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Showing posts with label Prabhudas Lilladher. Show all posts
Showing posts with label Prabhudas Lilladher. Show all posts
Monday, September 24, 2007
Prabhudas Lilladher - Tanla Solutions
Prabhudas Lilladher has buy rating on Tanla Solutions and revised its price target to Rs 944.
"We expect Tanla to clock revenues of Rs 410 crore in 2007-08 (Apr-Mar) and Rs 620 crore in 2008-09. At the current market price of Rs 614, the stock trades at 19.8 times the 2007-08 estimate earnings per share of Rs 31.1 and at 13 times 2008-09 estimate earnings per share of Rs 47.2. We have increased the target price as we have factored in the contribution from Ireland and we believe that this stock is on a path of re-rating," the brokerage said in its Sep 21 report.
The company has forayed into Ireland. "Tanla has tied up with all the Irish operators which include 3, O2, Vodafone and Meteor. The total addressable market for Tanla is around Rs 1,000 crore. Revenues would start flowing in from second quarter of 2007-08. The margins in Ireland will be at par with the company level as there is no major capex involved here," the report adds.
Tanla’s US subsidiary has begun operations and revenues are likely to flow in three months. It is also looking for acquisitions there.
Thursday, July 05, 2007
Prabhudas Lilladher - Gammon India
Prabhudas Lilladher report on Gammon India:
Result Snapshot
Gammon India reported Q4FY07 and FY07 results in line with expectations. Revenues (adjusting JV revenues) in Q4FY07 rose 54% y-oy to Rs 6268 million. However, due to higher tax on account withdrawal of 80IA benefits, net profit in the quarter was lower by 24% at Rs 220 million. For the full year (adjusting for JV revenues) was higher by 57% and net profit was higher by 20% at Rs 18.6 billion and Rs 984 million respectively. Given its strong order book of Rs 76 billion and a expected strong order inflows, we are projecting revenues of Rs 27.3 and Rs 35.7 billion for FY08E and FY09E. We have valued Gammon’s 82.5% stake in GIPL at Rs 114 per share. However, we believe that that there is an upside to this valuation and would look and revisiting this at a later date. Adjusted for GIPL and other subsidiaries value of Rs 124 per share, Gammon is currently trading at 21x and 16x FY08E and FY09E earnings respectively. While valuations do appear a bit on the higher side, given the strong order book and the likely value unlocking on account of GIPL we maintain our ‘OUTPERFORMER’ rating on Gammon.
Result Highlights
Revenues in Q4FY07 grew by 54% y-o-y and 65% sequentially to Rs 6.2 billion. Driven by strong EBIDTA margins of 9.6% for the quarter, EBIDTA increased 71% to Rs 603 million. EBIDTA margins were higher on account more projects reaching the profit-booking threshold. Gammon has provided for tax at 60% of PBT as adjustments for tax rates for the previous three quarters reflected in Q4FY07. As a result, net profit for the Q4FY07 fell by 27% y-o-y to Rs 220 million. For the full year gross revenue was at Rs 21 billion and net revenue (adjusted for JV income) grew by 57% to Rs 18.6 billion. Gammon now accounts for income from JV’s based on profit sharing, which implies that only the profits from the JV are included in the overall revenues. For the full year the revenues from the Oman JV was at Rs 2.4 billion and the profit from the JVs is at Rs 131 million. As EBIDTA margins for the year were lower at 9.9% as against 13% last year, EBIDTA for the full year grew at 20% to Rs 1.85 billion. The slower growth in EBIDTA is on account of the large base of last year, which also includes some claims that the company had received. Depreciation for the year grew at 19% to Rs 352 million on account of a total capex of Rs 1.7 billion during the year largely on new equipment. Gammon has provided for tax at 31% for the full year. In light of the clarifications on the applicability of 80IA benefits, Gammon has provided for income tax for previous years. This amounts to Rs 500.9 million and also includes the interest on the amount. As a result, for the full year, recurring net profit increased 20% to Rs 984 million. Adjusting for the short provision in tax, profit for the year was at Rs 445 million, which is lower by 47%.
