Emkay's view on SBI, JP Power, JSW Steel results

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Emkay's view on SBI, JP Power, JSW Steel results

Emkay Global Financial Services has came out with result updates on Jaiprakash Power, JSW Steel, Great Offshore, Indo tech Transformers and State Bank of India.

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RELATED NEWS Buy Camson Bio Tech; target of Rs 156: Unicon Investment Angel Broking neutral on PTC India Sell TRF; target of Rs 378: PINC Research ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about JaiprakashHydro See messages about JaiprakashHydro Jaiprakash Pow BSE | NSE 29/05/12 Are Mutual Funds betting on Jaiprakash Pow? Other Stocks in this news JSW Steel | Great Offshore | Indo Tech Transformers | State Bank of India |

Emkay Global Financial Services has came out with result updates on Jaiprakash Power , JSW Steel , Great Offshore , Indo tech Transformers and State Bank of India .

Jaiprakash Power

"Jaiprakash Power, below expectations - on lower VER sales. Q4FY11 PAT down 72% yoy due to lower VER sales and higher interest expenses which were partly neutralized by higher other income. Karcham (key FY12E growth driver) unit 1 has synchronized on 13th May - COD by May end. Assumed Commissioning of whole project by August 2011 - any delay to impact PAT. Reduce FY12E/13E earnings by -11%/-8% led by equity dilution. (21% or 556 mn shares) including treasury stock of 371mn on account of amalgamation of JPVL, Karcham and Bina. Assumed treasury stock sale in 12E to fund capex. Valuations imply LT merchant rate of Rs 3.7 (our est. Rs 2.7). Litigation on Karcham and funding gap to remain overhang."

"Current valuations imply long term merchant tariff of Rs 3.7/unit vs our estimate of sustainable merchant tariffs at Rs 2.7/unit.. At CMP of Rs 47/Share, the stock is trading at 1.8 x FY13E Book Value. We have assumed Karcham as a merchant power plant. Any outcome on litigation with PTC which is not favorable (less merchant capacity, capital cost approval lower than actual) for the company, to impact the stock performance. Also we believe funding gap would continue to be an overhang - even after treasury stock sale in FY12E, JPVL is likely to need about Rs 20bn as equity funding in FY14E. Maintain hold with revised price target of Rs 47/Share."

JSW Steel

"JSW Steel posted robust performance for Q4FY11 with topline growing by 33% YoY and 21% QoQ to Rs 72.8 bn (cons) backed by sharp jump in sales volume to 1.733 mt. Better product mix with lower sales of semis coupled with higher realizations (~Rs 41,000/ tonne) helped the company to post an EBITDA of Rs 16.6 bn, up 26% YoY and 64% QoQ. Strong operating performance flowed into the bottomline too which rose 30% and 172% on YoY and QoQ respectively to Rs 7.94 bn. Ispat also contributed positively to the reported PAT. Despite short- term challenges, volume growth and better integration should benefit FY13 performance. Upgrade to Buy with a target price of Rs 1,169 valuing at 6x FY13 EV/ EBITDA."

"Factoring in the rise in raw material costs, contribution from Chile and Ispat we have cut our FY12 EPS by 10% to Rs 95.6/ share and introduce our FY13 estimates with EPS at Rs 122.8/ share. At the CMP of Rs 921, the stock is trading at 7.5x FY13E EPS and 5.2x FY13E EV/ EBITDA. Considering the positive and concerns we value the company 6xFY13 EV/ EBITDA to arrive at a target price of Rs 1,169/ share. We upgrade the stock to BUY."

Great Offshore

"Great Offshore (GOL), APAT loss of Rs 25mn - sharply below estimates led by lower revenues and higher costs and interest charges. Revenues at Rs 2.07bn down 24.4% yoy dragged by lower spot rates of OSV , minimal revenues from marine construction and non utilization of marine construction assets. EBITDA at Rs 657 mn (-51.6% yoy). EBITDA margins down 1782 bps to 31.7% led by lower revenues & increase in repairs & maintenance and staff exp. GOL to sell rig 'Amarnath'. New rig V351 sees further delay in delivery (Dec11 vs June 11 earlier)- earnings to see sharp downward revision. Earnings, rating & target under review."

"GOL has decided to sell its Jack up rig Amarnath, due to some changes in operation under charter contract. Hence instead of redeployment of the rig the company has sold the rig at some profits, and the rig will be delivered to its new buyers during Q1FY12. Amarnath was bought by the company (in early FY11) for USD49 mn and it had spent USD5mn on its upgradation. With GOL selling its rig Amarnath & delay in delivery of new Rig V351 to Dec 2011 as compared to June 2011 earlier, we see sharp decline in GOL's earnings visibility for FY12 as these two rigs alone were expected to contribute more than 80% of our estimated 30% revenue growth for FY12. With absence of rig Amarnath & further possibility of delay of rig V351, we see limited earnings trigger for GOL. In this context we will be reviewing our earnings estimate post getting clarity on OSV operations from the management. In the meanwhile our rough cut calculations indicate a sharp 30-35% downward revis ion in GOL's FY12E earnings."

Indotech Transformers

"Indotech Transformers, Q4FY11 results below estimate, revenues of Rs 224mn, (est. Rs 677mn) EBITDA loss of Rs 70mn (est. loss of Rs 11mn) and net loss of Rs 76mn (est. loss of Rs 9mn) - volumes key culprit. Expect industry volumes to grow by minimum 15% in FY12E but not sure on Indotech's volume growth - more number of players looking for that pie. FY11 EBITDA margins dip led by fixed costs (36% of revenues vs 28% in FY10). Thus, scope of operating leverage (break even at 51% utilizations) but depends on volume growth. Assuming 49/61% capacity utilizations in FY12E/13E & expect Indotech to get into green by H212E."

"We believe that the stock will continue to languish until the company reports pick up in volumes and positive EBITDA. Though the possibility of outsourcing for parent (GEProlec is likely to make India, a supply base for Middle East, Africa and rest of Asia) exists but still no clarity on potential and timelines . Thus, in near term the momentum has to come from domestic market. At CMP of Rs 144/share, the stock is trading at 1.2x FY13E book of Rs 118/share. We maintain 'Hold' rating on the stock with revises price target of Rs 141/share."

State Bank of India

"State Bank of India (SBI)'s results extremely disappointing with NII of Rs80.6bn (down 10% qoq) and net profit of just Rs209mn. Sharp drop of 56bps qoq in NIMs to 3.04%. Lower NII with Rs8.8bn of pension expenses, Rs32bn of NPA provisions (100% qoq), high tax rate drag the net profit down. Good thing - has cleaned up all liabilities like pensions, teaser rate loan provision, bad thing - low tier I of 7.77% and sharp rise in slippages to Rs56.4bn. Early rights issue holds the key. Cutting loan growth estimate to 17% (from 20%) for FY12/13. Cutting earning estimates by 13%/14%."

"We have cut our earnings estimates for FY12/13 by 13%/14% taking into account lower loan growth of 17% and NIMs contraction of 25bps for FY12. We have also raised our slippage estimate from 1.7% earlier for FY12 to 2.0% now. Add to that, the pension liabilities may give surprises if actuarial valuations change though we are building in Rs 25bn of pension expenses for next two years. As highlighted earlier the rights issue now becomes very important for the company for future growth. We maintain HOLD rating on the stock while cutting price target to Rs 2,480 (from Rs 2700 earlier) valuing the consolidated banking operations at 1.4x FY13E ABV," says Emkay Global Financial Services research report.

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