08 June 2013
On track; Maintain Buy Mayur Uniquoters ::Centrum
On track; Maintain Buy
Mayur Uniquoters (Mayur) reported total operating income of
Rs.982mn (up 9% YoY and 5% QoQ) in 4QFY13. EBIDTA margins for
the quarter came strong at 20.9%, up 141bps YoY and 366bps QoQ.
Driven by strong operating performance, reported PAT stood at
Rs.129mn for the quarter registering a growth of 16% YoY and 26%
QoQ. While demand continues to remain strong, 1HFY14E revenue
growth is likely to remain muted due to capacity constraints.
However, this is likely to be addressed by Nov’13 (new coating line
with a capacity of 7.2mn meters annually will be operational by
then). Management has guided for revenue growth of 15-20% for
FY14E and sounded confident on achieving 20%+ revenue growth
for FY15E vs. 20% YoY in FY13. Focus on high realization export
market continues, reflected from the fact that the share of exports to
overall revenues has inched up to 22% in FY13 vs. 16% in FY12. We
continue to remain positive on the stock and maintain Buy rating
with a revised target of Rs.570.
Mayur Uniquoters (Mayur) reported total operating income of
Rs.982mn (up 9% YoY and 5% QoQ) in 4QFY13. EBIDTA margins for
the quarter came strong at 20.9%, up 141bps YoY and 366bps QoQ.
Driven by strong operating performance, reported PAT stood at
Rs.129mn for the quarter registering a growth of 16% YoY and 26%
QoQ. While demand continues to remain strong, 1HFY14E revenue
growth is likely to remain muted due to capacity constraints.
However, this is likely to be addressed by Nov’13 (new coating line
with a capacity of 7.2mn meters annually will be operational by
then). Management has guided for revenue growth of 15-20% for
FY14E and sounded confident on achieving 20%+ revenue growth
for FY15E vs. 20% YoY in FY13. Focus on high realization export
market continues, reflected from the fact that the share of exports to
overall revenues has inched up to 22% in FY13 vs. 16% in FY12. We
continue to remain positive on the stock and maintain Buy rating
with a revised target of Rs.570.
Tractor Recovery to Cushion UV Slowdown Notwithstanding slowdown in tractor segment, Mahindra & Mahindra (M&M)- Karvy
Tractor Recovery to Cushion UV Slowdown
Notwithstanding slowdown in tractor segment, Mahindra & Mahindra
(M&M) has delivered strong operational performance in Q4FY13. Its
operating margins rose 184 bps YoY (87 bps QoQ) to 12.1% vs. our estimate of
11%. Its revenues rose 12% YoY to Rs. 105 bn (vs. our estimate of Rs. 101 bn),
while volume grew 7% YoY to 199,105 units. Price hike and better productmix
resulted in 5% YoY rise in average realization per vehicle. Its RM/Sales
ratio dipped 75 bps YoY (110 bps QoQ) to 74.8%. M&M booked Rs. 900 mn
capital gain on stake sale of its investment in Mahindra Holidays, excluding
which its adjusted PAT rose 28.6% YoY to Rs. 8 bn. Adjusted profit of
combined entity (M&M+MVML) rose 8% YoY to Rs. 8.7 bn on revenues of Rs.
99.8 bn (up 9.6% YoY), while its EBIDTAM rose 239 bps YoY (91 bps QoQ) to
14.4% in Q4FY13.
Recovery in Tractor Segment Suffice to Offset UV Slowdown: We observed
strong positive co‐relation between tractor volume and election period during
past decades. Farm segment always benefits from election money‐flow in rural
India, which coupled with relief to farmers from government would result in
strong demand for tractors in FY15E. We expect UV growth to taper down
from ~50% to 13.5% in FY14‐15 due to high base, increase in excise duty
coupled with declining fuel price differential. We believe that strong tractor
volume would be more than enough to maintain profitability, as Tractor
segment (EBIT margin of 16%) enjoys much higher operating margin than
Auto segment (EBIT margins of 9%). We expect margin improvement of 50
bps over FY13‐15 on account of increasing contribution from Tractor segment.
