Emkay's research report
ArvindReco: BUYCMP: Rs 288Target Price: Rs 345Brand & Retail segment lags growth
In-line operational performance, although performance of brand and retail segment ex. Power brands disappoints. Mega Mart sees –ve 2.3% LTL growth in Q3FY15, while overall brand business see 1.9% LTL growth
Power Brands continue to show healthy growth with revenue in Q3FY15 grows by 25% YoY with EBITDA margins expanding by 60bps to 13.4%. Denims and Woven drive growth in Textiles segment with revenue growing at 8.3% with EBITDA expanding by 40bps YoY
ARVND lowers FY15E topline growth guidance from 22-24% to 14-15% with lower operational margins. We continue to maintain topline growth at 14.8%, with margin moderation as overall brand & retail segment margin expansion disappoints
Maintain Buy rating with TP of Rs 345 on SoTP basis with FY17E. Marginal cut in earnings estimates of FY15E / 16E by -7.9% / -6.0% respectively, mainly due to expensing Rs 250mn of VRS at its spinning facility & lower margin expansion in the Brand & Retail segment
JK Lakshmi CementReco: BUYCMP: Rs 393Target Price: Rs 510In-line operational results, maintain Buy
JK Lakshmi Cement’s Q3 EBITDA at Rs754mn (up 19% yoy) was in-line with estimates of Rs754mn despite higher than expected pressure on realization (Rs239/tn qoq drop vs est. Rs160/tn) and lower sales volume of 1.51mt (vs est 1.53mt). Operating cost/tn declined 3.8% qoq
Cement sales volume grew 6% yoy against industry growth of 3-4%. Realization was up 4.4% yoy to Rs3,693/tn
Revise FY15E/FY16E/FY17E EBITDA estimates downwards by 3.3%/6.4%/5.8% considering lower cement prices in North region and one quarter delay of Durg unit
Trial-run has started from 1.7mt capacity of Durg. Environmental clearance for 1mt grinding unit in Cuttack expected by Q4FY15. Remains preferred pick in the mid-cap space with TP of Rs510 (earlier: Rs547)
SJVNReco: BUYCMP: Rs 26Target Price: Rs 29Core performance in-line; retain Buy
SJVN’s Q3FY15 core RoE was in line with our expectation of 3.5%
With all 6 units of Rampur plant commissioned, there is visibility on earnings growth for FY16E with sustainable project level ROEs of ~20%
Based on 9M performance under the new CERC regulations 2014-19, we have marginally upgraded our FY15/16 estimates by 2%/1%
SJVN is largely a dividend yield and a proxy cash play, offering 5% dividend yield. With valuation at 1.0x book and 7.5x FY16E PER and ROE of ~14%, we retain Buy with price target of Rs29/sh
The Ramco CementsReco: HOLDCMP: Rs 338Target Price: Rs 323Result disappoints, maintain Hold
EBITDA at Rs1 bn (down 22.6% yoy/46.5% qoq) lower than ours/Bloomberg Consensus’ estimates of Rs1.37bn/Rs1.43bn primarily due to lower sales volume of 1.72mt vs estimated 1.91mt
Sales volume declined 11.5% yoy and qoq to 1.72mt led by weak demand in the South region and 10 days dealers strike in Kerala (led to 3-4% decline). Realization was up 5.6% yoy, though it declined 0.5% qoq. EBITDA/tn was at Rs603 (down Rs35 yoy and Rs226 qoq) against estimated Rs 663
Margin expansion expected going ahead led by higher realization in the South region, however declining sales volume remains a concern (volume declined 8.8% in 9MFY15). Revise EBITDA estimates downwards by 7.7%/8.4%/5.2% for FY15E/FY16E/FY17E
Weak demand continues to remain a concern in the South region though the cement prices have increased sharply. Positives factored in at valuation of 9.5x FY17e EV/EBIDTA. Pricing power may deteriorate if volume doesn’t pick up. Maintain Hold
Prism CementReco: BUYCMP: Rs 91Target Price: Rs 106In recovery mode, maintain Buy
Prism Cement’s Q3 EBITDA at Rs366mn (up 16.7x yoy, but down 21% qoq) was below our estimates of Rs474mn primarily due to lower than expected profits in the cement and TBK segment. EBITDA/tn of cement segment was at Rs217 vs estimated Rs281mn
TBK segment reported EBIT level loss of Rs35mn against loss of Rs52mn in Q3FY14, though the Revenue increased 24% yoy. RMC segment revenue increased by 3% yoy with EBIT level loss of Rs9mn against profit of Rs9mn in Q3FY14
Cement sales volume was at 1.3mt (+14.3% yoy/0.4% qoq) and realization was at Rs3,954/tn (+3.5% yoy, -2.7% qoq). EBITDA/tn of cement was at Rs217 against loss of Rs85 in Q3FY14
Expect profitability of TBK and Cement segments to improve going forward by led by cost saving measures initiated by the company. Maintain Buy on the stock with TP of Rs 106
NMDCReco: HOLDCMP: Rs 141Target Price: Rs 150Outperformance on better sales mix
NMDC reported numbers higher to our estimates aided by better realizations of Rs 4,166/ tonne, flat QoQ on account of better product mix
Revenues were higher to our estimates at Rs 29.5 bn (+4.4% YoY; -5.1% QoQ). Export volumes were marginally lower at 0.62 mn tonnes vs 0.67 mn in Q2FY15
