Finolex Industries Q2FY17 results were better than our estimates at operating level. Net revenue (net of excise) for the quarter declined by 2% yoy to Rs 4.57 bn (Vs estimates of Rs 5 bn) with PVC pipes volume declining by 6% as against our estimates of 14% growth. The decline in volume was on account of strong monsoon season over last year, which negatively impacted demand during the season. The EBITDA margins improved by 780 bps yoy to 19% led by improved margins in the PVC resins business due to higher PVC-EDC spread and increased in-house consumption of resin. Adjusted PAT for the quarter grew by 27.6% yoy to Rs 513.2 mn (Vs estimates of Rs 324 mn) on strong EBITDA margins and lower interest expenses. FIL believes that the demonetization has negatively impacted demand from rural and non-rural segment in short term. But the demand is expected to improve in next few months once the demonetization process gets over. Besides this, demonetization along with implementation of GST would be positive for organized players in the longer run. We believe that achieving earlier guidance of 12-15% volume growth in pipes business in FY17 would be challenging. We believe that, FIL would be a major beneficiary from government's focus on irrigation and improvement in rural consumption in long term. We have reduced our earnings estimates for FY17E and FY18E by 12% and 7% respectively factoring in impact of demonetization on volumes in near term. We maintainBUY recommendation on the stock with revised target price of Rs 493 (Vs Rs 530 earlier).
Result Update: Crompton Greaves Ltd
¾ CG management has confirmed that the ongoing transaction involving sale of international power business in Europe, North America and Indonesia to Pauwels Spaco (a SPV of First Reserve) stands terminated.
¾ We cut FY17/ FY18 earnings estimate to factor in lower than anticipated volume pickup in domestic power systems business and potential increase in losses from the international power systems business (as a result of deal termination) over the extended duration.
¾ We ascribe a PER of 15x (17x earlier; reduce target multiple to account for fresh uncertainties arising from cancellation of deal) on FY18E earnings and arrive at a target price of Rs 59 (Rs 88 earlier) on company's stock; move recommendation to 'SELL' from 'ACCUMULATE' earlier.
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.
No comments:
Post a Comment