Results Update

Shree Cement

Shree Cement (SRCM) posted a strong performance on the bottom-line front (up 264% yoy) in 2QFY2013 which was ahead of our estimates. The stellar performance was led by the power business which registered a profit of  `99cr during the quarter vs a loss of  `112cr in the corresponding quarter of the previous year. Even on a sequential basis the power segment’s profit rose by 63.7%.We expect SRCM to post a 2.9% and 35% growth in its top-line and bottom-line respectively over FY2012-14E. At the current market price, we believe SRCM's cement business is trading at fair valuations of EV/tonne of US$155 on current capacity (US$114 on FY2014E capacity).Source: Angel Broking

Sesa Goa

Sesa Goa (Sesa) reported disappointing results for 3QFY2013 due to ban on iron ore mining in Karnataka and Goa. Net sales declined by 91.0% yoy to `237cr as there was no iron ore production on the back of mining ban in Goa and Karnataka. As a result, the company reported an EBITDA loss of `105cr as compared to a positive EBITDA of  `1,085cr in 3QFY2012.  It reported a PAT loss of  `172cr, compared to a positive PAT of  `570cr in 3QFY2012. The share of income from its associate (Cairn India) was `669cr 

during 3QFY2013. Hence, the fall in the adjusted PAT (`522cr) was cut down to 39.9% yoy. We expect sales volumes to decline drastically from Goa due to the recent ban by the Supreme Court and Ministry of Environment and Forest Clearances (MOEF). Thus, we expect the company’s core business profits to decline significantly in FY2013-14. Considering the ongoing process of group restructuring by the promoter, Vedanta Resources, valuation of Sterlite will mirror the valuation of the consolidated company, Sesa Sterlite.Source: Angel Broking

Force Motors

Force Motors Ltd. (FML) reported a disappointing set of numbers for 3QFY2013. Its top-line slumped by 16.5% yoy and stood at  `436cr owing to 19.0% yoy decline in volumes. EBITDA fell by 31% yoy to '19cr with subsequent drop in EBITDA  margin  which  came  in  at  4.4%  as  compared  to  5.3%  in  same period previous year. The sharp decline in margin is attributable to 421bp yoy increment in other expenses as a percentage of sales. Despite the weak operating performance, net profit revived to `8cr which was 248% higher yoy; on the back of other income of `9.3cr and lower tax expenses (5.4% of PBT).  FML’s recent launches could not reap the expected benefits due to macro-economic concerns, rising fuel prices and inflation which subdued the consumer sentiment. Hence, we expect FML’s top-line to post a CAGR  of  just  5.0%  over  FY2012-14E.  The  EBITDA  is  expected  to  drop  from `122cr in FY2012 to  `116cr in FY2014E and EBITDA margins to normalize at 5.0% in FY2014E. The net profit is to soar by 27.3% CAGR to `66cr in FY2014E on the back of reduced interest cost and stable other income. FML is trading at an attractive PE of 8.9x on its FY2014E earnings.Source: Angel Broking

Bank Of Maharashtra

Bank of Maharashtra reported a strong performance for 3QFY2013, both on the operating as well as on the asset quality front. While strong advance growth of 48.5% yoy, resulted in operating profit growth of 23.4% yoy, earnings growth came in much higher at 43.2% yoy, further aided by decline in provisioning expenses on a yoy basis (partly due to write-back of investment provisions of `45cr). At the current market price, the stock is trading at a valuation of 0.7x FY2014E ABV. Given the extremely low CAR, risk of equity-capital raising at substantially book dilutive valuations persists. Additionally, recent aggressive loan growth increases concerns about future asset quality.Source: Angel Broking

Ashok Leyland

Ashok Leyland (AL) reported disappointing results for 3QFY2013 as operating margins collapsed to 4.3%, down 295bp yoy and 584bp qoq, owing to higher discounts in the medium and heavy commercial vehicle (MHCV) segment, adverse product-mix (higher share of  Dost) and lower utilization levels. Further, higher interest cost due to increasing working capital requirements also impacted the performance, leading to a bottom-line (adjusted basis) loss of  `82cr. We lower our volume estimates to account for the continued weakness in the MHCV segment. We also lower our EBITDA margin estimates to factor in weak 3QFY2013 performance and higher levels of discounting in the industry. Additionally, we raise our estimates for interest outgo due to the increasing working capital requirements. Nevertheless, we believe that expected easing of interest rates in CY2013 will lead to revival in industrial activity and thus the demand for MHCVs.While the near term outlook for the MHCV industry remains challenging due to slowdown in overall industrial activity; we expect volumes to recover in FY2014E led by likely easing of interest rates in CY2013. At `25, AL is trading at 11.2x its FY2014E earnings.Source: Angel Broking

