Market Summary - 2.05.2012 - Angel Broking - PDF link

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Market Summary

Technical Report - 2.05.2012 - Angel Broking - PDF link

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Technical Report

Market Outlook- 02.05.2012 - Angel Broking - PDF link

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Market Outlook

Sesa goa & Sterlite Industries Business performance steady, merger overhang on stocks to remain : Centrum

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Sesa goa & Sterlite Industries

Business performance steady, merger overhang on stocks to remain

m  Sterlite industries (SIIL) reported decent Q4FY12 results after better-than-expected results were announced by Hindustan zinc (HZL) and Sesa goa (Sesa) during the last few days. Vedanta group had announced the formation of Sesa Sterlite (involving the merger of Sesa goa, Sterlite, VAL, MALCO and the transfer of 38.8% stake of Vedanta in Cairn) during the quarter resulting in a simplification of the group structure. We had already noted this event (Refer our report on Sesa Sterlite merger dated 27 February 2012) as being more beneficial to Vedanta group with limited benefits to the consolidated entity and its shareholders on account of huge debt and skewed EBITDA profile of the proposed entity.  The proposed merger is pending for approvals and expected to get completed before the end of CY12 and since the market should keep valuing Sesa shares on the proposed Sesa Sterlite group value and SIIL shares at 0.6x of Sesa Sterlite value, we also continue to value the stocks based on this new formula (as is the case with proposed merged structure) which we had adopted in our event update note after the event was announced in Feb-12.  We remain positive on the prospects of zinc, lead and silver business and expected increase in power volumes going ahead but remain concerned on lower iron ore volumes and profitability of VAL (which would become the 100% subsidiary of the merged entity).  Huge debt servicing also remains a key balance sheet concern.

m  We have used FY14E EV/EBITDA valuation (see table below) to arrive at a SOTP fair value of Rs208 for Sesa Sterlite and corresponding fair value of Rs125 for Sterlite (based on 0.6x Sesa Sterlite value).  Stocks have seen substantial correction post the merger announcement and we believe that merger overhang would remain on the stocks going ahead. We recommend hold on Sesa goa with a target price of Rs 208 and Buy on Sterlite industries with a target price of Rs 125.

-- 

Hindustan Construction Company - Dismal performance continues :: IDBI Caps

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Execution remained muted with revenue coming 5% below our estimate at Rs11.6 bn. Order inflow in Q4FY12 remained subdued at Rs3.1 bn. The biggest negative surprise for the quarter came in the form of lower than expected OPM (7.6% V/s IDBIe of 12.0%). Consequently, EBITDA came 40% below estimate at Rs878 mn. HCC reported a net loss of Rs542 mn, against our estimate of Rs200 mn loss. Despite some improvement in execution, we expect HCC to continue to report a net loss in FY13/FY14. We have lowered our TP for HCC to Rs20 (Rs22 earlier) due to reduction in our target EV/EBITDA multiple to 4.5x (earlier 5x) and downward revision in our OPM estimates. Maintain REDUCE.
Key Highlights
 Revenue 5% below estimate at Rs11.6 bn; order inflow remains weak
Revenue declined by 5% YoY to Rs11.6 bn, against our estimate of Rs12.1 bn. This is the third successive quarter when HCC has reported a YoY decline in revenue. Order inflow in Q4FY12 remained subdued at Rs3.1 bn (Rs18.9 bn in FY12). Consequently, O/B declined 6% QoQ to Rs153.4 bn.
 OPM 440bps below estimate; EBITDA 40% below expectation
OPM at 7.6% was significantly below our estimate of 12% (11% in FY12). Consequently, EBITDA was 40% below estimate at Rs878 mn. The margin contraction is likely on account of business restructuring and distribution of overheads on the lower turnover. The management has guided for an EBITDA margin of 11.0% in FY13.
 Net interest expense up 19% QoQ; Reported net loss of Rs542 mn
Net interest expense increased 19% QoQ to Rs1.2 bn and was in-line with our estimate. The company reported a net loss of Rs542 mn, against our estimate of Rs200 mn loss.
 Subsidiary performance
Karl Steiner reported Revenue and PAT of Rs40bn and Rs158mn, respectively for FY12. The company has a current O/B of Rs82.9 bn. However, Lavasa and HCC Infra reported a net loss of Rs1.4 bn and 1.6 bn, respectively for FY12. HCC commenced tolling on the Dhule – Palasner BOT in Q4FY12 and the initial collections are in-line with management expectations. During the quarter, Lavasa launched 0.25msf of residential space, which the management claim got sold out completely.
 Maintain REDUCE; TP revised to Rs20
Despite some improvement in execution, we expect HCC to continue to report net losses in FY13 and FY14. We have kept our subsidiary valuation estimate unchanged at Rs49 per share. However, our value for the standalone business stands revised to negative Rs29 per share (earlier negative Rs27) due to reduction in our target EV/EBITDA multiple to 4.5x (earlier 5x) and downward revision in our OPM estimates. Consequently, we have revised our TP for HCC to Rs20 (Rs22 earlier). We maintain our REDUCE rating on HCC.

