Buy

Gujarat State Petronet (GSPL) reported its Q1FY17 result, which were above our estimates. GSPL reported flat YoY growth in revenue to | 258.1 crore, above our estimate of | 247.6 crore. While gas transmission volumes increased 4% YoY to 25.1 mmscmd (I-direct estimate: 25.3 mmscmd), the realisation declined 4.7% YoY to | 1.1/scm (I-direct estimate: | 1/scm) . EBITDA increased 2.7% YoY at | 233.3 crore, above our estimate of | 212.6 crore, mainly due to lower-than-expected operational and maintenance expenses. Subsequently, PAT in the quarter increased 7.5% YoY to | 121.3 crore, above our estimate of | 103.1 crore.

Valuation : GSPL’s transmission business is expected to report steady volume growth in the backdrop of falling LNG prices due to lowering of gas prices and renegotiated LNG supplier contracts. Higher growth in domestic power demand due to favourable reforms, increased LNG capacity and lower gas prices would also add to incremental volumes, going forward. An upward revision of transmission tariffs by PNGRB in coming months would be a key positive for the stock. GSPL’s investments in CGD entities such as Gujarat Gas (25.8% stake) and Sabarmati Gas (27.5%) would also create value for investors in future. We value GSPL’s investments at | 34 per share. Subsequently, we have valued GSPL based on an SOTP basis and arrived at a price target of | 170.

Net sales grew 10.6% YoY to INR 4.2bn in 1QFY17 vs INR 3.8bn in 1QFY16 led by robust volume growth of 36.7% YoY in cartridge from 22,426MT to 30,665MT and 10.7% growth in bulk explosive segment from 43,224MT to 47,843MT; exports revenue grew 16.5%YoY. The company’s has consistently reduced its reliance on CIL (Coal India Ltd) for revenues diversifying its customer portfolio. Consequently, customer share (in terms of revenue) stood at – CIL (24%), Non CIL & Inst (20%), Export & Overseas (25%), Trade & Others (31%), Defense (0.35%). Moreover management highlighted that the company has INR 720mn of defense orders in the order pipeline which would be completed within the year.

Valuation: Strong order book, expected rapid revenue growth from defense and growing export revenues are the key growth drivers. At current levels, the stock trades at P/E of 23.0X its FY18E. Consequently, we rate the stock an OUTPERFORMER, assigning P/E of 26X to FY18E EPS to arrive at a target price of INR 696.

Top takeaways from Q1FY17 : Gas sales volume fell 5% qoq to 5.14mmscmd (6% below our estimate of 5.50mmscmd) due to seasonal dip in domestic PNG volumes. Gross margin rose 3% qoq to Rs 7.0/scm (in line) due to decline in raw material gas price while clean EBITDA/scm increased 9% qoq to Rs 4.5 on 8% fall in opex/scm to Rs 2.5 9 Interest declined 11% qoq to Rs 534mn; ETR normalised at 30.1%; Net debt of Rs 22.8bn 8 PAT was up 30% yoy and 10% qoq at Rs 759mn, but 16% below our tax adjusted estimate due to lower than expected volumes. OCI was Rs 40mn loss in Q1FY17.

Outlook and valuation: They maintain positive view on GGL due to expected traction in existing markets like Morbi from 2HFY17 onwards. Longer term outlook is attractive with economic/industrial revival and development in new areas. We cut our FY17 EPS by 6% but raise our longer term estimates.Also lower WACC in DCF and hence revise their target price to Rs 700 (Rs 600 earlier). Maintain Buy 

ITD Cementation India (ITD) has cemented its position in the civil engineering infrastructure space with a presence across niche and growing segments, viz. maritime structures, Mass Rapid Transport Systems (MRTS) and hydro power projects/dams. With an operating history of over four decades, ITD is well poised to benefit from the...

In 4QFY16, NIIT Tech revenue stood at INR 6,847mn (up 12.0% YoY and +0.9% QoQ). Revenue declined in dollar terms by 1.6% QoQ to USD 101.7mn. In CC terms, revenue growth was flat QoQ. Growth was soft due to closure of large projects in travel and transportation vertical. EBITDA margins expanded by 20bps QoQ at 18.4% in 4QFY16, driven by healthy increase in GIS business, lower SG& A expenses and currency tailwinds. PAT margin rose by 60bps QoQ on the back of lower effective tax rate in 4QFY16. DSO declined by 10 days QoQ to 80 days.The company’s order book, executable over the next 12 months was flat at USD 301mn. During the quarter NIIT added 4 clients, 2 each in USA and RoW and received fresh order intake of USD 120mn (US: USD 30mn, EMEA: USD 61mn and RoW USD 28mn).

Valuation: Management expects the growth momentum to pick up in the remaining quarters and has guided for double digit growth in FY17 aided by healthy order bookings and traction in digital business. However, management indicated that 1QFY17E is likely to be soft quarter due to seasonality in its GIS business. The stock is currently trading at 10.5/9.1/8.2x of FY16/17E/FY18E EPS. We have arrived at a target price of INR 588 (earlier 564), valuing the stock at 10X FY18E EPS and maintain a BUY rating on the stock.

Update 2: The City Union Bank Ltd. (CUB) Target of Rs.145 achieved. Book Profit. Update 1: The City Union Bank Ltd. (CUB) rallied from the low of 106 to the high of 130 after our report publication, so on 28th July 2016 we advised to book 50% profit and Trailed stop loss to 115....

ICIL is the 2nd largest exporter of Home Textiles (bed linen, bed sheets and quilts). Company is benefiting from expanding into new profitable territories with better mix of valued added products.

Shift from textile to high margin mass market branded retailer has changed fortune for the company. Buoyant rural and semi-urban economy is expected to augur well for the company.

Company is a diversified NBFC with focus on vehicle and home financing. A rare combination of credit quality, growth, margins and return ratios are reasons to recommend to long term investors.

Dalmia Bharat (DBL) is India?s 3rd largest cement group. DBL is well positioned to ride the tide of infrastructure & housing boost. Stock price provides a good upside for investors.