Management Meet Update: Reliance Defence and Engineering (RELD)
Financial performance of Reliance Defence (RELD) has improved in the last 2 quarters after a change in the management of the company, still it is very poor and requires a big turnaround (both sectoral and company wise) for investors to invest in the stock. Shipbuilding market remains weak with poor demand, increased competition and environmental regulations. During H1FY17, RELD has signed few important MOUs to strengthen its manufacturing and technical capabilities and is preparing to exit the Corporate Debt Restructuring (CDR) which augurs well for the company. However, we do not see immediate financial turnaround for RELD as the sector is going through a slowdown. We estimate the company to report losses over FY16 to FY18E, though we expect the PL and BS of RELD to improve in the longer run. Maintain SELL with a TP of Rs 48.
Result Update: PNC Infratech Ltd
PNC Infratech has reported weak Q2FY17 results. The standalone net sales (EPC Business) for the quarter declined by 23.3% yoy to Rs 3.6 bn (Vs our estimates of Rs 5.08) bn on account of heavy rains in the region negatively impacting execution. The EBITDA margin for the quarter at 12.9% was broadly inline with our estimates of 13%. We believe that the execution would pick-up in Q3FY17 lead by contribution from Agra Lucknow expressway which would be near its completion and other smaller projects contributing to the topline. The order book at the end of quarter stood at Rs 62.2 bn including Rs 8.81 bn Hybrid annuity project in Rajasthan. The company targets to add Rs 30-40 bn of new orders in H2FY17 based on bid pipeline. The company is yet to begin work on new projects of total value Rs 30 bn due to delay in land acquisition by NHAI. The company has partly mobilized its resources and is expecting appointed date in all these projects by Q4FY17. Due to delay in new projects and weak Q2FY17, the management has revised revenue guidance for FY17 to 5-7% (Vs earlier 20% growth) in FY17 and 30% growth in FY18. We have cut our earnings estimates for FY17E & FY18E by 17% and 11% respectively, factoring in lower growth. We maintain positive view on the company for long term. We maintain BUYrecommendation on the stock with the revised target price to Rs 142 (Vs Rs 154 earlier).
Conference Call Update: Godrej Consumer Products Ltd. (GCPL)
We provide a summary of the key matters discussed in conference call of GCPL management with analysts, as related with India operations, and the company's reaction/ expectations as regards demonetization. On account of demand/supply chain issues that the industry is likely to face as also higher raw material prices (palm oil/ crude) which shall impact the company, we cut our FY18E EPS by 4%, and cut our price target to Rs 1481 (Rs 1537 earlier). Maintain REDUCE.
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