Recommendation: Buy
Price target: Rs70
Current market price: Rs60
Q3FY2008 results: First-cut analysis
Result highlights
Marico's sales growth in Q3FY2008 was in line with our expectations. The company posted a strong top line growth of 23.7% year on year (yoy) in Q3FY2008 to Rs506.2 crore aided by an impressive performance across businesses. The impressive top line growth was a result of a 19% organic growth and a 5% inorganic growth.
Affected by a hefty 34% year-on-year increase in the staff cost and a higher than expected increase in the other expenses (up 32.9% yoy to Rs81.2 crore) the operating profit margin declined by 79 basis points to 12.68%. Thus, the operating profit grew by 16.4% yoy to Rs64.2 crore.
The raw material cost was under check as copra prices during the quarter were lower by about 10-12% yoy. However, the input cost for edible oils continued to rise and was up 20-30% across categories.
A much higher other income of Rs7.53 crore (against Rs0.33 crore in Q3FY2007) and a lower tax incidence aided a strong 81% rise in the adjusted net profit to Rs50.2 crore.
The company changed the method of charging depreciation on factory building that led to a one-time charge of Rs4.29 crore; after this the reported net profit stood at Rs45.9 crore, which was up 61.5% yoy.
Marico continues to implement its three-pronged growth strategy of enhancing the existing products, introducing new products and achieving inorganic growth through acquisitions. During the quarter it entered the South African ethnic hair care and health care markets by acquiring the consumer division of Enaleni Pharmaceuticals, which has an annualised turnover of ~Rs53 crore.
We remain positive on Marico's businesses and maintain our Buy recommendation on the stock with a price target of Rs70. At the current market price of Rs59.7 the stock trades at 17.9x our FY2009E earnings per share of Rs3.34.
Friday, January 25, 2008
Sanghvi Movers
Recommendation: Buy
Price target: 350
Current market price: Rs290
Q3FY2008 results: First-cut analysis
Result highlights
For Q3FY2008 Sanghvi Movers Ltd (SML) has reported a spectacular growth of 65.4% in its top line to Rs64.4 crore. The growth is above our expectation.
The operating profit of the company grew by 66.9% to Rs46.9 crore during the quarter. The operating profit margin improved by 60 basis points to 72.8% as against 72.2% in Q3FY2007.The operating profit margin for the company has been improving on the back of better capacity utilisation and lower maintenance cost.
The interest cost increased by 13.2% to Rs7.5 crore while, the depreciation charge was up 33.3% to Rs11.7 crore in Q3FY2008.
The profit after tax grew by a whopping 111.2% to Rs17.8 crore, which is way above our expectation. The robust top line growth and stable operating performance led to a strong growth in the profits of the company.
The company plans to acquire100 cranes at a total cost of Rs550 crore over the next 18 months. These will include 72 second hand cranes from the USA worth Rs160 crore, mainly for the use of the power sector.
Price target: 350
Current market price: Rs290
Q3FY2008 results: First-cut analysis
Result highlights
For Q3FY2008 Sanghvi Movers Ltd (SML) has reported a spectacular growth of 65.4% in its top line to Rs64.4 crore. The growth is above our expectation.
The operating profit of the company grew by 66.9% to Rs46.9 crore during the quarter. The operating profit margin improved by 60 basis points to 72.8% as against 72.2% in Q3FY2007.The operating profit margin for the company has been improving on the back of better capacity utilisation and lower maintenance cost.
The interest cost increased by 13.2% to Rs7.5 crore while, the depreciation charge was up 33.3% to Rs11.7 crore in Q3FY2008.
The profit after tax grew by a whopping 111.2% to Rs17.8 crore, which is way above our expectation. The robust top line growth and stable operating performance led to a strong growth in the profits of the company.
The company plans to acquire100 cranes at a total cost of Rs550 crore over the next 18 months. These will include 72 second hand cranes from the USA worth Rs160 crore, mainly for the use of the power sector.
Ipca Laboratories
Recommendation: Buy
Price target: Rs875
Current market price: Rs638
Results in line with expectations
Result highlights
Ipca Laboratories (Ipca) reported a 21.2% year-on-year (y-o-y) increase in its net sales to Rs281.8 crore in Q3FY2008. The sales growth was in line with our expectations and was driven by a 32% rise in the domestic business and a 14% growth in the exports.
After a subdued performance in Q2FY2008 (on account of lower sales of anti-malarials), Ipca's domestic formulation business resumed its strong momentum. The domestic formulation sales grew by an impressive 32.1% in Q3FY2008, clearly outpacing the industry growth of 12.3%. The strong performance was driven by increased traction seen in the chronic therapy segments of cardiovascular, diabetology and arthritis.
Ipca's formulation exports grew by 19.2% to Rs86.4 crore during the quarter. This was on the back of a strong performance in Europe, on account of new product approvals received during H1FY2008. The African, Asian and Commonwealth of Independent States (CIS) markets also performed well. The performance seems impressive when viewed in light of the ~12-13% appreciation in the rupee against the US Dollar.
