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February 5, 2015

Amar Ambanis latest updates

Marico (Q3 FY15) – BUY
CMP Rs349, Target Rs402, Upside 15.1%
  • Marico recorded healthy 21%/18% yoy increase in revenues and net profit at Rs14.5bn /Rs1.6bn respectively during Q3 FY15
  • Parachute’s rigid portfolio registered 48% yoy growth in revenues driven by ~8% yoy volume growth, while Saffola revenues grew by 9% yoy led by subdued volume growth of 3%
  • International business recorded mere 4% yoy growth in revenues at Rs3.6bn with constant currency growth 6% yoy mainly due to disruption in Egypt business and subdued growth in South Africa
  • OPM declined by 50bps to 16.4% due to sharp 290bps increase in raw material cost on account of sharp rise in copra prices. 150bps/60bps decline in overhead and advertising cost restricted further margin erosion
  • We expect Marico to witness revenue/PAT CAGR of 13%/21% respectively over FY15-17. Maintain Buy with a 9-month target price of Rs402
Click here for the detailed report on the same.

Indian Hume Pipe Co (Q3 FY15) – BUY
CMP Rs349, Target Rs440, Upside 26.1%
  • Indian Hume Pipe’s operational results were lower than expected due to slower execution
  • Orderbook for the company declined 20% qoq as the company has removed slow moving orders worth Rs2.9bn and there were no major order wins during the quarter
  • Topline growth of 13.5% was lower than our expectations due to slower execution
  • Operating margins expanded 211bps, quite higher than expectations; but overall operating profit was lower than expected due to lower revenues
  • PAT growth of 96.9% yoy to Rs124mn was largely led by a jump in other income
  • Maintain Buy with a price target of Rs440
Click here for the detailed report on the same.

Hero Motocorp (Q3 FY15) – BUY
CMP Rs2,812, Target Rs3,250, Upside 15.6%
  • Revenues were flattish with 0.5% yoy fall and 1.1% qoq decline, Volumes declined 1.9% yoy and 2.6% qoq as motorcycle volumes declined by 6.2% yoy which was offset by 11.8% yoy growth in scooters in domestic market
  • Realizations were higher by 1.4% yoy and 1.5% qoq on the back of price hikes implemented and better product mix
  • Margins at 12% were substantially below our expectations of 13.7% owing to lumpy advertisement costs in the festive season and higher staff costs due to Diwali bonus and commencement of Neemrana plant
  • Cost cutting initiatives to add an estimated 200bps to margins by FY17
  • Revise estimates to factor in lower than estimated Q3 FY15 performance
  • Maintain BUY with a revised 9-month price target of Rs3,250
Click here for the detailed report on the same.

Lupin (Q3 FY15) – BUY
CMP Rs1,545, Target Rs1,800, Upside 16.7%
  • Margin uptick of ~150bps qoq key surprise especially in a weak topline as qoq revenues flat, +5.2% yoy
  • Regulatory delays hinder revenue growth with US sales up just 3.8% yoy; Europe, India post sequential declines while Japan INR sales down 8% though JPY sales up 4% yoy
  • US business to benefit from key products like Nexium (awaiting approval); co expects 15-20 launches in the next fiscal
  • Revise up our FY16/17 estimates and retain BUY with fresh 9-12mth target of Rs1,800
Click here for the detailed report on the same.

Punjab National Bank (Q3 FY15) – Reduce
CMP Rs177, Target Rs170, Downside 3.9%
  • Domestic loan growth decelerates to 8% yoy; Retail, SME and Agri post good growth while the corporate book contracted further sequentially
  • Domestic CASA ratio stable at 40%; NIM was flat
  • Core fee growth improves; but C/I ratio deteriorates
  • Influx of impaired assets remained concerning; significant write-offs contain increase in Gross NPLs
  • Stock to continue to underperform in the near term; Maintain Reduce
Click here for the detailed report on the same.

TVS Motors (Q3 FY15) - Accumulate
CMP Rs285, Target Rs300, Upside 5.3%
  • Net sales surge 28.9% yoy owing to 23% yoy growth in volumes and 4.8% jump in realizations, Sales were in line with our expectations
  • OPM at 6% was below our and street expectations, OPM was higher by 4bps yoy but fell by 3bps qoq
  • APAT was at Rs902mn was lower than estimates
  • Growth in volumes was on account of sharp jump of 51.5% yoy in scooters and 37.5% yoy jump in three-wheeler volumes
  • We maintain our Accumulate rating with a revised price target of Rs300 as valuations seem expensive at current levels
Click here for the detailed report on the same.

ACC (Q4 CY14) - Reduce
CMP Rs1,509, Target Rs1,442, Downside 4.5%
  • Suspension of mining operation drags performance; volume de-grows at 1.4% yoy. Revenue growth at 1.6% was below our estimate.
  • OPM stood at 9.1%; Higher clinker purchase led to jump in RM and freight cost.
  • Pre-tax profit at Rs1.4bn (down 41%yoy) was lower than our estimates.
  • Tax write back boost PAT by Rs1.8bn, which stood at Rs3.2bn (a jump of 19% yoy).
  • Maintain reduce as ACC continues to disappoint on operational performance.
Click here for the detailed report on the same.

Warm Regards,
Amar Ambani
Head of Research, IIFL

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