Outlook & Valuation
In view of UV growth tapering down, we lower our revenue and EPS
estimates by 3% each for FY15E. Based on 8xFY15E EV/EBIDTA, we value
M&M’s standalone business at Rs. 820 (from Rs. 836 earlier). Based on
7xEV/EBIDTA, we value MVML at Rs. 67 and post‐20% Hold Co discount, we
value subsidiary at Rs. 263 per share (from Rs. 247 earlier). We reiterate our
“BUY” recommendation on M&M and maintain our SOTP‐based target price
of Rs. 1,150 per share, primarily on account of increasing value of its
subsidiary supported by their improved financial performance.
Notwithstanding slowdown in tractor segment, Mahindra & Mahindra
(M&M) has delivered strong operational performance in Q4FY13. Its
operating margins rose 184 bps YoY (87 bps QoQ) to 12.1% vs. our estimate of
11%. Its revenues rose 12% YoY to Rs. 105 bn (vs. our estimate of Rs. 101 bn),
while volume grew 7% YoY to 199,105 units. Price hike and better productmix
resulted in 5% YoY rise in average realization per vehicle. Its RM/Sales
ratio dipped 75 bps YoY (110 bps QoQ) to 74.8%. M&M booked Rs. 900 mn
capital gain on stake sale of its investment in Mahindra Holidays, excluding
which its adjusted PAT rose 28.6% YoY to Rs. 8 bn. Adjusted profit of
combined entity (M&M+MVML) rose 8% YoY to Rs. 8.7 bn on revenues of Rs.
99.8 bn (up 9.6% YoY), while its EBIDTAM rose 239 bps YoY (91 bps QoQ) to
14.4% in Q4FY13.
Recovery in Tractor Segment Suffice to Offset UV Slowdown: We observed
strong positive co‐relation between tractor volume and election period during
past decades. Farm segment always benefits from election money‐flow in rural
India, which coupled with relief to farmers from government would result in
strong demand for tractors in FY15E. We expect UV growth to taper down
from ~50% to 13.5% in FY14‐15 due to high base, increase in excise duty
coupled with declining fuel price differential. We believe that strong tractor
volume would be more than enough to maintain profitability, as Tractor
segment (EBIT margin of 16%) enjoys much higher operating margin than
Auto segment (EBIT margins of 9%). We expect margin improvement of 50
bps over FY13‐15 on account of increasing contribution from Tractor segment.
Outlook & Valuation
In view of UV growth tapering down, we lower our revenue and EPS
estimates by 3% each for FY15E. Based on 8xFY15E EV/EBIDTA, we value
M&M’s standalone business at Rs. 820 (from Rs. 836 earlier). Based on
7xEV/EBIDTA, we value MVML at Rs. 67 and post‐20% Hold Co discount, we
value subsidiary at Rs. 263 per share (from Rs. 247 earlier). We reiterate our
“BUY” recommendation on M&M and maintain our SOTP‐based target price
of Rs. 1,150 per share, primarily on account of increasing value of its
subsidiary supported by their improved financial performance.
BGR Energy Systems- SELL :Karvy research
Lower Sales, High Interest Cost Drag
Performance; Maintain “SELL”
BGR Energy Systems (BGR Energy) has registered 6.5% decline in revenue to
Rs. 11.37 bn in the quarter ended Mar’13, while the Company’s operating
margin rose 110 bps to 13%, which has improved operating profit by 2.3% to
Rs. 1,387 mn. However, due to higher interest cost, its PBT declined 13% to
Rs. 829 mn. Eventually, the Company’s net profit declined by 20% to Rs. 538
mn on account of 550 bps rise in tax rate to 35% on YoY basis.
Segmental Performance: While the contribution of Capital Goods to the topline
of BGR Energy stood at 7.4% in Q4FY13, same as previous corresponding
period. Meanwhile, greater contribution from BoP projects (Chandrapur &
Marwa) has boosted the margin of the Company.
