Top takeaways from Q1FY17: Q1 results were just in?line of our expectations with 22%/19% growth in sales/profits. The US sales missed our expectations by 8% (mainly due to below expected performance in gGleevec caused by sequential price erosion) but strong double digit improvement in Emerging/ROW markets have almost neutralised the US sales miss. While US sales missed our estimates, interestingly SUNP’s US base business (excluding Taro sales, gGleevec sales and one?off sales of US$35mn in Q1) saw sequential improvemnet of 12%. This hints about improving supply from Halol plant. SUNP has completed remediation actions in its Halol plant and requested the USFDA to re?inspect the facility. Plant clearance by the USFDA could re?rate SUNP in near?term.Phillip Capital value SUNP at Rs 825 (24x FY18) vs. Rs 800 earlier. However, the clearance of the Halol plant by USFDA can re?rate the SUNP. Retain Neutral rating with revised TP of Rs 825 (Rs 800 earlier)
Top takeaways from Q1FY17: Delivered strong Q1 operating performance with 17% beat in earnings supported by 310bps positive surprise in margins and 6% beat in revenues. Guides for delayed commercialisation of its new projects –at Kakinada SEZ as well as at Vizag – during late FY18. This could hurt the modelled sales growth of 19% in FY18. Divi’s board has approved a one?time ex?gratia of Rs 790mn for its employees on the occasion of its 25th anniversary and that would hurt FY17 margins by ~150bps. Phillip Capital maintain their Neutral rating with raised TP of Rs 1200 (vs. Rs 1190 earlier).
Key highlights: Revenues grew 10% yoy at Rs35.94bn despite the integration of Invagen and that was 9% below our estimates. The miss in revenues was primarily due to no visible growth in Invagen portfolio, muted domestic as well as South African business. The margin performance at 17% (6.7% in Q4FY16) was almost in line of our expectations of 16.2% but the EBITDA missed our estimate by 4% due to lower sales.Thanks to lower tax incidence of 16% (vs 23% normal) that helped it report PAT of Rs 3.65bn (4% below estimated Rs 3.52bn). At a normalised tax rate, the profit performance was 7% below estimate. Phillip Capital retain their Neutral rating with lowered TP of Rs485.
Key highlights: Sales at Rs 8.42bn (+11% yoy) were 8% above our expectations, which was led by smart 22% yoy growth in formulation export. Both domestic formulations as well as APIs export were up by +9% yoy. Operating margin at 15.3% (+470bps yoy) was almost in line of our expectation 16.1%, resulting in 2% beat in EBITDA at Rs 1.28bn. However, forex loss of Rs 81mn and higher tax incidence of 34% (vs. normalised tax rate of 21%) dragged the reported PAT to Rs 476mn (+127% yoy). Now management guides for higher tax of ~25% for FY17. So, adjusting the forex loss and factoring guided taxes, the Adj PAT was 3% below our expectation of Rs 669mn.Phillip Capital pre?fixed target price of Rs 475 discounts FY18 estimates by 14x and don’t expect any immediate re?rating for IPCA. Hence, maintain NEUTRAL rating with TP of Rs 475.
Key highlights: A strong operational performance led by lower raw material costs and improving efficiency at old plants. Higher copper by?product (gold & silver) prices led to positive surprise in copper segment revenues and profitability. The company after obtaining additional coal security via linkage coal auction is confident to maintain the cost discipline as obtained during Q1FY17. Copper smelter has ramped up smoothly after the maintenance shutdown in Q1FY17 and company expects better efficiencies going ahead.Phillip Capital retain Buy rating on the stock and increase their target price to Rs 170 (from Rs 120 earlier) valuing at average of FY17 & FY18 valuations (6.5x Ev/Ebidta).
Top takeaways from 1QFY17: Thermax’s 1QFY17 standalone earnings (Rs 452mn; ?10% yoy) were materially below our and consensus estimates. The company disappointed on all metrics.Order inflow declined 19% yoy to Rs 8.2bn on weak domestic end markets coupled with certain deferrals in the international market, which should flow through in 2Q. Management highlighted that the outlook on large domestic orders from key sectors such as metals, power and cement continues to be weak over the next 12 months but expects ordering in the hydrocarbon sector to pick up pace in FY18. Current orders are driven by noncore sectors such as food processing and paint.Phillip Capital maintain Sell rating with a target price of Rs 700 (Rs 615 earlier), as the current stock valuations at 33x FY18 PE look expensive considering a modest 10% CAGR in FY16?18 earnings and RoE’s of 11?12%.