A strong quarter; regulatory overhang persists.. BUY Idea Cellular :: KRC

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A strong quarter; regulatory overhang persists.. BUY
Idea Cellular reported numbers were inline with estimates. The
company reported net sales of Rs 5370crs, strong growth of 27% Y-o-
Y. This growth was driven by both increase in subscriber base as well
as higher ARPU. EBITDA for the quarter was Rs 1357crs, a growth of
26% over Q4FY11.EBITDA margins slightly dipped by 10bps to 25.3%
on account of higher networking cost and spectrum charges. Net profit
was Rs 239crs which declined by 13% y-o-y due to higher amortization
cost and sharp increase in interest expenses. Net profit margin for the
quarter was 4.5% down by 200bps y-o-y. Steady growth in GSM
subscriber addition and increase in ARPU backed by pick up in 3G
services gives strong revenue visibility for FY13E. Cost rationalization
and lower interest outgo will help to improve margins going forward.
Better than industry net subscriber addition led the revenue growth:
Idea’s subscriber base increased from 106.4mn in Q3FY12 to 112.7mn in
Q4FY12. In spite of weak quarter compared to last quarter, the company
reported slight growth in ARPU. ARPU for the quarter was Rs 160. MoUs also
increased by 2% Q-o-Q to 379mins. However the average realized rate
declined from Rs. 433 to Rs. 422. The company reported higher mobile value
added services contribution from 13.7% in Q3FY12 to 14.3% in Q4FY12. Pick
up on 3G services front is clearly visible. We believe going forward data
revenue will go up with increase in penetration of 3G users.
Increase in networking cost & licence fees dented operating profit:
The company reported increase in networking cost 9% Q-o-Q to Rs 1258crs
and licence fees increased by whopping 31% Q-o-Q to Rs 737crs. It dragged
EBITDA margins from 140bps to 25.3% from 26.7% in Q3FY12.
Regulatory overhang persists:
With recent TRAI’s proposal of increasing spectrum pricing has dented market
capitalization of the company. The management said the association of telecom
operators has opposed the proposals and suggestions have been sent to higher
authority. The company is confident that such proposals would be taken into
consideration before actual implementation. We believe such regulatory
changes are overhang for the company’s performance.
Our View:
Idea’s another strong performance shows growth is back on track with
increasing trend in ARPU and higher MVAS revenue contribution. The company
has been adding higher net GSM subscribers than the industry average which is
contributing to strong sales in FY13E. Increase in ARPUs driven by higher
realized rate, improvement in traffic and 3G being operational, Idea is on track
of growth. The stock is trading at 5.8x EV/EBITDA to its FY13E earnings. We
recommend BUY on the stock with a target price of Rs 95 by assigning 6.5x
EV/EBITDA to its FY13E earnings.