Working Capital Loan: BGR Energy’s working capital loan stood at Rs. 21.5
bn as of Mar’13 and the long‐term loan was at just Rs. 200 mn. The Company
expects a reduction of Rs. 3‐3.5 bn in working capital limits by end of FY14.
Overall Order Inflow Remains Muted sans NTPC Orders: BGR is executing
nine major projects while its current order‐book stands at Rs. 110 bn with
orders worth Rs. 72 bn from NTPC. Hence, the order inflow remains muted
excluding the projects secured from NTPC. We expect lower EBITDA
margins going forward on account of project execution of NTPC orders.
Outlook & Valuation
We expect the financial performance of BGR Energy to deteriorate with the
beginning of JV with Hitachi Again, with capacity utilization likely to remain
low, it seems difficult to win profitable orders amidst stiff competition. We
downgrade earnings for FY14 & FY15 by 2.7% & 13.6% due to delay in
projects execution of NTPC & Krishnapatnam projects. We expect BGR
Energy’s revenue to register 10.5% CAGR, while earning could see ‐8.7%
CAGR in FY12‐15E. Based on 8xFY15E earnings at 40% discount to its mean
multiple of 13x, we maintain our “SELL” recommendation on the stock with
downwardly revised target price of Rs. 188 per share (from Rs. 215 earlier).
Performance; Maintain “SELL”
BGR Energy Systems (BGR Energy) has registered 6.5% decline in revenue to
Rs. 11.37 bn in the quarter ended Mar’13, while the Company’s operating
margin rose 110 bps to 13%, which has improved operating profit by 2.3% to
Rs. 1,387 mn. However, due to higher interest cost, its PBT declined 13% to
Rs. 829 mn. Eventually, the Company’s net profit declined by 20% to Rs. 538
mn on account of 550 bps rise in tax rate to 35% on YoY basis.
Segmental Performance: While the contribution of Capital Goods to the topline
of BGR Energy stood at 7.4% in Q4FY13, same as previous corresponding
period. Meanwhile, greater contribution from BoP projects (Chandrapur &
Marwa) has boosted the margin of the Company.
Working Capital Loan: BGR Energy’s working capital loan stood at Rs. 21.5
bn as of Mar’13 and the long‐term loan was at just Rs. 200 mn. The Company
expects a reduction of Rs. 3‐3.5 bn in working capital limits by end of FY14.
Overall Order Inflow Remains Muted sans NTPC Orders: BGR is executing
nine major projects while its current order‐book stands at Rs. 110 bn with
orders worth Rs. 72 bn from NTPC. Hence, the order inflow remains muted
excluding the projects secured from NTPC. We expect lower EBITDA
margins going forward on account of project execution of NTPC orders.
Outlook & Valuation
We expect the financial performance of BGR Energy to deteriorate with the
beginning of JV with Hitachi Again, with capacity utilization likely to remain
low, it seems difficult to win profitable orders amidst stiff competition. We
downgrade earnings for FY14 & FY15 by 2.7% & 13.6% due to delay in
projects execution of NTPC & Krishnapatnam projects. We expect BGR
Energy’s revenue to register 10.5% CAGR, while earning could see ‐8.7%
CAGR in FY12‐15E. Based on 8xFY15E earnings at 40% discount to its mean
multiple of 13x, we maintain our “SELL” recommendation on the stock with
downwardly revised target price of Rs. 188 per share (from Rs. 215 earlier).
Aegis Logistics Ltd.:: report by Sushil Research,
Aegis Logistics has come out with decent set of numbers for Q4FY13. We attended the
concall and some of the key takeaways are:-
For Q4FY13, as guided by the management its consolidated revenues de-grew by 51.4%
YoY and 14.3% QoQ to Rs.7450.9 Mn. Its volumes in the B2B gas segment have come down
drastically impacting the revenue. For FY13 the revenue is down by 10.8% YoY to
Rs.39816.4 Mn in line with our estimates.
