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January 29, 2015

AMAR AMBANI TAKES A CONTRA SELL CALL ON UNITED SPIRITS

Amar Ambani, The rockstar IIFL research analyst is having a good time in bourses with his picks outperforming most other managers.The celebrated manager has taken yet another contra call with a SELL rating on united spirits which came with an average set of numbers.Lets see who gets it correct.

Colgate-Palmolive (India) (Q3 FY15) – BUY
CMP Rs1,927, Target Rs2,217, Upside 15.1%
  • Matching our expectations Colgate recorded ~12% yoy revenue growth at ~Rs10bn during Q3 FY15 driven by price hikes and favourable sales mix. Toothpaste volume growth stood at 5% against 7% yoy in Q2 FY15
  • Sharp 230bps/260bps drop in raw material and advertising cost fuelled operating margin by 270bps to 19.7%
  • Net profit increased by ~16% yoy to Rs1.3bn, in line with our expectations driven by improved operating efficiency. The growth could have been even better but for higher depreciation and lower other income
  • We increase our EPS estimates by ~7%/10% for FY16/FY17 respectively to account for lower input costs and reduced competitive intensity. We expect Colgate to witness a ~12%/23% revenue/PAT CAGR over FY15-17. Upgrade to Buy with a 9-12 month price target of Rs2,217
Click here for the detailed report on the same.

Maruti Suzuki (Q3 FY15) – BUY
CMP Rs3,685, Target Rs4,280, Upside 16.1%
  • Net sales surge 15.4% yoy owing to 12.4% yoy rise in volumes. Domestic volumes were higher by 10.1% yoy while export volumes jumped 43.8% yoy
  • OPM at 12.7% was in line with our expectations which represented an increase of 23bps yoy and 30bps qoq, forex had a positive impact of 50bps qoq on OPM
  • PAT at Rs8bn was lower than our estimates of Rs8.7bn owing to higher than estimated depreciation and lower other income
  • Volumes are expected to gain strength in Q4 FY15 and pick further pace in FY16, margins are expected to strengthen with higher volumes and rising localization
  • We maintain our BUY rating with a 24-month target of Rs4,280
Click here for the detailed report on the same.

United Spirits (Q3 FY15) – Reduce
CMP Rs3,485, Target Rs3,200, Downside 8.2%
  • Encouraging trends in prestige and above brands continue with 4.7% volume and 9% value growth yoy
  • Imputed net sales value growth up 5.3% despite volume lower by 2% to ~31mn cases
  • Margins improve 48bps yoy on lower other expenditure; ENA costs rise unabated, up Rs12/case yoy
  • Repaid foreign currency loans using GBP370mn out of W&M sale proceeds which would result in lower interest costs in upcoming Qs
  • Reiterate our confidence on underlying business turnaround but await a better entry point
Click here for the detailed report on the same.

Ashok Leyland - Call Success
Reco Price Rs61.0, Call Closure Price Rs68.0
We had recommended a BUY on Ashok Leyland in Q2 FY15 result update released on November 10, 2014 with a target price of Rs55. We extended our target on the stock to Rs61 in a call update released on November 13, 2014 and further to Rs68 in a call update released on January 08, 2015. The stock surpassed our target in today’s trading session. While we remain bullish on the prospects for Ashok Leyland’s core business of manufacturing commercial vehicles, we will review our estimates, rating and target in Q3 FY15 result update. Results are expected to be announced on January 29, 2015.
Click here for the detailed report on the same.



Warm Regards,
Amar Ambani
Head of Research, IIFL

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