Motilal Oswal - TISCO

Motilal Oswal recommends Buy On TISCO @ 373 With Target Price 502

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Sharekhan Stock Update

Grasim Industries 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,430
Current market price: Rs1,178 

Subdued performance

Result highlights

• Grasim Industries' net sales (stand-alone) for Q1FY2006 stood at Rs1,553 crore, registering a 2.4% growth on a year-on-year (y-o-y) basis. 
• The operating profit margin (OPM) at 24.1% declined by 430 basis points primarily on account of lower margins in the viscose staple fibre (VSF) and sponge iron businesses. 
• The operating profit stood at Rs374.4 crore, registering a decline of 13% yoy. 
• The interest expenses fell by 19% yoy to Rs26.5 crore primarily due to the restructuring of debt and higher cash on books, while the other income grew by 24% yoy to Rs20.1 crore.
• The pre-exceptional net profit stood at Rs205.6 crore, down 6.2% yoy. The net profit after the exceptional items stood at Rs251 crore, recording a growth of 14.5% yoy. 
• On a consolidated basis the company's net sales for the quarter grew by 8.4% to Rs2,495 crore primarily driven by the improved performance of UltraTech Cement Company and its subsidiaries. 
• Pre-exceptional consolidated net profit grew 20% to Rs251 crores.

Hyderabad Industries 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs500
Current market price: Rs419

Another spectacular quarter

Result highlights

• Hyderabad Industries Ltd's (HIL) net sales in Q1FY2006 went up by 11.4% to Rs131.8 crore. While the building product business contributed Rs121.5 crore, the heavy engineering division (HED) contributed Rs5.48 crore to the company's top line. 
• The operating profit growth of 90.7% to Rs28.35 crore was primarily driven by strong asbestos prices and lower losses in the HED. 
• The interest cost came down by 52% to Rs1.42 crore as strong cash flows led to loan repayments. We expect the interest cost to further come down in the coming quarters.
• The reported net profit (after the write-off of the expenses on account of a voluntary retirement scheme or VRS) increased by 129.7% to Rs15.07 crore in Q1FY2006. However the net profit before extraordinary items increased by 169.5% to Rs17.68 crore in Q1FY2006. 
• The HED was transferred to Titagarh Wagons Limited on July 8, 2005. The HED registered losses to the tune of Rs3.77 crore in Q1FY2006 the negative impact of which will not be felt in the future.

Reliance Industries

Cluster: Evergreen
Recommendation: Buy
Price target: Rs800
Current market price: Rs741

Results above expectation

Result highlights

• Reliance Industries Ltd's (RIL) revenue for Q1FY2006 grew by 24.5% year on year (yoy) to Rs17,784 crore on the back of the buoyancy in its refining business.
• The refining margins remained robust during the quarter and continued to command a premium over the regional margins in Asia because of a superior crude mix. However the petrochemical business faced pressure in terms of pricing as well as volumes.
• The operating profit was up by 27.1% yoy to Rs3,546 crore owing to a strong expansion in the company's refining margins.
• The net profit was up by 60.8% to Rs2,310 crore due to operational efficiencies, lower interest outgo and lower depreciation.

Television Eighteen India

Cluster: Emerging Star
Recommendation: Buy
Price target: Rs350
Current market price: Rs343

Results in line with expectations

Result highlights

• Television Eighteen India's (TV18) overall results for Q1FY2006 are in line with our expectations.
• Its top line grew by a good 57% during the quarter led by the advertisement revenue, which grew by 58% in Q1FY2006.
• With the operating costs remaining under check the operating profit margin (OPM) improved by 40 basis points.
• The net profit improved by 28.5% to Rs8.0 crore during the quarter.
• At the current market price of Rs343 the stock is quoting at 12.1x FY2007E earnings and 6.5x its EV/EBITDA.
• We maintain our Buy call on the stock.