Its Liquid Division has seen a growth of 22.6% YoY in Q4FY13 to Rs.292.9Mn with Liquid
PBT at Rs.133.2 Mn and PBT margin of 45.5% up 260 bps. Its Liquid revenue for FY13 is up
by 17% YoY due to higher volumes from debottlenecking at Mumbai and higher capacity
utilization at Kochi.
Its Gas revenue for Q4FY13 is down by 52.5% YoY to Rs.7158.0 Mn due to lower volumes
from the B2B segment. The company’s wholesale business contributes more than 80% of
its gas revenue, thus as the volumes from this segment have fallen drastically due to lower
offtake from oil PSU’s the revenue is impacted. Its B2B volumes have fallen from 620,000
MT in FY12 to 417,000 MT in FY13. However the higher margin distribution business
volumes have increased by 35.9% YoY to 53,000 tonnes thus reducing the impact at
EBITDA level. For FY13 its gas revenue is down by 11% YoY to Rs.38741.3 Mn but
normalized EBITDA is up by 11.8% to Rs.951 Mn.
Its EBITDA has come in green in Q4FY13 at Rs.82.7 Mn after losses in the preceding three
quarters as the company has decisively closed all the outstanding options contract.
Normalized EBITDA for the full year stood at Rs.1560 Mn vs Rs.1390 Mn up by 12% YoY
despite of 10.8% fall in revenue due to higher contribution from Liquid and Gas – B2C
segment.
It’s RPAT for FY13 stood at Rs.336 Mn up by 71% YoY due to higher other income with Net
Profit Margin at 0.8% up by 40 bps. EPS for FY13 stood at Rs.10.
The company has declared a dividend of Rs.4 for FY13, 40% dividend payout.
EXPANSION
Liquid Division - The Company has commissioned phase 1 of Haldia of 15,000 KL which is
already running at 100% capacity utilization. The remaining 45,000 KL is likely to be
commissioned by end of Q2FY14 at a total capex of Rs.480 Mn. It has also commenced
work at Pipavav for a 120,000 KL facility with a total capex of Rs.1010 Mn. This project is
likely to get commissioned by FY15. Post this expansion the company’s liquid division’s
capacity is likely to increase to 504,000 KL from the current 339,000 KL.
Gas Division – The Company is also increasing its gas division’s capacity by 10% to 25,400
MT which translates into a handling capacity of 850,000 MT from current 750,000 MT at a
capex of Rs.220 Mn. It is also widening its reach in the B2C segment with number of
operational autogas stations at 94 from 80 in FY12. It also plans to add another 41 autogas
stations by the end of FY15E.
OUTLOOK & VALUATION
We strongly believe that Aegis Logistics, India’s leading oil, gas, and chemical logistics company,
is likely to be in a sweet spot from FY14E due to spurt in volume from the high margin business
– Liquid division post expansion and Retail Autogas and Commercial cylinder business due to -
cap on subsidized cylinders and network expansion. Also, with the expiry of the options
contract in Mar’13, the volatility in earnings is also likely to reduce considerably. However,
revenue is likely to grow at a slower pace of 6% in FY14 as its wholesale low margin gas
business is witnessing short term blip because of lower offtake from National Oil Companies.
Keeping in mind subdued volumes from the wholesale segment, we have reduced our earnings
estimate for FY14E by 12% to Rs.22.6 and introduced FY15 earnings of Rs.33.8. The stock
currently trades at 6.3x and 4.2x its FY14E and FY15E EPS vs 5yr average P/E of 12x. We thus
continue to maintain our positive outlook on the company with BUY rating and a target price of
Rs.205.
concall and some of the key takeaways are:-
For Q4FY13, as guided by the management its consolidated revenues de-grew by 51.4%
YoY and 14.3% QoQ to Rs.7450.9 Mn. Its volumes in the B2B gas segment have come down
drastically impacting the revenue. For FY13 the revenue is down by 10.8% YoY to
Rs.39816.4 Mn in line with our estimates.
