Buy

Restructured assets (RA) declined further to Rs 18909 crore. The stressed asset (GNPA + RA) stayed higher at 18.55% of assets. The account sleeping to NPA category with exposure of above Rs 100...

Redington India is the brand behind the top global brands like Hewlett Packard, Toshiba, IBM, Cisco, Lenovo, Acer, Apple, Blackberry, Xiaomi, HTC and Motorola. The technology distributor with strong partnerships is expanding its horizons into the Middle East, Africa and Turkey (MEAT), Srilanka, Bangladesh and CIS countries. The new acquisitions and partnerships would gain operational synergies and provide inorganic growth in the new regions i.e. Acquired 80% of Turkey based leading Oracle distributor linkplus. The end-to-end supply chain firm has increased it’s smart phone distribution to new markets like UAE and Nigeria. The IT and Telecom industries are now penetrating into small towns and villages, the firm has vertical businesses with pan india presence and would likely to become the largest contributor serving not only new product launches but also for the sustenance of growth of brands in the Indian market and extending its wings to other geographies.

Valuation: At CMP of Rs.106, Redington is currently trading at P/E of 7.5x on FY18E EPS of 14.3.We value the company at P/E of 9.5x of FY18E EPS Rs.14.3 for the target of Rs.136.We initiate coverage on Redington with a “BUY” rating for a target price of Rs.136 representing an upside potential of 28% in 12-15 months period.

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).

Revenues grew 12.9% YoY to | 3725.9 crore (I-direct estimate: | 3804.0 crore) on account of 20.5% growth in the US to | 1703.9 crore (I-direct estimate: | 1727 crore). The Europe business grew 12.1% to | 831.2 crore (I-direct estimates: | 856.7 crore) . EBITDA margins increased 188 bps YoY to 23.9% (I-direct estimate: 23.5%) mainly on account of an improvement in gross margins. Net profit grew 23.8% YoY to | 585.0 crore (I-direct estimates: | 565.9 crore) mainly due to a better operational performance.

Valuation: The management is sounding extremely confident about the margin improvement and debt reduction on the back of an improved product mix (Increasing injectables contribution in the US) and improved operating leverage. They maintain theirr target price of | 1055, based on 22x FY18E EPS of | 48.0.

In Q1FY17, TCI got approval to de-merge its XPS division into a wholly-owned subsidiary following which consolidated numbers were unavailable. Revenues for Q1FY17 (excluding XPS) grew 8% YoY to | 427 crore. Traction was witnessed across all segments. Growth was mainly driven by its supply chain segment, which grew 12% YoY to | 172 crore. However, freight division and shipping grew 5.6% YoY and 9%, respectively. Post de-merger, the freight business would contribute ~51% of total revenues; supply chain and shipping would form the remaining 40% and 9%, respectively.

Valuation: Given the share swap ratio, the FY18E EPS of XPS division is expected at | 14. Assigning a multiple of 30x to same we arrive at a targeted listing price of | 400-450/share. The value unlocking to the current investors is ~11%, following which they maintain BUY rating.

 

HPCL’s reported strong results in 1QFY17 led by the inventory gains of ~Rs 11bn. EBITDA was Rs 36bn and RPAT was Rs 21bn. Results are not comparable owing to inventory, forex and under-recovery impacts.Growth in FY17 may be challenging considering the higher base and muted GRM trend. The benefits of lower crude prices (balance sheet healing and lower interest cost) are mostly priced in. Expansion in marketing margins is the only trigger left. We are positive on HPCL owing to a structural uptrend in marketing segment. The stock has moved up by ~80% over the past 6-months. We see a correction in near term (better entry point) led by the weakness in GRM and no further inventory gains.

Their SOTP target is Rs 1,350 (4x FY18E EV/e for standalone refining, 6.5x EV/e for marketing and Rs 255/sh from other investments). Maintain BUY.

NTPC’s 1QFY17 recurring PAT at Rs 24.0bn (6%YoY growth) was 8% ahead of our estimates due to (1) Higher incentive income (Rs 1.5bn in 1QFY17 as against Rs 0.8bn for 1QFY16), and (2) Impact of change in accounting standard to Ind AS. Gross generation at 64.6bn units grew by 10%YoY. Coalbased PLF stood at 81.4% for 1QFY17 (vs. 77.6% for 1QFY16). Average tariff realization was Rs 3.11/kwh for 1QFY17 as against Rs 3.25/kwh for 1QFY16 due to lower coal imports as well as rationalization of coal linkages.

Valuation: We increase our TP to Rs 191 to factor in (1) Roll forward of target P/B to Jun-18E from Mar-18E, and (2) An increase in target P/B at 1.5x (from 1.4x earlier).Maintain BUY.

 

 

Near-term Risks are Pass; Eyes on Tariff Resolution for Mundra Consolidated Segmental Performance: TPCL's consolidated revenue dipped 4.8% yoy owing to poor performance from CGPL (18%) and standalone business (20.0%) which was partially offset by revenue from Tata Power Delhi Distribution (TPDDL) which...

Meghmani Organics Limited, a 6000 million Rupees company is one of the largest producers of color pigment in the world. Sound fundamentals, outstanding export performance, strong presence in the domestic market and a focused management team has seen Megmani Organics grow at a compounded annual growth rate of 17% and profits 10% over the past 3 years. Meghmani is also one of the largest producers of pesticides in India. More than 80% of the company's pigment products and over 50% of...