Order Book
Gammon has an unexecuted order book position of Rs 76 billion of which a third each is distributed across the power and transportation segments and the balance within irrigation, water, industrial structures etc. While order inflows in the current year have been relatively slower, we expect this momentum to pick. Moreover, Gammon would also add to the order inflows once GIPL received the LoI for the Mumbai Offshore Port and the HEPs. Currently, approximately 20% of the total outstanding order book comprises projects awarded to the parent by GIPL. Going forward the management has indicated that this share should increase as more projects are awarded through the Public Private Partnership route. Moreover, order intake from the mega real estate developments should also likely provide momentum in overall order intake.
Gammon Infrastructure Projects
In March 2007 the Securities Appellate Tribunal (SAT) passed an interim order directing SEBI to process GIPL’s draft 'Red Herring Prospectus' expeditiously. SEBI has thereafter directed the company to refile the DRHP. The management has indicated that they are in the process of working out the fund raising format for GIPL and will make available the details shortly. Currently GIPL has 13 BOT projects totalling a project value of Rs 55 billion. Of this GIPL has yet to receive the formal LoIs for 3 of these projects, namely the Mumbai Offshore and the Hydel Power projects. GIPL currently has a networth of Rs 2.6 billion.
Real Estate
During the year, GIL incorporated Gammon Realty Ltd, as a subsidiary of the parent company, with the objective to carry on the business, developers, builders and construction of residential, commercial and industrial premises etc. However, the company has yet to formally announce its real estate development plans.
Valuations
Given its strong order book of Rs 76 billion and a strong order inflow pipeline, we are projecting revenues of Rs 27.3 and Rs 35.7 billion for FY08E and FY09E. We have valued Gammon’s 82.5% stake in GIPL at Rs 114 per share. However, we believe that there is an upside to this valuation and would look and revisiting this valuation at a later date. Adjusted for GIPL and other subsidiary valve of Rs 124 per share, Gammon is currently trading at 21x and 16x FY08E and FY09E earnings respectively. While valuations do appear a bit on the higher side, we believe that given the strong order book and the likely value unlocking on account of GIPL we maintain our ‘OUTPERFORMER’ rating on Gammon.
Wednesday, July 04, 2007
Prabhudas Lilladher - Pfizer
Prabhudas Lilladher report on Pfizer:
Sluggish sales growth
For Q2 FY07 (ending May ’07), Pfizer has reported a 1% yoy dip in net sales -from Rs 1.67 billion to Rs 1.65 billion. The dip is attributed to supply-related issues regarding its major product, Corex. Moreover, the company is in the process of divesting its consumer healthcare (CHC) business in favor of Johnson & Johnson (J&J) in line with the global transfer of its CHC business to J&J, and hence the uncertainty about the divestment. The pharmaceutical business slipped 4% yoy whereas the animal healthcare (AHC) segment has reported a 21% sales growth. The clinical development services grew a marginal 1%.
Margins under pressure
During the quarter the operating margin slipped 60bp—from 22% to 21.4%—due to the rise in ‘other expenses’. ‘Other expenses’ climbed 130bp—from 25% to 26.3% of net sales—due to lower sales growth. Material cost rose by 50bp—from 37.8% to 38.3% of net sales—with the change in product mix and higher sales of AHC products. Personnel expenses declined by 120bp—from 15.2% to 14%—due to the ongoing VRS.
Higher ‘other income’
The company has reported a 60% rise in ‘other income’—from Rs 109 million to Rs 174million—due to the rise in treasury income (Rs 90 million during the quarter). Pfizer has completed the sale of the Chandigarh property, and profited by Rs 2.74 billion. With this higher ‘other income’, the EBIDTA margin has improved, by 340bp—from 28.5% to 31.9%.
Capital gain
The company paid Rs 462 million as capital gains tax from the sale of the Chandigarh property and therefore the net inflow is Rs 2.28 billion. With this inflow, the company’s treasury income is likely to rise by over Rs 50 million per quarter.
Net profit improved
Net profit before extraordinary items grew 10%—from Rs 298 million to Rs 329 million—due to higher ‘other income’. Net profit after EO items also went up—from Rs 238 million to Rs 2,578 million—from the high inflow due to the sale of the Chandigarh property.
