{LONGTERMINVESTORS} India Daily: GameChanger Perspectives; Results; Results, Change in Reco; Update

 

 

 

Special Reports

Strategy

GameChanger Perspectives: Forecasts of fewer jobs dull demographic sheen

l More people likely to do less than earlier thought l Fewer new jobs: 16 mn new jobs every year, not 24 mn l The more things change... half a billion Indians in agriculture by 2022E l The devil is in the data; glimpses inside

Daily Alerts

Results

Sun Pharmaceuticals: In-line quarter for Taro; pressures to intensify

l Largely in-line quarter l Topicals pricing to come under pressure as >250 topical steroid ANDAs pending with the FDA l Challenges persist; SELL

Coal India: Weak results, but price increase taken

l Volume growth sustains, helps offset weak realizations, overhead costs surprise l Price increase will help absorb wage provision and a moderating volume trajectory l Rich dividend yield, no-growth multiples keep us positive on CIL

State Bank of India: Putting a brave front

l A relatively better revenue growth/mix puts the bank ahead of its peers l Slippages from corporate segment, primarily metals, lead to rise in impairment ratios l Wagering for much better year ahead; appears a tad aggressive l Maintain BUY: the best-positioned among peers and limited risk of consolidation

IOCL: Impacted by volatility yet again; FCF set to improve

l 4QFY16 results marred by significant adventitious loss and high other expenses l Consolidated EPS of Rs41, despite non-recurring expenses of Rs129 bn - EPS impact of Rs35 l Raise EPS estimates by 2-5%; expect significant FCF generation

Shree Cement: Volumes head up

l Strong volume growth, lower production cost offset by weakness in realizations l Sharp price increase in North India will help Shree Cement in the ensuing quarter l Maintain SELL with price target of Rs10,600/share (Rs9,750 earlier)

NMDC: Weak quarter - high costs, export sales hurt

l Weak overall due to lower realizations, high costs and increase in low margin export sales l Increasing competition in the domestic market from imports and increasing Odisha volumes l New debt indicates falling cash reserves due to steel plant; Maintain REDUCE with TP of Rs75

United Spirits: Weak quarter; upbeat outlook

l 4QFY16 earnings print - weak as it gets, even adjusted for one-offs l Pace of improvement in business profile continues to be slower than expectations l We still keep the faith and retain ADD with revised TP of Rs2,800 (from Rs2,900)

BHEL: No respite likely in the near-term

l FY2016: A year to forget; weak execution and EBITDA loss on deteriorating gross margin l Is FY2016 performance a precursor of continued weak performance ahead? l Significant variability likely in near-and-medium-term estimates; maintain SELL.

NHPC: Strong earnings marred by project cost

l Seasonally weak quarter, exceptional write-off taken for project related expenses l Subansiri - hopes of resolution rekindled by changing political landscape in Assam l Maintain REDUCE rating with a target price of Rs23/share

DLF: It's all about the deal now!

l Results review: Net debt increases by Rs7 bn in 4QFY17 l 'High' on delivery, 'low' on sales and 'no' on launches l Remain a BUY: betting on the transaction l Highlights from conference call and presentation

Oil India: Results saved by lower operating costs

l Low employee cost, high other income and low tax rate boost net income in 4QFY16 l FY2016 EPS of Rs41, saved by high domestic gas price and low employee costs l Revise estimates to factor in changes in volumes and realizations

Hindalco Industries: Good quarter - volumes, costs and possibly one-offs aid

l EBITDA outperformance led by higher sales volumes, lower coal and other input costs, likely one-offs l FY2016 - India EBITDA increases 15% to Rs41.3 bn (including Utkal); hedging gains likely l Maintain our cautious view on weak aluminum fundamentals; revise TP to Rs85 (Rs70 earlier)

Sun TV Network: Turnaround efforts commence

l 4QFY16 - ad revenues decline; lower movie amortization costs protect operating profit l Sincere efforts underway to turn around non-Tamil GECs l Valuations inexpensive; ADD

Reliance Power: High interest costs dent performance

l Operationally strong with healthy PLF; higher interest incidence offset by tax reversals l Samalkot project moving to Bangladesh in three phases l Maintain SELL rating with target price of Rs36/share

Tata Chemicals: Back on track

l Subsidiaries see strong improvement in performance; results ahead of expectations l Subsidiaries to improve margins in FY2017; debt overhang likely to stay longer l Marginally increase estimates; revise TP to Rs500 (Rs410 earlier) on valuation rollover

National Aluminium Co.: Broadly in-line

l 4QFY16 - in line; alumina EBIT declines 51% qoq due to lower prices; aluminum EBIT improves l FY2016 - EBITDA declines by 45% to Rs9.4 bn due to sharp fall in aluminum earnings l We maintain our cautious stance given inefficient aluminum operations and weak outlook

Canara Bank: Trend similar to those of peers

l Fresh impairments rise sharply; front-ending the pain on credit costs l Maintain REDUCE with TP of Rs190

Mphasis: Fails to enthuse

l 4QFY16 - Digital Risk declines sharply, earnings miss led by one-time provision for future losses l Low comfort on sustainability of growth and profitability l Cut revenue estimates; maintain REDUCE rating

Muthoot Finance: Capitalizing on higher gold prices

l Muthoot Finance surprises on earnings l Large recoveries boosted earnings l Raise price target to Rs275, BUY

J K Cement: Strong quarter aided by low energy costs, high volumes

l Volume growth of 13% and lower costs aid 9% growth in EBITDA despite weak realizations l Sharp price increase in North India will help JK Cement in the ensuing quarter l Demand revival in North will augur well for JK Cement; maintain BUY rating

Kalpataru Power Transmission: Back on track

l KPTL standalone: Picture perfect l JMC continues on steady path to recovery; SSSL ends a forgettable year l Sells another 10% of area in the Thane IT park; launches the Indore project for sale l Revise estimates to build outperformance and strong order inflows

J&K Bank: Heading towards a weak 1HFY17

l Not the best ending for FY2016 l Impairment ratios rise sharply; restructured loan definition undergoes a change l Unlikely to be a strong start in FY2017 l Maintain BUY as the revenue profile is strong to manage the crisis

Results, Change in Reco

BPCL: Near-peak earnings for a while; downgrade a notch

l Consolidated EPS of Rs110 boosted by strong margins and low depreciation l Raise EPS estimates by 8% and TP by 15% on rollover l 4Q marketing margins not sustainable; earnings growth set to moderate

HPCL: Robust results; downgrade to ADD

l In-line net income despite higher other expenditure l Consolidated EPS of Rs145 despite significant non-recurring expenses l Raise EPS estimates by 12-14% to factor in higher underlying margins

Rural Electrification Corp.: Stable performance, compelling valuations

l Higher provisions pull down PAT l Uday scheme will lead to loan book compression and NIM pressure over time l Valuations compelling, upgrade to BUY

Dr Lal Pathlabs: Strong growth continues; upgrade to REDUCE

l 4QFY16 - operationally above estimates; revenues modestly lower than estimates l Robust growth in patient volumes to continue; expansion in East India on track l Increase estimates by 3-7%; upgrade a notch to REDUCE

Company alerts

Tech Mahindra: Target Group - a good asset but not the best fit

l Acquires BPaaS platform for GBP112 mn or 2.2X CY2015 revenues l Modest synergies from geographical expansion, cross-sell to small clients l Is TM following the right M&A strategy in financial services vertical?

 

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