ICICI Bank
Cluster: Apple Green
Recommendation: Buy
Price target: Rs650
Current market price: Rs520

Earnings momentum sustained

Result highlights

• ICICI Bank reported a strong 35% year-on-year (y-o-y) and 7.7% quarter-on-quarter (q-o-q) growth in its net interest income (NII) on the back of a strong growth in its advances.
• The strong growth momentum in the bank's fee income continued-during the quarter the fee income grew by a strong 57.4% year on year (yoy).
• The operating profit for Q1FY2006 grew by 74.7% yoy to Rs970.8 crore. Notably the core operating profit grew by even a stronger 100.5% yoy.
• However the net profit growth was restricted to 23% yoy as the company used the strong operating performance to make higher provisions for the amortisation of the premium on its "held till maturity" (HTM) investment portfolio.
• We maintain our Buy recommendation on the stock with a revised price target of Rs650.

Thermax 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs780
Current market price: Rs655

Robust growth in revenue

Result highlights

• Thermax' revenue saw a robust year-on-year (y-o-y) growth of 79.7% to Rs226.5 crore in the quarter. The growth came on the back of a strong volume growth in its key business segments: energy and environment.
• The energy segment grew by 87.6% to Rs 152.5 crore and the environment segment grew by 68.5% to Rs83.9 crore in the quarter.
• The company's operating profit margin (OPM) increased by 330 basis points to 8.8% in the quarter, reflecting the gains arising on account of economies of scale and falling input prices as a percentage of revenues.
• The net profit reported a y-o-y growth of 137.1% to Rs13.3 crore in the quarter, mainly driven by a strong revenue growth resulting from a robust order book.
• The stand-alone order backlog stood at Rs810 crore in Q1FY2006 as against Rs770.0 crore in Q4FY2005. The consolidated order backlog stood at Rs1,150 crore at Q1FY2006 as against Rs1,130 crore in Q4FY2005. 
• The earnings in the quarter stood at Rs5.6 per share on a stand-alone basis and at Rs3.2 per share on a consolidated basis.
• Considering that the company's strong order book shall impart visibility to its earnings and that the outlook for the company's key business segments is robust, we believe that the stock is trading at attractive valuations of price/earnings ratio (PER) of 12.4x FY2007 and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.5x FY2007E. We maintain our Buy call on Thermax with a price target of Rs780.

Omax Auto

Cluster: Apple Green
Recommendation: Buy
Price target: Rs178
Current market price: Rs138

Reiterate a Buy 

Result highlights

• The net sales of Omax Auto Ltd (OAL) grew by an impressive 25.0% year on year (yoy) to Rs144 crore in Q1FY2006.
• The operating profit margin declined by 60 basis points yoy to 10.2% leading to a 17.4% yoy growth in the operating profit.
• The net profit growth was muted and was up 1.9% yoy due to higher interest and depreciation charges.

Sun Pharmaceutical Industries

Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs650
Current market price: Rs615

Formulation sales rise

Result highlights

• Sun Pharmaceuticals' net revenue was Rs385.9 crore during Q1FY2006 as compared to Rs278.9 crore in Q1FY2005 (an increase of 38.3%) primarily because of an increase in its formulation sales.
• The operating profit grew by 33.1% over Q1FY2005, at a mildly lower pace compared to the growth in the net revenue, and stood at Rs135.2 crore, as the company faced pricing pressure in USA and other foreign markets. 
• The profit before tax (PBT) rose by 48.3% year on year (yoy). This was due to an increase in the interest income (Rs16.2 crore for Q1FY2006) from the return on excess funds obtained from the issue of foreign currency convertible bonds (FCCBs). 
• The profit after tax (PAT) increased by 54.2% over Q1FY2006 to Rs136.3 crore helped by a 13% reduction in the total tax over Q1FY2005.
• At the current market price of Rs615 the stock is trading at 22x FY2006E earnings.

Gujarat Ambuja Cement

Cluster: Apple Green
Recommendation: Book Profit
Current market price: Rs67.4

Book profit

Result highlights

• The net sales of Gujarat Ambuja Cement (GACL) for Q4FY2005 stood at Rs720.5 crore, registering an impressive 21% year-on-year (y-o-y) growth, driven by a 16% volume growth and a 4.4% growth in realisations.
• The volume growth was mainly driven by the commissioning of the new 1-million-tonne capacity grinding unit at Ropar, Punjab and the merger with Ambuja Cement Rajasthan Ltd.
• The operating profit margin (OPM) for the quarter declined by 80 basis points primarily because of a 19% increase in the power & fuel cost. However for FY2005 the OPM improved by 160 basis points.
• The operating profit for the quarter grew by 18% to Rs227.1 crore year on year (yoy). For FY2005 the operating profit registered a growth of 40%.
• The pre-exceptional net profit for the quarter grew 1% to Rs145.2 crore yoy. However the post-exceptional net profit jumped by 24% to Rs145.2 crore yoy.

