Angel Broking neutral on Bajaj Hindusthan

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Angel Broking neutral on Bajaj Hindusthan

Angel Broking has maintained neutral rating on Bajaj Hindusthan (BJH), in its May 3, 2011 research report.

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Angel Broking has maintained neutral rating on Bajaj Hindusthan (BJH), in its May 3, 2011 research report.

"Bajaj Hindusthan (BJH) reported an increase of 116% yoy in its total revenue to Rs 1,262 crore for 2QSY2011. PAT for the quarter grew by 131% yoy to Rs 73 crore. Numbers are not comparable on a yoy basis due to merger of the company's subsidiary. EBITDA margin improved by 720bp yoy to 25.4% in 2QSY2011 from 17% in 2QSY2010 and 18% in 1QSY2011, on account of lower cane and other costs. Raw-material cost as a percentage of sales fell to 63.7% in 2QSY2011 compared to 73% in 1QSY2011. Revenue contribution from the sugar division declined to 84% in 2QSY2011 from 90% in 1QSY2011. However, revenue contribution from the distillery and power divisions increased to 6% and 10% in 2QSY2011 compared to 5% and 4% in 1QSY2011, respectively."

"Going ahead, we expect sugar prices to remain at Rs 28-30/kg. Domestic ex-mill prices have corrected from the highs of Rs 42/kg to Rs 28-29/kg currently, while cost of inventory is at Rs 28/kg. However, due to declaration of SAP by the UP Government, margins in the sugar business would be under pressure; however, the same is likely to be compensated by higher contribution from the power and distillery divisions. At current levels, the stock is trading at fair valuations of 0.6x P/BV and 0.8x EV/IC on SY2012 estimates. Hence, we maintain our Neutral view on the stock," says Angel Broking research report.

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