Investment positives
Pfizer has employed a contract field force of 100 people in three states to promote its mature products. It is widening its geographical reach to cover class II and class III cities. This is likely to generate additional sales and improve top-line growth.
To raise top line growth, it is focusing on the institution and hospital segments and the retail segment.
To improve sales and profitability as well to expand therapeutic coverage, the company is looking at domestic acquisitions.
Its new launch, Lyrica, is doing well in the domestic market. It is likely to be a future growth driver for the company.
Financials and Valuations
We expect Rs 3 billion from the sale of CHC business to J & J in FY07. Net inflow after capital gains tax is likely to be Rs 2.66 billion. With this, Pfizer can look at acquisitions aggressively. We expect a 13% reduction in net sales in FY07—from Rs 6.89 billion to Rs 6.04 billion, due to it’s divesting its CHC business, which accounts for about 22% of the company’s revenue. We expect an 11% rise in sales in FY08—from Rs 6.04 billion to Rs 6.73 billion. We expect the operating margin to inch up from 24% in FY06 to 24.4% in FY07 due to the reduced material cost as well as from operational efficiencies. We expect net profit (after EO items) to shoot up—from Rs 1.06 billion in FY06 to Rs 5.91 billion in FY07—and then slip to Rs 1.35 billion in FY08. Management has guided to double-digit sales growth and the maintaining of the EBIDTA margin after the transfer of the CHC business. The CMP of Rs 804 discounts the FY07E EPS of Rs 38.4 by 21x and the FY08E EPS of Rs 48.6 by 16.5x. We are positive on the long-term prospects of the company.
Prabhudas Lilladher - Bhagwati Banquets
Prabhudas Lilladher report on Bhagwati Banquets:
Investment Highlights
Just now, it monopolises premium catering in Ahmedabad and Surat and commands a high (about 35%) operating margin from this business. The company wants to expand catering business to other major cities.
It plans to branch out to other cities like Mumbai, Jaipur, Jodhpur, etc., to become a national player. From October ’07, it will commence catering services in Mumbai. The entry into other cities is likely to improve the sales and profitability of the company.
BBHL has plans to enter into tie-ups with clubs for providing F & B services, resulting in additional revenue and profits.
In FY07, it has undertaken the F&B management of the revolving restaurant, Patang, in Ahmedabad. The company is exploring similar F & B management opportunities.
It plans to serve companies and MNCs, BPO centres, shopping malls, theatres, etc. catering for them and providing food packs. This business is likely to generate additional revenues and profits.
BBHL expects a good response for the Surat hotel as well as for club membership at its Surat Club, adjoining the hotel. It expects Rs 500 million in revenue and Rs 150 million in operating profit from the Surat hotel in the first year of operation.
The catering business generates free cash, as it receives payments in cash and obtains credit from its suppliers. Hence, the working capital required is low.
Major risks
The company had a negative cash flow in FY04 and FY06 due to continuous expansion of the business.
Delay in implementing the Surat project might affect profitability.
Revenue arises from catering contracts at various hotels/ clubs and party plots. On expiry, these contracts might not be renewed; or might even be terminated before expiry, resulting in loss of revenue and profits.
BBHL’s business is seasonal, with greater revenue arising in the October-March period. Any disturbances/ disruptions during this period might result in loss of revenue and profits.
Management Vision
In the long run, BBHL plans to set up 5-star hotels in Ahmedabad (2nd hotel in 2008), Jaipur (2011), Hyderabad (2014), Lucknow (2017) and Mumbai (2020). It is evaluating several proposals to acquire property for its new hotel at Ahmedabad.
Business Development
BBHL expects a good response to the 5-star hotel now being set up at Surat. This hotel will have 100 rooms (deluxe, suites and a presidential suite). It will have two large banquet halls, which can be partitioned as required. The hotel will also have a business center, with a boardroom, conference rooms, a world-class spa, a pub, a discotheque, etc. The company plans to develop a separate club adjoining the hotel. BBHL is likely to enroll members for the club and expects a good response for membership. The company has 1,000 people, consisting of 10 master chefs and a catering staff of 650 for Ahmedabad and 45 for Surat.