Bajaj Electricals 

Cluster: Ugly Duckling
Recommendation: Book Profit
Current market price: Rs354

Book your profits

Result highlights

• Bajaj Electricals Ltd's (BEL) revenue grew by 26.3% in Q1FY2006 to Rs137.4 crore on the back of the strong performance of the company's lighting and consumer durable businesses. 
• The lighting business continued its growth momentum in the quarter, registering a year-on-year (y-o-y) growth of 31.1% with revenue of Rs56.3 crore. Even the consumer durable business clocked a y-o-y growth of 30.4% with revenue of Rs65.9 crore in the quarter. 
• The operating profit margin (OPM) improved by 390 basis points in the quarter to 7.4% as compared to 3.5% in the same period last year, driven mainly by lower raw material costs as a percentage of its revenue.
• The company's key business segments registered a sharp improvement in the profit before interest and tax (PBIT) margins. The lighting segment's PBIT margin improved from 5.3% in Q1FY2005 to 8.9% in Q1FY2006 while that of the consumer durable segment improved from 1.4% in Q1FY2005 to 3.9% in Q1FY2006.
• The company reported a profit after tax (PAT) of Rs1.6 crore in the quarter against a loss of Rs2.0 crore in the same period last year, in line with estimates. 
• The extraordinary income in the quarter stood at Rs3.5 crore (on account of discontinued operations) while the PAT (after extraordinary expenses) stood at Rs5.1 crore in the quarter against Rs0.7 crore in the same period last year. 
• We believe that at the current levels BEL's valuation factors in all possible positives. Thus in the absence of any fresh triggers and considering the rich valuations of the stock currently-price/earnings ratio (PER) of 11.6x FY2007E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.1x FY2007E—we advise booking profits.

Punjab National Bank  

Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs500
Current market price: Rs435

Results in line with expectation

Result highlights

• Punjab National Bank (PNB) reported a strong growth of 14.1% in its core operating profit for Q1FY2006 on a year-on-year (y-o-y) basis. However the bank's overall operating profit declined by 8.6% year on year (yoy) as the treasury income was much lower this quarter.
• The growth came on the back of a 16.3% y-o-y growth in the net interest income (NII) and a 19.2% growth in the fee income.
• The net profit grew by 11.0% yoy as the bank wrote back Rs36.2 crore of its non-performing asset (NPA) provisions.
• The capital adequacy ratio (CAR) at the end of the quarter was at 15.5%, higher than Q1FY2005's 12.7% due to the public offering (PO) done in Q4FY2005.
• At the current market price of Rs435 the stock is quoting at 1.4x its FY2006E expected book value. We maintain our Buy recommendation on the stock with a price target of Rs500.

Marico Industries 

Cluster: Apple Green
Recommendation: Buy
Price target: Rs300
Current market price: Rs291

Growth momentum sustained

Result highlights

• Marico Industries reported an 11.8% growth in its revenue and a 33.9% rise in its operating profit in Q1FY2006, thus maintaining the growth momentum of the past quarters. 
• The growth was powered by a volume growth of 6.0% in the consumer product business whose key brands showed a robust volume growth.
• The high-margin consumer product portfolio saw a healthy volume growth of 9.0% in the quarter, contributing 71.0% of the consumer product revenue.
• The operating profit margin (OPM) improved by 178 basis points in the quarter to 10.8%, primarily because there was no revision in Parachute prices despite the fall in the company's raw material costs.
• Powered by the improvement in the margins the earnings growth was robust at 27.8% to Rs3.7 per share in the quarter.
• The company announced an interim dividend of Rs1.2 per share in Q1FY2006. 
• The stock trades at a price/earnings ratio (PER) of 15.7x FY2007E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 11.1x FY2007E. Looking at the healthy growth prospects for the company we maintain our Buy call on the stock with a price target of Rs300.

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