Strides Arcolab: Buy ::Business Line

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Strides Arcolabs : TP: ` 715 Accumulate: Dolat Capital

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Topline marginally ahead of estimates; an operationally strong quarter
Strides Arcolab’s Q1CY12 revenue (including 24 days of Ascent Pharma sales)
grew 7.3% YoY to ` 5.34bn. However, the topline on a like-to-like basis grew
40% YoY to ` 4.95bn. Licensing income for the quarter stood at ` 640mn.
Highlight of this growth was healthy performance in the specialty division driven
by new product launches and benefit of operating leverage. Core revenue from
the division (ex licensing income) more than doubled to ` 2.74bn with operating
margins at 26%.
The company has acquired an FDA approved sterile formulations facility to
effectively capitalize on the US drug shortage opportunity. Its existing capacities
(including non-oncology) are already tied up.
The Pharma division’s revenue on a like-to-like basis grew 37% YoY to ` 1.58bn
with its core operating margin (ex licensing income) at 19% for the quarter.
Operating margin increased by 450bps YoY to 24.9% mainly due to lower other
expenses (down 270bps YoY) and raw material costs (down 110bps YoY).
The exceptional items for the quarter include (a) forex loss of ` 250mn, (b) loss
of ` 15mn related to fair value of options and (c) profit on sale of investments of
` 6.32bn (mainly pertaining to Ascent sale).
Recurring PAT (adjusted for tax impact and excl. exceptional items) grew 126%
YoY to ` 608mn (` 269mn in Q1CY11).
At the same time, the management indicated of high growth potential in sterile
business, to be aided by launch of 31 products this year and higher contribution
from Penem exports from Brazilian facility. To reflect the benefit of operating
leverage on commercialisation of these products, we have revised our earnings
estimate upward by 4.7%/4.2% for CY12E/CY13E.

Bhushan Steel: Hold ::Business Line

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Jindal Steel & Power - Positive outlook; company update; BUY: Edelweiss, PDF link

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Jindal Steel & Power (JSP IN, INR 487, Buy)

Jindal Steel & Power’s (JSPL) steel business performed strongly in Q4FY12, led by sharp jump in both steel and pellet sales volumes. The segment is likely to remain robust owing to firm steel prices, weak coking coal cost and completion of Angul DRI project in March 2013. JSPL intends to start its first unit in the 2,400 MW power project one year ahead of its original schedule. We are positive on JSPL on the back of growth in both steel and power businesses and its portfolio of resource assets. We maintain ‘BUY’ with TP of INR648.

Open now: Samvardhana Motherson Finance IPO: All you need to know

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Samvardhana Motherson Finance Limited
	*Non-Retail investors i.e. QIB and Non-Institutional Investors Bidding for more than 2 lac shall mandatorily use ASBA facility
Symbol - Series	SMFL EQ
Issue Period	May 2,2012 to May 4,2012
Post issue Modification Period	May 5,2012
Issue Size	Public offer of [.] equity shares of Rs.10 each aggregating to 16650 million.(including Anchor Portion of 193,06,900 equity shares)
Issue Type	100% Book Building
Price Range	Rs 113 to Rs 118/-
Face Value	Rs.10/-
Tick Size	Re. 1/-
Market Lot	50 Equity Shares
Minimum Order Quantity	50 Equity Shares
IPO Grading	IPO GRADE 4
Rating Agency	ICRA
Maximum Subscription Amount for Retail Investor	Rs.200000
IPO Market Timings	10.00 a.m. to 5.00 p.m.
Book Running Lead Manager	Standard Chartered Securities (India) Limited, J.P. Morgan India Private Limited
Syndicate Member	Standard Chartered Securities (India) Limited, J.P. Morgan India Private Limited
Categories*	FI, IC, MF, FII, OTH, CO, IND, NOH and SHA
No. of Cities with Bidding Centers	60
Name of the registrar	Link Intime India Private Limited
Address of the registrar	C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (West) Mumbai 400 078 Maharashtra, India
Contact person name number and Email id	Sanjog Sud, +91 22 25960320, sml.ipo@linkintime.co.in
Prospectus	Click Here
Trading Member List	Click Here
Application Forms	Click Here
ASBA e-form link	e-Forms
Grading Report	Click Here
Branches of Self Certified Syndicate Banks (SCSBs) where syndicate / sub syndicate member to submit ASBA form	Click Here
Anchor Allocation Report	Click Here