¾ CUMI reported Q1FY17 result in line with our estimates; operating margin expanded mainly on 1) higher volumes in domestic market driven by improved demand and market share gain in abrasives segment and 2) loss curtailment in overseas subsidiaries driven by restructuring initiatives at Thukela and Foskor.
¾ We value CUMI stock at 18x FY18 estimated earnings (earlier 16x FY18 earnings) to take into account pick up in domestic demand (earlier driven by market share gains). However in view of recent run up in stock price (+26% appreciation since our last update) we believe that current valuations are expensive (offering less margin of safety) and rather look for better entry points. We therefore move recommendation to 'SELL' from 'Accumulate' earlier with revised price target of Rs 245 (Rs 215 earlier).
Result Update: Century Plyboards Ltd
¾ Revenues for Q1FY17 were in line with our estimates and were led by volume improvement in plywood and laminates division. CFS division also reported healthy growth during the quarter. Operating margins stood stable sequentially but witnessed a decline on yearly basis due to lower realizations. However, despite lower margins, PAT came ahead of our estimates. Volumes are likely to improve going forward as company has taken lot of promotional initiatives in last one year to push volumes along with higher expense on branding and advertisement. Along with this, market has started witnessing some improvement in demand as the cash crunch situation of end users is easing now.
¾ We revise our FY18 estimates upwards to factor in MDF revenues also. We revise our valuation multiple upwards to factor in positive developments related to imposition of anti-dumping duty on MDF, implementation of GST as well as impact of higher disposable income. We arrive at a revised price target of Rs 242 based on 23x FY18 estimates (Rs 204 earlier based on 21x FY18 estimates). We remain positive on the company as we expect it to benefit from demand revival and GST implementation going forward. Maintain BUY on the stock.
Result Update: Hindustan Media Ventures Ltd
HMVL's earnings missed estimates on account of weak advertising revenue growth (affected by weak macro as well as certain one-off issues). The company expects advertising revenue growth to pick up pace in 2HFY17 (UP elections, and improving macro picture). Management comments indicate that launches in some new geographies are on the horizon (although not in the current quarter), which reduce earnings visibility. We retain our BUYrecommendation (price target Rs 336, unchanged) as valuations are supportive (8.7X FY18E PER, ~Rs90/ share net cash and investments), and discount relative to peers (13.6X PER FY18E for Jagran, 16.4X FY18E PER for DB Corp) factors in the negatives.
Result Update: Entertainment Network India Ltd
ENIL's 1QFY17 earnings missed estimates on account of weaker than expected revenues, higher marketing spends. Miss on the topline is largely on account of a shifting of certain events, and the management has assured that the revenues shall come in through the year. Even so, earnings are likely to appear weak through the year on new station launches and associated expenses. The quarter's earnings do not help improving visibility in near/ medium - term. Even as we value ENIL somewhat aggressively, upside is modest, and earnings risks, in our opinion, are tilted to the downside in the near-term. We downgrade the stock to REDUCE, with a target price of Rs 725 (unchanged).
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