Bharat Bijlee

Bharat Bijlee

Bharat Bijlee

Bharat Bijlee

Bharat Bijlee

Bharat Bijlee

BEML, Berger Paints, Bharat Bijlee, Bharat Electronics, BOSCH, Britannia Industries

BEML, Berger Paints, Bharat Bijlee, Bharat Electronics, BOSCH, Britannia Industries

Bharat Bijlee

Bharat Bijlee

Bharat Bijlee, ICICI Bank

Bharat Bijlee, ICICI Bank

Bharat Bijlee, Indian Overseas Bank, Indotech Transformers, JK Cement

Bharat Bijlee, Indian Overseas Bank, Indotech Transformers, JK Cement

HCL Technologies, Bharat Bijlee

HCL Technologies
Cluster: Apple Green
Recommendation: Buy
Price target: Rs395
Current market price: Rs300

Beaming with confidence

Result highlights

• HCL Technologies has reported a revenue growth of 2.2% quarter on quarter (qoq) and 28.6% year on year (yoy) to Rs1,612 crore for the fourth quarter ended March 2007. For the fourth consecutive quarter, it has reported close to double-digit sequential growth in revenues in dollar terms (up 9.2%). The sequential growth was driven by a 6.6% growth in volumes, a 1.7% improvement in the blended realisation and a one-time income (0.9%). However, the appreciation in the rupee by close to 7% limited the growth in revenues in rupee terms.
• The earnings before interest, tax, depreciation and amortisation (EBITDA) margin declined by 170 basis points to 21.6% on a sequential basis, due to the adverse impact of the steep appreciation in the rupee (a negative impact of 300 basis points) and higher selling, general and administration expenses (up by 60 basis points as a percentage of the sales) and unfavourable revenue mix (a negative impact of 30 basis points). This was partially mitigated by better realisation and an improvement in the utilisation rate. Consequently, the operating profit declined by 5.3% to Rs347.4 crore.
• However, the five-fold jump in foreign exchange (forex) fluctuation gains to Rs250.4 crore (up from Rs41.8 crore in Q3FY2007) and 87.3% growth in the other income component to Rs36.9 crore enabled the company to post a robust growth of 46.7% qoq and 108.9% yoy in its consolidated earnings to Rs486.7 crore. The company had taken an aggressive forex cover of $900 million at the beginning of the quarter, which was further increased to $1.16 billion as on June 30, 2007.
• In terms of operational highlights, the company signed seven large deals (multi-million, multi-year) during the quarter. The deals are spread across geographies and industry verticals, reasserting the company’s positioning as a strong contender for total outsourcing deals. Encouraged by the continued flow of large deals and the consequent growth momentum across the service lines, the management has given a broad guidance of a 30% growth in revenues (in dollar terms) for the next two years.
• To factor in the appreciation in the rupee and the charges related to the employee stock option scheme ($24 million in FY2008 which was not factored in earlier), we have revised downward our earnings estimate for FY2008 by 11% to Rs18.4 per share. However, the earnings estimate for FY2009 remains unchanged at Rs23.8 per share. We maintain our Buy recommendation on the stock with a price target of Rs395.

Bharat Bijlee
Cluster: Apple Green
Recommendation: Buy
Price target: Rs2,425
Current market price: Rs2,145

Beating all expectations with 62% growth

Result highlights

• Bharat Bijlee Ltd (BBL) has once again delivered a spectacular performance. Beating all market expectations its revenues grew by 62.8% to Rs115.6 crore in Q1FY2008.
• The operating profit moved up smartly by 161.5% to Rs19.9 crore, translating into an operating profit margin (OPM) of 17.2%. The OPM expanded by an impressive 650 basis points. The profit after tax (PAT) jumped by a whopping 194.4% to Rs12.6 crore, resulting in earnings per share of Rs22.5.
• The increase in the revenues and profits was due to improved realisation in both transformer and motor businesses. The margins expanded on the back of a lower cost-to-sales ratio. The raw material cost-to-sales ratio declined by 410 basis points to 65.2% during the quarter.
• The interest cost declined by 13.1% to Rs0.9 crore while the depreciation charge grew by 48.1% to Rs0.8 crore.
• At the end of the quarter the order backlog of BBL stood at Rs300 crore with the majority of the orders coming for transformers (about 65-70%).
• At the current market price of Rs2,145 the stock is discounting its FY2008E earning by 15.8x and FY2009E earnings by 11.7x. The stock is trading at 8.4x FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) and 6.0x its FY2009E EV/EBIDTA.
  

Infosys Technologies, Bharat Bijlee

Infosys Technologies, Bharat Bijlee

Bharat Bijlee

Bharat Bijlee

Easun Reyrolle, Bharat Bijlee

Easun Reyrolle, Bharat Bijlee

Emkay - Bharat Bijlee, Canara Bank, Jindal South West Holdings

Bharat Bijlee

Canara Bank

Jindal South West Holdings

Sharekhan Investor's Eye dated May 11, 2007

Lupin
Cluster: Apple Green
Recommendation: Buy
Price target: Rs840
Current market price: Rs707