Competitive Environment
At present, there is no organized player in the catering business in Ahmedabad and Surat and hence the company enjoys a “healthy” market share (a monopoly) in the premium segment. There are other cooks in the unorganized sector who undertake contracts for wedding and other functions. However, unorganized players do not have a centralized kitchen; hence, the cooking is done at the wedding site, resulting in hindrances and disturbances. Since the business of catering is unorganized, most transactions are conducted in cash. Hence, the unorganized players are at an advantage, as they do not pay tax. The company pays 6.4% service tax and 4% VAT. This renders it less competitive than those in the unorganized sector. With the rise in corporate clients, it does not envisage a problem on this front.
Financials and Valuations
In April ’07, Bhagwati came out with a public issue of 23 million shares at Rs 40 each, aggregating Rs 920 million. Its equity capital then rose–-from Rs 62.9 million to Rs 292.9 million. The catering service has done well in the past five years. The number of meals supplied per day has jumped from 200/300 in FY03 to 1,500/2,000 in FY07. The company derives over 66% of its revenue from F&B and the other 34% from its hotels business. It charges from Rs 350 to Rs 900 a meal and provides personalized service. A minimum order has to be for 300 people (off-season) and 500 in season, resulting in revenue ranging from Rs 0.1million--0.45million on each order. The typical room rate in Ahmedabad is Rs 5,000 per day and average occupancy is 75-80%. BBHL is likely to commence catering services in Mumbai and is likely to generate sales of Rs 29 million-35 million in FY08 and Rs 135 million-150 million in FY09, with an EBIDTA margin of about 35%.
Valuations
At the CMP of Rs 37,the stock trades at 9.7x FY08E EPS of Rs 3.8 and at 7.3x FY09E EPS of Rs 5.1. With its unique business model of catering services as well as monopoly in premium catering, we are upbeat about the company’s long-term prospects.
Friday, June 29, 2007
Prabhudas Lilladher - AIA Engineering
Prabhudas Lilladher report on AIA Engineering:
AIA Engineering is a niche player in high-chrome metallurgy products catering to the cement, power and mining segments. It enjoys a 90% market share in the domestic market and 20% in the global market. AIA is increasing its capacity manifold from 65,000 tpa to 265,000 tpa within a span of two years and is poised for substantial growth in the years to come.
For the period FY07-09E, we expect a net profit CAGR of 40.2% on the back of a revenue CAGR of 46.5%. At the ruling price of Rs 1,752, the stock trades at 24.2x and 17.8x FY08E and FY09E earnings of Rs 72.3 and Rs 98.6 respectively. On an EV/EBIDTA basis, the stock is available at 16.4x and 11.4x FY08 and FY09 estimates respectively. We arrive at a DCF based target price of Rs 1,974 per share which discounts FY09 earnings by 20.0x.
Investment Argument
Niche player in a high-growth segment
AIAE is a niche player in the value-added high-chrome metallurgy segment catering to the cement, mining and thermal power industries in grinding and crushing operations. The grinding mill is of utmost importance to the user industries, as reduced efficiency has a significant impact on output. In case of a thermal power plant, lower output of ground coal would lead to reduced heat generation and eventually reduction in electricity produced. In case of a cement plant, lower output leads to substantial increase in power and maintenance cost.
The size of the market for mill internals in cement plants is expected to be around 275, 000 tonnes including China. Demand from the Chinese market stands at about 100,000 tonnes. The company does not have any presence in China. Thus, the total market available stands at 175,000 tonnes.
Industry capex cycle driving growth
Companies in cement, power and mining have announced huge expansion plans. AIA stands to benefit from this expansion, as the grinding mills manufactured by it are critical components in these plants. Industrial capex is expected to have a CAGR of 22% from FY06 to FY10.
AIAE has a market share of 90% in the domestic market for grinding mills and is thus expected to garner a major chunk of the emerging opportunities in related sectors. Most of AIA’s revenue now arises from replacement demand. However, ahead, as new capacities in the sectors start coming up, we could see this proportion changing.
