Piramal Healthcare
Reco price: Rs 489
Target price: Rs 520
Piramal Healthcare’s (PIHC) Q4FY10 (fourth quarter of 2009-10) results were above expectation, with profit after tax (PAT – excluding one-offs and forex gain) growing 22 per cent year-on-year (y-o-y) to Rs 150 crore. This was buoyed by strong performance in domestic formulations and Rs 12.9 crore of exceptional income, offset by lower–than-estimated performance in pharma solutions (CRAMS) and critical care. For the full FY10, PIHC’s net sales grew 12 per cent y-o-y. Operating pre-tax profit grew 5 per cent y-o-y to Rs 490 crore. The brokerage revised down the estimated FY11-12 earnings by one-two per cent to factor in lower-than expected outlook for FY11. PIHC is currently operating off a high domestic base, which provides headwinds to growth. The stock is trading at 15x FY12 earnings. Maintain hold.
— Edelweiss
Hindalco Industries
Reco price: Rs 170
Target price: NA
Hindalco’s standalone earnings before interest, taxes, depreciation and amortisation (Ebitda) for Q4FY10 grew 7.4 per cent quarter-on-quarter (q-o-q) to Rs 860 crore, in line with estimates. Lower tax provisioning due to write-backs resulted in a substantially higher adjusted PAT of Rs 690 crore. Net sales remained flat q-o-q at Rs 5,440 crore. Aluminum production declined 3 per cent q-o-q and copper smelter’s annual shutdown was advanced due to low margins. Novelis, which started reporting margin expansion, has reached a quarterly Ebitda run-rate of $200 million that is likely to continue in subsequent quarters. The brokerage upgraded estimates of Novelis’ Ebitda from $612 million to $850 million for FY11 and from $732 million to $930 million for FY12. Consequently, FY11 and FY12 earnings per share (EPS) estimates have been increased from Rs 6.6 to Rs 12.2 and from Rs 12.6 to Rs17 respectively. Maintain neutral.
— Motilal Oswal
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Jagran Prakashan
Reco price: Rs 115
Target price: Rs 135
Jagran Prakashan (JAGP) has announced the acquisition of the print business of Mid-Day Multimedia (MML). Mid-Day operates its print business under a wholly-owned subsidiary, Mid-Day Infomedia Ltd (MIL), which will become a wholly-owned subsidiary of JAGP. According to the swap ratio announced, JAGP will issue two shares for every seven shares held in MML. This implies a dilution of around five per cent in JAGP’s equity. JAGP has indicated the focus in English and Gujarati would be on improved profitability and presence in existing markets rather than expanding to new markets. While this deal has a marginal positive impact on EPS of 0.7 per cent, the valuation for MIL appears steep prima facie. The stock is trading at 18x its estimated FY10 earnings. EPS estimates are Rs 7.5 for FY11E (estimated) and Rs 9 for FY12E. Maintain sector outperformer.
— Enam Securities
Bajaj Hindusthan
Reco price: Rs 109
Target price: Rs 99
Bajaj Hindusthan (BJH) reported a subdued Q2FY10 with higher-than-expected cane costs and 17 per cent y-o-y decline in the sugar volumes. Expect stability in sugar prices and increased government action to keep prices stable. BJH has formed a separate 100 per cent subsidiary, Bajaj Energy, for its 450-Mw power venture. The stock is currently trading at 10.9x its estimated FY11 earnings of 10.9x. The brokerage did not have any valuation for the power business. It has lowered FY2010E and FY2011E operating profit estimates by 23 per cent and 11 per cent, which is driving a 58 per cent and 43 per cent cut in net profit respectively. Maintain sell.
— Kotak Institutional