Rallis India

For 3QFY2013, Rallis India (RAIL)’s consolidated net sales grew by 7.0% yoy to `340cr. The OPM for the quarter came out to 12.9%, ie a dip from 15.2% in 3QFY2012. The yoy dip in the OPM resulted in a 15.9% yoy decline in the company’s adjusted net profit to  `22cr. Going forward, we expect RAIL to register a CAGR of 15.0% and 20.3% in net sales and profit over FY2012-14, respectively.The Management is confident about the long-term prospects of the agrochemicals industry. We expect RAIL to register a CAGR of 15.0% and 20.3% in net sales and profit over FY2012-14, respectively. At the current levels, the stock is trading at a fair valuation of 16.6x FY2014E EPS.Source: Angel Broking

Reliance Communication

For 3QFY2013, Reliance Communications (RCom) reported an in-line revenue performance but the consolidated profit  fell short of expectations because of higher depreciation and interest costs. One key positive thing was that the average revenue per user (ARPU) grew by 16.7% to  `119 on the back of subscriber reduction and September’s tariff hike. Due to lack of triggers except for the planned monetization of its Infratel business, which can cut down its debt by more than half.RCom's 3G/data business subscriber base during the quarter stood at 6.1mn/27.6mn as against 4.8mn/26mn in 2QFY2013. The company’s Management reiterated its stand that data growth and tariff hike will be primary drivers for future growth. The company revised its base rates from `1.25 to  `1.50 in September 2012 and indicated that it has reduced its promotional discounts from January 2013 which is in tandem with its peer companies. Both these steps will lead to ARPM improvement in the coming quarters. Going forward, we expect RCom to post a revenue CAGR of 4% over FY2012-14E. The company is striving to reduce the debt level in its books and has maintained its stance of selling stake in its tower assets, which might help in deleveraging the balance sheet and reducing debt. This would act as a positive trigger for the stock price. Various other announcements related to measures of reducing debt have been made time and again in the past but no concrete step has been visible until now.Source: Angel Broking

Blue Star

For 3QFY2013, Blue Star reported a 2.5% yoy growth in revenue (net sales) to `599cr. The growth in the top-line was subdued as the 7.6% yoy growth in the company’s EMPPACS division was offset by a 5.1% yoy decline in the cooling products division. The EBITDA is positive for the quarter as compared to negative EBITDA of the corresponding quarter of the previous year. The EBITDA margin, coming in at 4.2% during 3QFY2013, was supported by better quality orders in the EMPPACS division. This led to a net profit of `5cr for the quarter as compared to a loss of  `33cr during 3QFY2012. However the net profit declined on a sequential basis by 26.1% due to high interest cost and low other income. We expect Blue Star to report a modest revenue growth of 5.4% yoy in FY2014 to `2,896cr, post a decline for two consecutive years. This would be on the back of an expected improvement in macro-economic scenario. EBITDA margin is expected to expand by a sharp 642bp over FY2012-14E due to better margin orders. Consequently, the net profit is expected to be at  `84cr in FY2014E as compared to a loss of `105cr in FY2012. At the current market price of `169, the stock is trading at EV/sales of 0.6x for FY2014E which we believe is attractive.Source: Angel Broking

Larsen & Toubro

Larsen and Toubro (L&T) posted a mixed set of numbers for 3QFY2013, with decent growth on the revenue front but a fall in the EBITDA margin (owing to higher input cost). Despite a drop in margins, earnings growth was higher-thanexpected owing to huge surge in other income. As of 3QFY2013, L&T’s order backlog stands at `1,62,334cr, indicating a growth of 11.4% yoy. Order inflow for the quarter jumped by 14.1% to  `19,545cr mainly driven by major orders bagged in the Infrastructure, power and hydrocarbon segment.  For FY2013, the management has reiterated its guidance of a 15-20% growth for both revenue and order inflow and +/- 50bp on EBITDA margins. We believe given its robust order backlog, healthy order inflows during the past few quarters and strong execution capabilities, the company is well placed to achieve its guidance on both- order inflow and revenue front. We believe L&T is best placed to benefit from a gradual recovery in the capex cycle, given its diverse exposure to sectors and a strong balance sheet.Source: Angel Broking