Expanding capacities to cater to huge market
The biggest constraint the company faces in increasing market share is capacity, which is being fully utilized. It aims to increase its global market share to 50% within a span of three years. Currently, almost 55-60% of the global market is controlled by Magotteaux, which has a capacity of 300,000 tonnes. Magotteaux’s global market share has come down from 80% two years ago.
AIA Engineering currently has capacity of 115,000 tpa, which it plans to increase to 165,000 tpa by October 2007 and subsequently to 265,000 tpa by October 2008.
Robust order book
The company has a current order book of Rs 4.2bn, which includes orders only on the current facility. It has not booked any orders for the new facilities that are under commissioning, though it has been receiving a number of queries for the same.
Investment Concerns
Raw material price volatility
The main raw material utilized by the company is chromium. Chromium prices have peaked in the past few months; however, they now have come off their highs and are expected to be stable in the near term. Any increase in the price of chromium would adversely affect the margins of the company, thus hindering the bottom line.
Delay in execution of projects
The company is undertaking huge expansion projects. It plans to increase its capacity over four-fold to 265,000 tpa from 65,000 tpa. The capacities would come up in various phases till October 2008. Any delays in execution of plans might hinder growth of the company and thus have a negative effect on the estimates.
Downturn in industrial capex
Any downturn in the planned industrial capex might affect the growth prospects of the company. However, AIA supplies grinding media to three industries namely cement, mining and thermal power, thereby de-risking its business model from an industrial downturn in any sector. Also, the company generates almost 80% of its revenue from replacement demand, thus reducing its dependence on new capacities. hinder future growth
Financial Overview
Bottom line growing stronger than top line
We expect a bottom-line CAGR of 40.2% and a top-line CAGR of 46.5%. The bottom line is expected to grow faster than the top line due to improved margins from higher volumes, leading to operating leverage.
Q4 FY07 result update
AIA Engineering (AIAE) reported flat revenue for the quarter at Rs 1.7bn, due to capacity constraint. However, the new capacity has now come up and the company has started taking orders on the new facility. The EBIDTA margin improved by 30bp yoy to 23.1%. Net profit increased by 15% yoy to Rs 307m. The order book as on 1st April 2007 stands at Rs 4.2bn, which does not include any orders booked on the new facility.
Valuation
Tuesday, June 19, 2007
Wednesday, June 13, 2007
Sunday, May 27, 2007
House Chitter Chatter
ISEC recommends BUY on BPCL at 371 with a 12 month target of 540-566.BPCL seems attractive on current valuations given the robust outlook on refining margins and benign Government policy on under-recovery sharing. Proposed reforms on CST, octroi and a possible fuel price increase post the Uttar Pradesh elections would provide further impetus.
ISEC recommends BUY on Mahindra & Mahindra at Rs.735.EBITDA margin expansion is likely to drive net profit growth of 28.8% YoY.
ISEC recommends BUY on Indraprastha Gas at Rs.110. Net income expected to surge 20.7% YoY to Rs360mn. CNG, PNG volumes and depreciation are the key factors to watch for
KR Choksey says Patel Engineering is the cheapest stock amongs its peers
and can deliver good returns.
CLSA recommends RCOM with a price target of 514
Prabhudas Lilladher recommends Dabur at CMP of Rs 98 which is trading at
25.2x FY08 earnings and at 21.5x FY09 earnings. They continue to remain positive on the company and believe that Dabur would be able to sustain its premium valuations in view of its strong growth appetite. Therefore maintain an Outperformer on the stock at the current levels.
Man Financial upgrades NIIT Tech to BUY with a target of 660 which is
12x FY09E earnings.
SSKI recomends OUTPERFORMER on BPCL with a price target of 431
SSKI recommends Centurion Bank of Punjab with a OUTPERFORMER
Thursday, May 24, 2007
Wednesday, May 23, 2007
Tuesday, May 22, 2007
Sunday, May 20, 2007
Thursday, May 17, 2007
Wednesday, May 16, 2007
Saturday, May 12, 2007
Wednesday, May 09, 2007
Tuesday, May 08, 2007
Monday, May 07, 2007
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