ACC
Reco price: Rs 532
Current market price: Rs 538.05
Target price: Rs 422
Downside: 21.6%
Brokerage: India Infoline
ACC’s cement volumes grew 7 per cent Y-o-Y in Q4 CY08. Moderate volume growth would continue in CY09 as well, expect in 2QCY09, for which a low-base effect would likely translate to robust volume growth.
However, volume growth for ACC is expected to improve from CY10, after completion and subsequent stabilisation of its expansion at Bargarh (1.3mtpa) and Wadi (3mtpa). Volume growth is expected to be 7 per cent and 10 per cent for CY09 and CY10.
The per-tonne cement realisation increased 3.8% Y-o-Y but declined 4 per cent Q-o-Q in Q4 CY08. It is indicated that sharp discounts are offered by ACC to retain market share. There could be further declines in ACC’s cement realisation going forward, given the poor industry outlook.
With lower dependence on open-market and international coal, ACC’s cost savings from declines in coal prices from these sources will be low compared to other cement companies’ savings. Given the low possibility for further efficiencies as ACC already has near-100 per cent captive power facilities, The brokerage expects the company to post one of the highest profit declines going forward. The stock is trading at a P/BV of 1.9 x of its CY09 earnings. Maintain reduce.
PVR
Reco price: Rs 88
Current market price: Rs Rs 88
Target price: Rs 180
Upside: 104.5%
Brokerage: KR Choksey
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The Net sales for Q3 FY09 were up by 17 per cent Y-o-Y to Rs 78.4 crore driven by F&B income, revenue contribution from new properties and advertisement & royalty income. The Occupancy rates have declined by 580bps Y-o-Y but improved by 200bps q-o-q to 34.7per cent in Q3 FY09.
However, spend per head grew by 16 per cent Y-o-Y to Rs 37, out of which growth of 6 per cent was driven by existing properties and rest was driven by high average spend per head from new properties, including PVR Premiere. The average ticket price has also increased by 7.7 per cent Y-o-Y to Rs 140; the growth led by higher ATPs newly opened PVR Premiere properties.
The brokerage expects PVR to post a robust growth in Q4 FY09 as occupancies at their multiplexes are higher on account of release of quality content such as Slumdog Millionaire, Victory and Raaz along with films like Delhi- 6, Billu Barber and Dev D in the pipeline. Further, in Q4 FY09, PVR would open a 24-lane Bowling Alley Center at Ambience Mall in Gurgaon, which would help them to diversify their revenue model. At Rs 88, the stock is trading at 8.1x FY09E EPS of Rs 10.9. Maintain buy.
MAHINDRA & MAHINDRA
Reco price: Rs 291
Current market price: Rs 274.15
Target price: Rs 264
Downside: 3.7%
Brokerage: Emkay
M&M registered a 23 per cent Y-o-Y decline in volumes to 61,225 units in Q3 FY09. Average realizations improved by 7.3 per cent Y-o-Y to Rs 409,352. This is despite of adverse volumes mix.
While the company has not made any significant price hikes in the UVs segment, tractors witnessed a pricing action of around 12 per cent to 15 per cent. Also, company has not passed on the completely the benefits of reduction in excise duty. Net sales stood at Rs 2,520 crore.
EBIDTA was at Rs 230 crore (8 per cent below expectation) as there was a pressure on the operating performance on account of inventory reduction activity, which is equivalent to the inventory accretion during 1HFY09 of Rs 2.7 bn. However, high cost inventory stands at around 15o crore.
Net profits (adjusted for MTM loss on forex liabilities of Rs 46.1 crore) declined by 85 per cent Y-o-Y to 37.7 crore. The drastic decline in net profits is attributable to Rs 140 crore of forex loss on cancellation of forward contracts for probable exports in 3QFY09. The brokerage revised FY09 and FY10 adjusted net profits estimates by 16 per cent (Rs 620.5 crore) and 4 per cent (Rs 796.8 crore), respectively. Maintain reduce.
LANCO INFRATECH
Reco price: Rs 112
Current market price: Rs 111.65
Target price: Rs 279
Upside: 149.9%
Brokerage: Angel Broking
During Q3 FY2009 on a consolidated basis, Lanco reported revenue of Rs 1,820 crore registering 143 per cent growth on y-o-y basis. The construction segment grew 176 per cent to Rs 1,043 crore followed by power segment which was up by 115 per cent to Rs 910 crore.
On the power trading front, Lanco Electric recorded revenue of Rs 520 crore (Rs184cr), up 183 per cent y-o-y basis. Besides during 3QFY2009, the company reported decline in EBITDA to 12.2 per cent as against 23.1 per cent in the corresponding quarter last year.
The decline in margins was on account of higher revenue from power trading and naphtha being used in the Kondapalli power plant. Overall, the strong order book of the company ensures revenue visibility. The company received orders worth Rs 322 crore during the quarter.
The construction and EPC segment order book, as on December 30, 2008, stood at Rs 11,335 crore. The broking house values the Lanco's stock on a sum-of-parts basis to arrive at a target price of Rs 279. This includes valuations of core EPC business at Rs 90 (6x FY2010E, EPS), power business at Rs165 (using FCFE and/or P/BV), real estate at Rs10 (on NAV basis) and BOT at Rs 14 per share.
C&C CONSTRUCTIONS
Reco price: Rs 100
Current market price: Rs 102
Target price: NA
Brokerage: Edelweiss
C&C Constructions reported impressive revenue growth of 90 per cent during Q2FY09 to Rs 164 crore. Its EBITDA margins, at 19.6 per cent, improved by 40 basis points on Q-o-Q basis, though they were down 60 basis points on Y-o-Y basis due to the softening of commodity prices.
As capital charges remained under control, there was an improvement in the PAT margins by 140 basis points on Q-o-Q basis to 5.2 per cent. However, with its balance sheet likely to become more leveraged in the near future, the brokerage believes capital charges could impact earnings growth.
C&C, which had ended Q1FY09 with an order book of Rs 1,490 crore, saw a sharp uptick in order intake with orders worth Rs 1,560 crore flowing in Q2FY09. The major orders received includes Rs 635 crore order to construct the Afghanistan parliament building and a new Indian Chancery in Kabul and another order worth Rs 780 crore from the Dedicated Freight Corridor Corporation of India.
Current market price as on 06 February 2009