Orient Cement Ltd (Q1 FY17): Realisations nosedive - Buy
CMP: Rs166, 12-mts Target: Rs192, Upside: 15.7%
² Hit by drought, realisations nosedive
² Inefficiencies at Chittapur plant inflates power & fuel cost
² Trades below replacement cost
Cadila Healthcare (Q1 FY17): HCQS-led erosion dampens revenues - Accumulate
CMP: Rs347, 12-mts Target: Rs355, Upside: 2.2%
Cadila's Q1 revenues dipped an adjusted 1% yoy as US sales dropped ~14% yoy largely due to price erosion in HCQS. India growth at 6.2% was suppressed by ~2-3% due to NLEM linked price cuts and should revert to double digit growth for remainder of the year. Gross margin excluding the favourable forex tailwind declined while operating margin was also lower by ~135bps yoy. Adjusted for exceptional items and ANDA sale related income in Q1FY16, PAT fell 15% yoy. Moraiya received EIR for 483 observations made in Aug' 14 inspection though the warning letter remains unresolved. CDH expects to launch 12-15 products through Dec' 16 including 2-3 large ones apart from Asacol HD AG launched on August 1. We marginally revise estimates for FY17/18E and retain Accumulate based on 19x FY18E EPS. Moraiya warning letter resolution remains the key near term overhang on the stock.
Voltas (Q1 FY17): AC business drives earnings growth - Accumulate
CMP: Rs346, 12-mts Target: Rs390, Upside: 11.3%
Voltas managed to report strong Q1 FY17 results boosted by strong growth in room AC business. The company registered 28.9% yoy growth in cooling products segment (UCP), higher than our estimate of 16%. This was due to warm summer and strong branding. The company improved its market share to 22% from 21.1% in FY16 and maintained its market leader position. Growth in other two segments remained muted due to subdued capex and highly competitive market. However, order inflow in the Electro-Mechanical Projects (MEP) was strong at Rs.9.5bn, higher by 58% yoy. We have raised our estimates factoring in strong demand growth for cooling products and strong order inflow in MEP business in the last two quarters. We maintain our Accumulate rating with target price of Rs.390.
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