guidance in 1Q itself (Rs 20.6bn, +318% yoy).
Valuation: Phillip Capital maintain their Buy rating as they believe that though the order inflows thesis may be priced in, there is further scope for re?rating on a turnaround in margins, which should benefit from operating leverage. We expect EIL’s core earnings (ex?other income) to see a 53% CAGR in FY16?18, aided by a 46% CAGR in EBITDA. We base our revised price target of Rs 280 (Rs 210 earlier) on 33x (30x earlier) FY18 core EPS of Rs 6.1 and add Rs 79/share of cash value.
Top takeaways from Q1FY17 : ARBP’s Q1 earning performance missed our estimates by 3% (but was just in line with street expectations), primarily due to lower than expected US sales caused by delayed launch of approved drugs.Guides for strong double digit growth in its US business in FY17 led by the planned launch of 19 approved oral dosages (with branded size of US$ 6.8bn, including gNexium) and ~8 injectables in next few months.ARBP indicated that its Europe business turned PAT positive in FY16; expects it to improve further with cost optimisation initiatives like site transfer to a low?cost manufacturing base in India.
Valuation: Phillip Capital estimate ARBP to report sales/earnings CAGRs of 13%/20% over FY16?18. In fact,they are positive on ARBP’s firm footing in the US with limited impact of price correction and robust approval flow. They retain their BUY rating with an unchanged TP of Rs 1,000, i.e., 20x FY18 EPS.
Nestle India Limited - NESTLEIND recently attended Nestle India’s analyst meet. The company is in a transitional phase of achieving its lost sales by launching new products and rejuvenating its existing portfolio. While it has managed to execute very well in a highly challenging environment marked by sluggish market conditions, most of the easy gains have already come through. Its growth path from here is rather challenging, but the consensus estimates paint an overly optimistic scenario. We continue to believe that chances of earnings downgrades remain high and maintain our Sell recommendation.
Valuation: Phillip Capital raise their target multiple to 40x our CY17 earnings, translating into a target price of Rs 5,900 (Rs 5450 earlier). Considering the significant downside, maintain Sell recommendation.
Media reports have indicated that Idea and Vodafone are exploring opportunities for a possible merger. The merger could be a significant positive for both the players and the telecom industry, but regulatory hurdles could play the spoil sport. The merger will make the combined entity the number one player with a revenue market share of 42% significantly higher than Bharti Airtel. Apart from the market share gains there could be significant operational synergies which will improve the cash flow profile and capital efficiency of combined entity. The industry will see consolidation benefits of reduced competitive intensity, stable long-term realisations and significant improvement in capital efficiency.
Valuation: Phillip Capital downgraded target price to Rs 130 and maintain BUY recommendation
Top takeaways from Q1FY17 : Lower than estimates due to impact of one?time cost and increase in depreciation.MTO volumes grew and the business maintained margins. However, lower shipping freight rates affected revenue negatively.CFS business outperformed the industry in terms of volume growth.Project business disappointed on revenue and margin with reduction in asset base and dry?docking of one ship.Acquisition of controlling stake in CCI Integrated Logistics to strengthen contract logistics and ecommerce.
Valuation: At its CMP, the stock trades at 13x our FY18 expected earnings of Rs 14.1, 1.8x FY18 P/BV, and 7.5x EV/EBITDA. We have cut our FY17/18 earnings by 9%/14%, considering weakness in freight rates in MTO and lower?than?expected growth in projects. The stock has traded at a significant discount of ~35% to other players while it is doing relatively better than other logistics players – with good volume growth; we expect this valuation discount to narrow to ~15%. We have revised our target valuations to 15x FY18 EPS (from 12x earlier) to arrive at a new target price of Rs 215 (Rs 200 earlier).
Top takeaways from Q1FY17: Sharp recovery in volume growth to 13% yoy at 4.33mmscmd. CNG grew by a robust 10% yoy while PNG was up a whopping 17%. Volumes were up 6% qoq. Gross margin expanded by 11% (Rs 1/scm) qoq to Rs 10.6/scm on muted 2?3% retail CNG/DPNG price cuts, despite a 20% reduction in domestic gas rates.Opex fell by 1% qoq to Rs 1.6bn due to a decline in other expenditure, which was a positive surprise; we had expected it to rise due to commissioning of new outlets. As a result, EBITDA/scm rose by 25% (Rs 1.3) qoq to Rs 6.5, significantly beating estimates.CUGL/MNGL reported a robust gross PAT of Rs 340mn, up 42% yoy and 21% qoq.
Valuation: They upgrade the stock to Buy with a revised target price of Rs 840 (Rs 650 earlier). This implies a target PE of 16x, which believe is justified due to a sharp recovery in volume/margins and lower WACC in their DCF.
Merger of subsidiaries is a onetime cost for creation of Provident Fund of Rs 30bn. The cost to income ratio of merged entity stands at 50% which the management expects to come down to 45% over three year time frame. This will be driven by branch rationalisation; economies of scale, removal of duplicationofvariousdepartmentliketreasury. Rationalisation of deposit cost in line with parent bank as associate use to...
9 Debt reduction and operational excellence are the only two areas we understand the companywillworkaggressivelyandthisisboundtoreratevaluations. 9 Giventhestocktradesatdeepdiscounttopeers(US$55/tonne),weseedeepvaluein thestock.EvenattargetstocktradesatUS$75/tonne(~40%discounttoreplacement) 9 At this stage we do not foresee any material risk to our estimates. There is scope for earningsupgradegivenarecoveryincementprices. 9 OurearlierpricetargetofRs125isnowmetandweupgradeourtargetmultipleto7.0x EV/EBITDA(vs.5.0xearlier).WemaintainBUYonthestockwitharevisedpricetargetof...
9 Dalmia Bharat has continued to deliver robust operating performance in Q1 and continuestobeatconsensusby12%/largelyinlinewithourestimatesonEBITDAfront. ThoughitbeatsusonEBITDA/tonneestimateby4%. 9 Dalmia Bharat continues to beat consensus consistently for the past many quarters now.Givencementpricesupportreturns,earningsupgradecannotberuledout....
The second law of thermodynamics states that the entropy of the universe is always increasing'. Entropy, in non-engineering parlance, is a measure of the disorder of a system. We see this law playing out in the global political landscape the rise of unabashed xenophobic nationalism has led to events like Brexit, which will lead to higher business uncertainty across the world, directly impacting the demand environment for Indian IT companies over the next few years. In the first report of our thermodynamics series' (December 2015), we had downgraded the IT sector based on the inefficient capital allocation policy that it had followed over the last...