Price target revised to Rs840

Result highlights

• Lupin's net sales increased by 22.8% year on year (yoy) to Rs518.1 crore in Q4FY2007. The growth in the top line is above our expectations. The sales growth was driven by a 12% rise in the domestic formulation business to Rs144.3 crore and a 53.4% increase in the formulation exports to Rs165.9 crore.
• Lupin's operating profit margin (OPM) expanded by 460 basis points yoy to 14.5% in Q4FY2007; the same was lower than our expectation of 15.7%. The OPM was below expectations on account of a higher than anticipated rise in the company's raw material cost and higher research and development (R&D) expenses. Consequently, the company's operating profit grew by 80.0% yoy to Rs75.0 crore in Q4FY2007.
• The company's reported net profit stood at Rs137.1 crore, up by 173.1% yoy. However, this includes the one-time income related to the sale of the Perindopril patent. Based on our estimates, the net profit excluding the post-tax consideration received from the sale of the Perindopril patent stood at Rs61.3 crore, a jump of 22% yoy. The same was above our estimate of Rs57.5 crore.
• For FY2007, the company's net sales increased by 22.7% to Rs1,970.9 crore, which was above our estimate. The OPM expanded by 70 basis points to 14.9% as against our estimate of 15.7%, driven largely by higher R&D expenses. The company's reported net profit stood at Rs302.1 crore, up by 65.3% yoy. However, this includes the one-time income related to the sale of the Perindopril patent. Based on our estimates, the net profit excluding the post-tax consideration received from the sale of the Perindopril patent stood at Rs226.2 crore, a jump of 23.8% yoy. The same was in line with our estimate of Rs228.4 crore.
• Lupin ’s FY2007 profit performance (exclusive of the one-time gain) was just in line with our expectations. Hence, we are maintaining our FY2008 sales and profit estimates at Rs2,600 crore and Rs328.9 crore respectively. For FY2009, we expect the revenue to grow by 18% to Rs3,054.4 crore and the profit to rise by 25% to Rs410.5 crore. As per FY2009 estimates, the revenue and profit (exclusive of the one-time gain from the patent sale) would grow at compounded annual growth rate (CAGR) of 24% and 35% respectively. We have not included the earnings upside from the R&D pipeline in our estimates.
• The management has given an impressive revenue guidance of Rs3,000 crore for FY2008 (a 50% growth) and of Rs4,200 crore (a 40% growth) for FY2009. The growth would be achieved through various initiatives in the USA, Europe and semi-regulated markets. As per the management, a small part of the growth would also come from acquisitions. However, as per our organic growth estimates, at the current price Rs707 the stock is available at Rs19x its FY2008E and 15.2x its FY2009E earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs840 (18x of FY2009E earnings).

Bharat Bijlee
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,730
Current market price: Rs1,637

Q4FY2007 results: first-cut analysis

Result highlights

• The Q4FY2007 results of Bharat Bijlee Ltd (BBL) are much ahead of our expectations.
• The revenue for the quarter grew by 73% to Rs179 crore on the back of a strong order book. The net profit increased by a superb 123% to Rs29.07 crore, much ahead of our expectations.
• The operating profit for the quarter grew by 105% to Rs44.5 crore, as the operating profit margin (OPM) for the quarter improved by 370 basis points to 24.8% against 21.1% on a year-on-year (y-o-y) basis.
• The improvement in the OPM is on account of a lower raw material/sales ratio, which stood at 62.8% as against 64.9% in the same quarter last year. The OPM also improved because of other operational efficiencies as the other expenses/sales ratio declined to 5.9% from 7.6% on a y-o-y basis.
• The interest cost for the quarter decreased by 20% while the depreciation charge increased by 89%.
• The company has declared a dividend of Rs25 (250%) per share.
• The timely expansion of its transformer manufacturing capacity, by 3000MVA to 8000 MVA per annum, has benefited the company. Going forward, the huge investments lined up in the power sector and the continuing activity in the industrial sector will drive BBL's order book.
• At the current market price of Rs1,637, the stock is discounting its FY2007 earnings by 16.3x and earnings before interest, depreciation, tax and amortisation by 8.6x. Excluding the value of the cash and cash equivalents, the stock is trading at 13x its FY2007 earnings. In view of the better than expected results and strong order backlog, we maintain our Buy recommendation on the stock with a price target of Rs1,730. We shall be upgrading our FY2008 earnings estimates and price target after analysing the annual report of the company. Watch this space.

Sharekhan Investor's Eye dated May 11, 2007

Bharat Bijlee: Buy

Strong financials and expanded capacities, combined with increased demand for transformers on the back of power reforms lend strength to the earnings prospects for Bharat Bijlee over the medium term.

At the current market price, the stock trades at 13 times its expected earnings for FY08. We reiterate a `buy' on the stock with a medium-term perspective. Returns may, however, be moderate in contrast to the manifold gains over the past couple of years.

Bharat Bijlee manufactures power and distribution transformers and a range of electric motors. After restructuring its business portfolio, which involved divesting its elevator field operations, the company has focussed on its transformer business. This resulted in an increase in the segment revenue from 34 per cent in FY2005 to about 50 per cent in FY2006. The company expanded its transformer manufacturing capacity from 4800 MVA to 8000 MVA in March 2006. This is already reflected in the 50 per cent jump in revenues for the nine months ended December 2006 against the same period last year. This expansion appears well timed and augurs well for the company's revenue growth given the current boom in offtake of power equipment. Until 2005, Bharat Bijlee lagged its peers in terms of operating profit margins (OPMs). It has since then improved its OPMs by moving to higher range transformers that typically yield better margins. Its OPMs for the third quarter of FY2007 at 20 per cent are superior to most similar sized companies in the industry. The motor division, which has clients such as NTPC and Reliance Industries, accounted for about 30 per cent of the revenues over the last two years. We expect the current capital spending by various industries to aid steady growth for this division. Bharat Bijlee has a comfortable cash position, despite operating in a working capital intensive industry with long gestation periods. Internal accruals and a solid investment book is likely to take care of further expansion plans, without the need for equity dilution. Any hike in price of raw materials such as copper can impact margins. The financial health of State Electricity Boards, who are major clients for the company, still remains a cause of concern. However, fund assistance through power reform programmes has mitigated the above risk to some extent.