ICICI Bank
Cluster: Apple Green
Recommendation: Buy
Price target: Rs750
Current market price: Rs575
Price target revised to Rs750
Result highlights
- ICICI Bank reported a strong 59.1% year-on-year (y-o-y) and a 22.4% quarter-on-quarter (q-o-q) growth in its net interest income (NII) in Q3FY2006. The growth in the NII was achieved on the back of a strong growth in the advances.
- The strong growth momentum in the bank's fee income continued--during the quarter the fee income grew by a strong 51.6% year on year (yoy).
- The operating profit for Q3FY2006 grew by 55% yoy to Rs1,194.5 crore with the core operating profit growing at even a stronger rate of 67.8% yoy.
- A higher provisioning and other adjustments pulled down the net profit growth rate to 23.7%. However, the adjusted profit after tax (PAT) grew by 17.9% yoy.
- The asset quality improved dramatically as the net non-performing assets (NPAs) stood at 0.8% of customer assets in Q3FY2006 against 2.29% in Q3FY2005.
- The capital adequacy ratio (CAR) improved to 14.5%, with the Tier I CAR at 10.5% after the recent equity issue by the bank.
- At the current market price of Rs575, the stock is trading at 2.3x its FY2007E book value. The valuation looks attractive if one considers the value of the bank's subsidiaries which works out to Rs150 per share of the bank. It also trades at substantial discount to its peers in the sector like HDFC Bank which is trading at 3.8x its FY2007E book value. We maintain our Buy recommendation on the stock with a revised price target of Rs750 at which it discounts its FY2007E book value by 2.5x.
ORG Informatics
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs194
Current market price: Rs160
Earnings grow exponentially
Result highlights
- The consolidated net revenues of ORG Informatics declined by 40% quarter on quarter (qoq) and by 3.7% year on year (yoy) to Rs29 crore in Q3FY2006. The sequential drop was largely due to the higher base effect resulting from the completion of a large system integration project in the previous quarter.
- However, the operating profit margin (OPM) zoomed up to 10.3% from 4.5% in Q2FY2006 and 3.9% in the corresponding quarter of the previous year. The higher contribution from the high-margin telecom business boosted the overall profitability.
- At Rs3 crore the earnings grew exponentially, by 867% yoy and by 301% on a sequential basis. The earnings were slightly ahead of our expectations due to a lower tax outgo during the quarter. Given the accumulated losses and the unabsorbed depreciation, the company created a deferred tax asset in the last quarter. The lower interest and depreciation charges also boosted its earnings growth.
- For the nine-month period, the earnings have grown at 619% to Rs4.3 crore. The performance is in line with our full-year estimates of Rs7.1 crore.
- We maintain our Buy call on the stock with a one-year price target of Rs194.
Maruti Udyog
Cluster: Apple Green
Recommendation: Buy
Price target: Rs850
Current market price: Rs699
Price target revised to Rs850
Result highlights
- Maruti Udyog Ltd's (MUL) reported better than expected numbers for Q3FY2006. Income from operations grew by 8% yoy on back of a 7% growth in volumes and a 1.1% improvement in realizations.
- The operating profit margins improved by 258 bps to 15% due to control on costs mainly on the raw material front and other expenditure.
- 77% reduction in interest cost and 35% lower depreciation lead to the Profit after tax for the quarter growing by 41% to Rs 339 cr.
- At the current market price of Rs 699, the stock is quoting at 15x on its FY2007E earnings per share (EPS) and 9x on EV/EBIDTA basis. We reiterate our Buy recommendation on the stock with a revised price target of Rs850.
Orchid Chemicals & Pharmaceuticals
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs355
Current market price: Rs260
Net profit zooms
Result highlights
- Orchid Chemicals' net sales for Q3FY2006 were up 37.9% year on year (yoy) to Rs237.6 crore due to high revenues from ceftriaxone sales in the USA.
- The operating profit was up 67.7% yoy to Rs69.26 crore as the operating profit margin (OPM) went up by over 500 basis points to 29.1%.
- The profit after tax (PAT) saw an increase of over 400% from Rs5.76 crore in Q3FY2005 to Rs28.97 crore in Q3FY2006. The net profit margin jumped by close to 900 basis points to 12.2% during the quarter.
- The company had earnings per share (EPS) of Rs4.1 in Q3FY2006. At the current market price of Rs260, the stock is trading at 12.5x FY2007 earnings estimate. We maintain our Buy recommendation on Orchid with a price target of Rs355.
Emco
Cluster: Apple Green
Recommendation: Buy
Price target: Rs600
Current market price: Rs525
Price target revised to Rs600
Result highlights
- Emco's revenues for Q3FY2006 grew 67.0% year on year (yoy) to Rs97.1 crore on the back of higher order booking of Rs117 crore during the quarter.
- The operating margins were down 220 basis points yoy to 13.0% primarily on account of higher raw material prices (mainly copper). But on a quarter on- quarter (q-o-q) basis, the margins were maintained at 12.9-13.0% range.
- Emco's interest cost in Q3FY2006 came down by 14.4% yoy to Rs3.4 crore, conforming our assumption of interest cost saving in FY2006-08E.
- The net profit grew to Rs6.1 crore registering a y-o-y growth of 98.4%. The earnings for the quarter stood at Rs7.9 per share.
- Emco's order backlog grew by Rs20.0 crore (4.7% qoq) to Rs445.0 crore, thus imparting a strong visibility to the revenues and the ensuing earnings.
- We have revised our FY2008 revenue estimates by 12% to Rs600.9 Crore and net profit estimates by 15% to Rs39.8 Crore.
- Considering the robust macro economic scenario, high revenue visibility, strong earnings momentum, strong balance sheet, improvement in return ratios and attractive valuations (PER of 10.4X FY2008E earnings and Ev/Ebidta of 7.0X FY2008E); we revise our price target to Rs600 discounting its FY2008E earnings at 12X.