Its Liquid Division has seen a growth of 22.6% YoY in Q4FY13 to Rs.292.9Mn with Liquid
PBT at Rs.133.2 Mn and PBT margin of 45.5% up 260 bps. Its Liquid revenue for FY13 is up
by 17% YoY due to higher volumes from debottlenecking at Mumbai and higher capacity
utilization at Kochi.
Its Gas revenue for Q4FY13 is down by 52.5% YoY to Rs.7158.0 Mn due to lower volumes
from the B2B segment. The company’s wholesale business contributes more than 80% of
its gas revenue, thus as the volumes from this segment have fallen drastically due to lower
offtake from oil PSU’s the revenue is impacted. Its B2B volumes have fallen from 620,000
MT in FY12 to 417,000 MT in FY13. However the higher margin distribution business
volumes have increased by 35.9% YoY to 53,000 tonnes thus reducing the impact at
EBITDA level. For FY13 its gas revenue is down by 11% YoY to Rs.38741.3 Mn but
normalized EBITDA is up by 11.8% to Rs.951 Mn.
Its EBITDA has come in green in Q4FY13 at Rs.82.7 Mn after losses in the preceding three
quarters as the company has decisively closed all the outstanding options contract.
Normalized EBITDA for the full year stood at Rs.1560 Mn vs Rs.1390 Mn up by 12% YoY
despite of 10.8% fall in revenue due to higher contribution from Liquid and Gas – B2C
segment.
It’s RPAT for FY13 stood at Rs.336 Mn up by 71% YoY due to higher other income with Net
Profit Margin at 0.8% up by 40 bps. EPS for FY13 stood at Rs.10.
The company has declared a dividend of Rs.4 for FY13, 40% dividend payout.
EXPANSION
Liquid Division - The Company has commissioned phase 1 of Haldia of 15,000 KL which is
already running at 100% capacity utilization. The remaining 45,000 KL is likely to be
commissioned by end of Q2FY14 at a total capex of Rs.480 Mn. It has also commenced
work at Pipavav for a 120,000 KL facility with a total capex of Rs.1010 Mn. This project is
likely to get commissioned by FY15. Post this expansion the company’s liquid division’s
capacity is likely to increase to 504,000 KL from the current 339,000 KL.
Gas Division – The Company is also increasing its gas division’s capacity by 10% to 25,400
MT which translates into a handling capacity of 850,000 MT from current 750,000 MT at a
capex of Rs.220 Mn. It is also widening its reach in the B2C segment with number of
operational autogas stations at 94 from 80 in FY12. It also plans to add another 41 autogas
stations by the end of FY15E.
OUTLOOK & VALUATION
We strongly believe that Aegis Logistics, India’s leading oil, gas, and chemical logistics company,
is likely to be in a sweet spot from FY14E due to spurt in volume from the high margin business
– Liquid division post expansion and Retail Autogas and Commercial cylinder business due to -
cap on subsidized cylinders and network expansion. Also, with the expiry of the options
contract in Mar’13, the volatility in earnings is also likely to reduce considerably. However,
revenue is likely to grow at a slower pace of 6% in FY14 as its wholesale low margin gas
business is witnessing short term blip because of lower offtake from National Oil Companies.
Keeping in mind subdued volumes from the wholesale segment, we have reduced our earnings
estimate for FY14E by 12% to Rs.22.6 and introduced FY15 earnings of Rs.33.8. The stock
currently trades at 6.3x and 4.2x its FY14E and FY15E EPS vs 5yr average P/E of 12x. We thus
continue to maintain our positive outlook on the company with BUY rating and a target price of
Rs.205.