EBITDA at Rs 19.5 bn (+2.4% YoY; 2.9% QoQ) was higher owing to lower operational costs and inventory accumulation. EBITDA/ tonne was Rs 2,791 vs Rs 2,763 in Q2. APAT was higher at Rs 15.9 bn (+1.6% YoY; +1.7% QoQ) on better operational performance
Believe current tight supply scenario to ease resulting in lower realizations in the ensuing quarters. Volume uncertainty remains. Maintain Hold with a target price of Rs 150
Dhanuka AgritechReco: ACCUMULATECMP: Rs 509Target Price: Rs 630Delayed monsoon impacts growth
Revenue at Rs 1.8bn were up 7%yoy, lower than our estimates due to adverse monsoons and lower sowing activity in the current rabi season. Volume growth for the quarter stood at ~4%yoy while price/mix led growth stood at ~3% yoy
EBITDA at Rs 259mn was up 3.5%yoy, lower than our estimates. Gross margin for the quarter was lower by ~230bps yoy due to price reductions taken in select products. EBITDA margin for the quarter at 14.4% contracted by ~50bps yoy
Received regulatory approval for “Sempra”; a novel product (Section 9(3)) in the current quarter and aims to launch the same in the current sugarcane season
We continue to maintain our Accumulate rating on the stock with a target price of Rs 630, as we expect strong new product pipeline and distribution reach to continue to drive above industry average revenue growth.
Ballarpur IndustriesReco: ACCUMULATECMP: Rs 16Target Price: Rs 23Results disappoint, deleveraging the key catalyst
Consolidated revenues at Rs 12.1bn down 10%yoy, lower than our estimates on the back of lower than estimated pulp segment revenues
Consolidated EBITDA at Rs 1.5bn was down 34%yoy on account of subdued margins for both the paper and pulp business. Paper segment margins at 5% were significantly lower than our estimate of 12% while pulp business continued to drag performance
Results for the quarter were impacted due to production loss at its step down subsidiary Sabah Forest (which was exceptional in nature) resulting in a net loss of Rs 810mn
We have cut our FY15E (9 month financial year) on account of subdued Q2FY15 while maintaining our FY16E. We continue to maintain our Accumulate rating on the stock with a target price of Rs23
Apollo TyresReco: HOLDCMP: Rs 214Target Price: Rs 210Revenue miss; Retain HOLD
Apollo Tyres Q3 consolidated revenues missed our est. by a significant 12%; consequently reported EBITDA missed our estimates by 14% despite decent operating margins (benefitting from lower rubber prices)
India biz saw a revenue dip of 2% YoY on weak demand, an unfavourable price & mix and increasing competition from cheaper imports
European biz saw a 11% Euro based topline de-growth as demand for winter tyres was impacted from a weak winter and as the VBBV lost some market share
The South African plant virtually operated for just a month during the quarter and underwent business restructuring/closure; going ahead the company will only undertake trading business in South Africa
We maintain our HOLD rating on the stock with a TP of Rs 210 based on 10xFY17E EPS. We see increasing competitive pressures, risk of increase in rubber prices and premium trading multiples vs historical average as key downside risks.
PTC IndiaReco: HOLDCMP: Rs 89Target Price: Rs 92Volumes miss due to transmission constraints; maintain Hold
APAT of Rs284mn (-36% YoY) was significantly below our estimate of Rs425mn. The profit was impacted due to lesser volumes traded (-6% YoY)
The decline in volume was mainly due to lesser demand and corridor constraint at Bangladesh and transmission network congestion in India
On back of the weaker than expected performance, we have reduced our FY16/17 earnings estimate by 11%/8%
We maintain our Hold rating with a revised base case SOTP price of Rs92/share. Key upside risks would be higher than expected bids from SEBs and PTC able to participate.
GAIL IndiaReco: HOLDCMP: Rs 420Target Price: Rs 434Operationally weak, bleak outlook
Results came significantly below our and consensus est. with PAT at Rs6bn on back of payment towards previous quarter subsidy of Rs5bn coupled with weak performance in Petchem and Gas marketing margin
As expected transmission vol. came at 94.09mmscmd, growth of 3.4% while trading volumes increased by 7.4% to 74.08 qoq. Transmission EBIDTA came in at Rs6.8bn, growth of 38% qoq, while trading EBIDTA stood at Rs0.53bn, declined of 88% qoq
Petchem margins have declined sharply to 2.3% (v/s 14.1% qoq) to Rs0.2bn (v/s Rs1.8bn qoq) on higher cost of natural gas and lower net realisation of products. Trading margins have also nosedived to 0.5% (v/s 4.6% qoq) to Rs0.5bn (v/s Rs4.6bn qoq) as company reported negative marketing margin of 33cents/mmBtu
Except transmission, rest all business like Trading, Petchem and LPG outlook remains weak in near term. Subsidy sharing still a bleak picture. Cut our TP to Rs434 (Rs485 earlier) and EPS for FY15/16 by (19.3)/(18.5)% to Rs 28.7/31.7 respectively, Maintain Hold.
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