Transport Corporation of India
Cluster: Cannonball
Recommendation: Buy
Price target: Rs420
Current market price: Rs362
Price target revised to Rs420
Result highlights
- Transport Corporation of India Ltd's (TCIL) Q3FY2006 pre-exceptional net profit of Rs3.6 crore is in line with our expectation. The performance was primarily driven by the performance of TCIL's transport division, which contributed around 60% to the total revenues.
- The net sales for the quarter stood at Rs224 crore, registering a growth of 15.6%.
- The operating profit margins (OPMs) for the quarter improved by 10 basis points, and consequently the operating profit for the quarter was up 16%.
- The earnings before interest and tax (EBIT) margins of the transport division improved by an impressive 90 basis points. However, the EBIT margins for the express cargo division declined by 130 basis points.
- During the quarter TCIL made a gain of Rs2.11 crore on the sale of its long-term investments. We have treated this as extraordinary other income and accounted for it below the line.
- The pre-exceptional net profit stands at Rs3.6 crore, up 15%, and the reported net profit stands at Rs5.2 crore, up 68%.
Aditya Birla Nuvo
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,031
Current market price: Rs716
Good results
Result highlights
- The consolidated revenues of Aditya Birla Nuvo (ABN) grew sharply by 41.5% year on year (yoy) to Rs1,150.2 crore. The growth was driven by the increase in the revenues of the businesses of garments (up 31.5% yoy), carbon black (up 25.5% yoy), textiles (up 18.0% yoy), insurance (up 37.3% yoy) and telecom (up 24.2% yoy).
- The contribution of the high-growth businesses—garments, insurance, business process outsourcing (BPO), software and telecom—to the total revenues improved to 60.5% in Q3FY2006 from 52.2% in Q3FY2005.
- The margins in all the businesses except that of rayon improved sharply yoy: garments (up 500 basis points), BPO (up 1,410 basis points), insulators (up 990 basis points), textiles (up 430 basis points yoy) and telecom (up 290 basis points).
- Telecom business was the pick of the performers—with the revenues growing by 24.2% yoy, the PBIT rising by 43.3% yoy and the PBIT margins expanding by 290 basis points yoy to 21.9%.
- Driven by the strong performance of all the business segments (except rayon), the company's operating profit margin (OPM) expanded by 410 basis points to 12.1% and its net profit grew by 481.9% yoy to Rs32.9 crore.
- Based on the sum-of-parts valuation of the merged entity, we estimate the fair value of ABN at Rs1,031 per share. The stock is available at a 44% discount to its fair value and we maintain a Buy recommendation on ABN with a 12-month price target of Rs1,031.
Omax Auto
Cluster: Apple Green
Recommendation: Buy
Price target: Rs178
Current market price: Rs143
Profit margins below expectations
Result highlights
- Omax Auto's Q3FY2006 net sales grew by 16% year on year (yoy) to Rs164.7 crore. For the 9MFY2006 the sales have registered a growth of 18% to Rs459.0 crore. Export sales for the nine-month period touched Rs19.0 crore as compared to Rs10.0 crore in the corresponding period of FY2005.
- The operating profits for the quarter declined by 4.7% yoy to Rs12.1 crore. This was on the back of a 160-basis-point decline in the operating margins to 7.4%, which were affected by higher other expenses and staff costs that negated the savings on the raw material costs.
- The net profits declined by 7.1% yoy to Rs5.0 crore, as there was a higher interest charge of Rs2.3 crore, but was somewhat aided by a lower effective tax rate of 35.1%.
- We are downgrading the earnings for FY2006E by 13% at Rs9.6 and for FY2007E by 2% at Rs13.9.
- At the current market price of Rs143, the stock trades at 11.1x its FY2007E earnings. We maintain our Buy on the stock with a price target of Rs178.
Alok Textile Industries
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs120
Current market price: Rs72
Consolidating its position
Result highlights
- The net sales of Alok Industries (Alok) for the quarter were up by 10.7% year on year (yoy) to Rs366.4 crore from Rs330.9 crore in Q3FY2005 on the back of a 61.4% year-on-year (y-o-y) jump in its home textile sales. The home textile sales grew from Rs46.5 crore in Q3FY2005 to Rs75 crore during the quarter.
- The operating profit for the quarter was up 31.8% yoy to Rs81.0 crore as against Rs61.5 crore in Q3FY2005 on the back of a 352-basis-point jump in its operating profit margin (OPM). The OPM increased from 18.6% in Q3FY2005 to 22.1% in Q3FY2006.
- Depreciation for the quarter was up by 38.6% yoy to Rs19.8 crore in Q3FY2006 from Rs14.3 crore in Q3FY2005. The interest cost for the quarter stood at Rs18.1 crore as against Rs15.8 crore in Q3FY2005, a jump of 14.2%.
- The profits before tax (PBT) during the quarter were up by 16.8% yoy to Rs40.4 crore as against Rs34.6 crore in Q3FY2005. The net profits jumped by 18.6% yoy to Rs29.5 crore in Q3FY2006 from Rs24.9 crore in Q3FY2005.
Sun Pharmaceutical Industries
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs810
Current market price: Rs725
Price target revised to Rs810
Result highlights
- Sun Pharma's net sales on a consolidated basis were up 37.1% year on year (yoy) from Rs309.9 crore in Q3FY2005 to Rs424.7 crore in Q3FY2006 due to a good performance in the domestic and international formulations business.
- The operating margins saw a decline in the quarter due to a change in classification of the revenues. The operating profit saw an increase of 24% yoy to Rs138 crore.
- The net profit in the quarter stood at Rs146.4 crore as against Rs106.9 crore in Q3FY2005, a rise of 36.9% yoy. The net profit was boosted by the interest income obtained from the foreign currency convertible bond (FCCB) proceeds. The net profit margins were maintained at 34.5%.
- At the current market price of Rs725, the stock is trading at 18x its FY2008 earnings estimate. We are revising our estimates for FY2006 and FY2007 upwards and maintain our Buy recommendation on Sun Pharma with a revised price target of Rs810.