Topline inline with expectations at Rs 8.6bn (+18% yoy). The company has now reported topline of Rs 18.8bn in 1HCY16 (+42% yoy). EBITDA margins at 4.9% fell by 200bps yoy (-160bps qoq) – significantly below expectations of 6.9%. Margins fell due to losses in JV (esp DMRC project JVs), which reported losses of Rs 224mn in the quarter (Rs 40mn profit in 2QCY15). PAT, at Rs 52mn (+65% yoy), was significantly below our and consensus expectations (Rs 160mn), driven by low EBITDA margins. Orderbook was Rs 44.3bn (1.2x book-to-sales); Rs 72bn including L1 (2.1x). L1 includes Rs 11.2bn Mumbai Metro phase 3 order (accrued in July), while the Udangudi jetty project (Rs 12bn) is delayed, and might accrue by CY16 end. Balance sheet improved significantly, with inventory reduction of over Rs 3.6bn – leading to net debt reduction Rs 2.2bn (gross debt down to Rs 4.9bn from Rs 6bn. Cash up to Rs 2.7bn from Rs 1.5bn). Inventory days reduced to 81 from 140 days, leading to reduction in WC cycle to 65 days from 85 days.Phillip Capital continue to value the company at 15x CY17 P/E (inline with valuation for other EPC companies). They downgrade to NEUTRAL with price target of Rs 135 (Rs 140 earlier), on expensive valuations.
Top takeaways from Q1FY17: Topline at Rs 15.2bn (+33% yoy) was driven by strong 49% yoy growth in EPC revenues. Toll collection grew by 15% yoy – driven by commencement of tolling on NH-8 for Vadodara-Ahmedabad project. Adjusting for new and completed projects, the like-forlike toll collection grew by 9% yoy (6% excl Mumbai-Pune).EPC orderbook is Rs 87bn – 2.6x book-to-sales (Rs 69bn adjusting for O&M contracts @ 2.2x book-to-sales). With the termination of the Zozila tunnel project, the orderbook (to be executed over the next three years) looks rather unimpressive.Phillip Capital maintain BUY with a price target of Rs 320 (unchanged) – BOT Rs 225 + EPC Rs 95.
Muted retail price cuts imply sharp gross margin expansion, but opex is a key factor We try to revisit our assumption of IGL’s EBITDA margin, which would have a significant bearing on its future earnings. After muted 2%/3% retail price cut in CNG/domestic PNG in Delhi against a 20% reduction in APM gas rate in April 2016, we estimate its gross margin has expanded by a significant Rs 1.3/1.0 per scm qoq in Q1FY17. Against this, IGL commissioned 90+ new OMC?located outlets in this period (~30% increase), which would raise expenses, as unit throughput would be lower and additional margins have to be paid to OMCs. The extent of opex/scm increase is a key determinant of how much the EBITDA/scm would grow. Continuous minimum wage hike is also a recurring feature in Delhi. IGL’s opex rose to Rs 4.5/scm in Q4FY16 from Rs 3.3/scm in FY14; therefore, despite an increase in gross margin (to Rs 9.6/scm from Rs 8.9/scm), EBITDA/scm fell to Rs 5.2 from Rs 5.6.
Phillip Capital Maintain Neutral with Rs 650 target price, await Q1 result to assess margin assumptions They keep earnings estimates and target price unchanged though there is a 10% upside to the same if EBITDA/scm expands to Rs 5.8.They would await Q1FY17 results to take a stock on the opex and thereafter change our estimates. Sector outlook is positive though valuations seem to price in existing triggers. Maintain Neutral.
Escorts today announced the deal to divest majority of it Auto product business for an undisclosed amount. We see this deal as a significant positive for the company not only as it improves the profitability but also provides confidence on the company’s intent of resolving issues in various businesses. The next focus area for the top management is expected to be the turnaround of its construction equipment business. Our estimates partially factor in the said turnaround; however it is far lagging the company’s plans for the segment. While the company benefits from the resolution to its dragging business segments, a turnaround in tractor industry fortunes and a strong growth in the railways business will see substantial gains for the company over the next couple of years (60% net profit CAGR over FY16?18). We increase our EPS estimate for FY18 by 5% to factor in the sale of auto business. Phillip Capital increase their target multiple to 12x from 11x earlier given the profit and return ratio improvement post the deal. We retain our Buy rating on the stock with a revised target price of Rs 390 (Rs 310 earlier).