Reliance Power Sasan restructuring ‐ More technical less material ::Prabhudas Lilladher
! Preface: Reliance Power’s (RPower’s) Sasan UMPP loan of Rs145bn has been
restructured by the lenders. We believe that it is a technical factor which now
takes into the account a realistic Commercial Operation Date (COD) referred to
as the Date of Commencement of Commercial Operations (DCCO). The original
DCCO of Sasan at initial bidding was from May 2013-April 2016. However, it was
revised to December 2011-March 2013 as MOP wanted two units to come up in
the 11th Plan itself. This condition was accepted by the company on the
assurance of required assistance given for securing timely inputs and a revised
PPA was signed which necessitated a change in loan documents too. On account
of a delay in land acquisition (which allowed RPower to start land acquisition
only in January 2011), COD of the 1st unit by December 2011 was not possible.
Ultimately, COD of 1st Unit of Sasan took place in March 2013.
! More of a technical factor: Since the DCCO of Sasan is now shifted to March
2013 - June 2014, the same will also have to be incorporated in the loan
documents. As per RBI, if any change occurs in DCCO, it will lead to a
restructuring. Thus, this restructuring is not on account of any payment default
but purely for technical adjustment. Also, out of the total Rs145bn domestic
loan sanctioned till date for Sasan, Rs25bn has been used from domestic banks,
Rs60bn from US and Chinese EXIM banks. The company is currently funding the
construction activities from buyer’s credit, which in future, will get replaced by
non-domestic loans.
restructured by the lenders. We believe that it is a technical factor which now
takes into the account a realistic Commercial Operation Date (COD) referred to
as the Date of Commencement of Commercial Operations (DCCO). The original
DCCO of Sasan at initial bidding was from May 2013-April 2016. However, it was
revised to December 2011-March 2013 as MOP wanted two units to come up in
the 11th Plan itself. This condition was accepted by the company on the
assurance of required assistance given for securing timely inputs and a revised
PPA was signed which necessitated a change in loan documents too. On account
of a delay in land acquisition (which allowed RPower to start land acquisition
only in January 2011), COD of the 1st unit by December 2011 was not possible.
Ultimately, COD of 1st Unit of Sasan took place in March 2013.
! More of a technical factor: Since the DCCO of Sasan is now shifted to March
2013 - June 2014, the same will also have to be incorporated in the loan
documents. As per RBI, if any change occurs in DCCO, it will lead to a
restructuring. Thus, this restructuring is not on account of any payment default
but purely for technical adjustment. Also, out of the total Rs145bn domestic
loan sanctioned till date for Sasan, Rs25bn has been used from domestic banks,
Rs60bn from US and Chinese EXIM banks. The company is currently funding the
construction activities from buyer’s credit, which in future, will get replaced by
non-domestic loans.
BALKRISHNA INDUSTRIES Volumes dip; lower costs, higher prices boost margin: Edelweiss
Balkrishna Industries’ (BKT) Q4FY13 top line of INR7.8bn (flat YoY) came
in line with our estimate. The disappointment was primarily due to 7%
dip in volumes, which was somewhat compensated by better realisation
and favourable currency movement. The company clocked 34,061MT
volume with average realisation of INR229/KG (up 5.5% YoY). Softening
rubber prices enabled it to post 20% EBITDA margin (up 4% YoY).
Management reiterated that the slowdown in Europe and US is
impacting volumes and the company’s order book, which shrunk to 1.5
months. BKT has given muted volume growth guidance for FY14 owing to
tough macro environment. However, it has been able to gain market
share and is confident of achieving full capacity utilisation once the
macro environment improves. Maintain ’BUY’.
in line with our estimate. The disappointment was primarily due to 7%
dip in volumes, which was somewhat compensated by better realisation
and favourable currency movement. The company clocked 34,061MT
volume with average realisation of INR229/KG (up 5.5% YoY). Softening
rubber prices enabled it to post 20% EBITDA margin (up 4% YoY).
Management reiterated that the slowdown in Europe and US is
impacting volumes and the company’s order book, which shrunk to 1.5
months. BKT has given muted volume growth guidance for FY14 owing to
tough macro environment. However, it has been able to gain market
share and is confident of achieving full capacity utilisation once the
macro environment improves. Maintain ’BUY’.
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