Ipca's active pharmaceutical ingredient (API) business grew by 13.1% to Rs77.0 crore in Q3FY2008, driven by a 33.3% rise in the domestic API sales and a muted 6.6% growth in the export of APIs. Ipca's API exports have been under pressure over the last few quarters, due to the sharp appreciation in the rupee against the US Dollar. However, Ipca has now initiated the process of raising prices across some of the key products and remains confident of a much improved performance in the coming quarters, given the strong order visibility.
Ipca's operating profit margin (OPM) expanded by 40 basis points to 21.8% in the quarter. The expansion in the margin was driven by a 100-basis-point drop in the staff cost and a 150-basis-point reduction in the other expenses. Consequently, the operating profit grew by 23.7% to Rs61.6 crore in Q3FY2008.
Ipca's pre-exceptional net profit increased by 12.8% to Rs38.3 crore and was in line with our estimate. The growth in the net profit was restricted due to a sharp reduction in the other income. On the other hand, the net profit was boosted by an 80-basis-point drop in the tax incidence of the company.
At the current market price of Rs638, Ipca is discounting its FY2008E earnings by 10.6x and its FY2009E earnings by 8.7x. The valuations at these levels seem absolutely compelling when viewed in context of the strong growth potential that awaits the company. We retain our positive stance on the stock and maintain our Buy call with a price target of Rs875.
Price target: Rs875
Current market price: Rs638
Results in line with expectations
Result highlights
Ipca Laboratories (Ipca) reported a 21.2% year-on-year (y-o-y) increase in its net sales to Rs281.8 crore in Q3FY2008. The sales growth was in line with our expectations and was driven by a 32% rise in the domestic business and a 14% growth in the exports.
After a subdued performance in Q2FY2008 (on account of lower sales of anti-malarials), Ipca's domestic formulation business resumed its strong momentum. The domestic formulation sales grew by an impressive 32.1% in Q3FY2008, clearly outpacing the industry growth of 12.3%. The strong performance was driven by increased traction seen in the chronic therapy segments of cardiovascular, diabetology and arthritis.
Ipca's formulation exports grew by 19.2% to Rs86.4 crore during the quarter. This was on the back of a strong performance in Europe, on account of new product approvals received during H1FY2008. The African, Asian and Commonwealth of Independent States (CIS) markets also performed well. The performance seems impressive when viewed in light of the ~12-13% appreciation in the rupee against the US Dollar.
Ipca's active pharmaceutical ingredient (API) business grew by 13.1% to Rs77.0 crore in Q3FY2008, driven by a 33.3% rise in the domestic API sales and a muted 6.6% growth in the export of APIs. Ipca's API exports have been under pressure over the last few quarters, due to the sharp appreciation in the rupee against the US Dollar. However, Ipca has now initiated the process of raising prices across some of the key products and remains confident of a much improved performance in the coming quarters, given the strong order visibility.
Ipca's operating profit margin (OPM) expanded by 40 basis points to 21.8% in the quarter. The expansion in the margin was driven by a 100-basis-point drop in the staff cost and a 150-basis-point reduction in the other expenses. Consequently, the operating profit grew by 23.7% to Rs61.6 crore in Q3FY2008.
Ipca's pre-exceptional net profit increased by 12.8% to Rs38.3 crore and was in line with our estimate. The growth in the net profit was restricted due to a sharp reduction in the other income. On the other hand, the net profit was boosted by an 80-basis-point drop in the tax incidence of the company.
At the current market price of Rs638, Ipca is discounting its FY2008E earnings by 10.6x and its FY2009E earnings by 8.7x. The valuations at these levels seem absolutely compelling when viewed in context of the strong growth potential that awaits the company. We retain our positive stance on the stock and maintain our Buy call with a price target of Rs875.
UPCOMING IPO
J Kumar Infraprojects Ltd
Cords Cable Industries Ltd
OnMobile Global Ltd
KNR Constructions Ltd
Bang Overseas Ltd
Manjushree Extrusions Ltd
Emaar
Cords Cable Industries Ltd
OnMobile Global Ltd
KNR Constructions Ltd
Bang Overseas Ltd
Manjushree Extrusions Ltd
Emaar
ONGC: Scrip to Watch in 2008
1. It is no doubt that oil exploration companies are going to reap harvest by virtue of strengthening of oil price and it is being anticipated that oil may rule greater than $100 per barrel.
2. ONGC has interests in 85 domestic blocks including 52 offshore fields. It has to its credit 28 discoveries in past two years.
3. IPO of Oil India in next few months can provide a new valuation to ONGC.
4. Icing on cake is its interests in MRPL, Petronet LNG, GAIl and IOC. Invest to reap a good harvest.
2. ONGC has interests in 85 domestic blocks including 52 offshore fields. It has to its credit 28 discoveries in past two years.
3. IPO of Oil India in next few months can provide a new valuation to ONGC.
4. Icing on cake is its interests in MRPL, Petronet LNG, GAIl and IOC. Invest to reap a good harvest.
Caution Do NOT SELL
I am again insisting to you that do not trade in the market for time being. Wait for the market to get stabilized. I hope it will still go down - 5%. Hold on to your stocks, do not sell. May be the targets will arrive a little late, but it will definitely reach. Please do not PANIC. The key term here is "HOLD".
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