Biocon: greater erosion of PAT

ANALYSTS' CORNER

Enam Securities rates Biocon as "neutral" relative to the sector. The report states that the company's Q2 performance has been in line with expectations. While net revenues at Rs 201 crore (up eight per cent y-o-y) were a tad better than estimated, the PAT at Rs 43.5 crore (down 23 per cent) was in line.

Revenues from its mainline biopharmaceuticals business were up six per cent to Rs 156 crore, on the back of higher statin volumes and some pick-up in insulin sales. Realisations were significantly lower as simvastatin formulation prices have declined across all European markets.

However, the management stated that they expected prices to remain stable going forward. Among its other businesses, while sales of enzymes were down 10 per cent to Rs 22 crore, the contract research business grew briskly, with revenues up 53 per cent to Rs 23 crore.

While the consolidated OPM was down by 368 bps to 29.4 per cent for the quarter, it was actually up by 34 bps q-o-q, possibly implying that prices for its main products were stable. Some positive impact can also be attributed to the contract services business. The stock trades at 25.7x FY06E.

Tamil Nadu Newsprint: sales up

Enam Securities rates Tamil Nadu Newsprint as "neutral", relative to the sector. The report states that the company's Q2 sales were up 13 per cent y-o-y. Operating profit rose to Rs 41.1 crore (up 18.2 per cent q-o-q) on the back of higher volumes and increased realisation. Net profit jumped to Rs 18.2 crore (up 98.4 per cent y-o-y and 38.1 per cent q-o-q).

The strong y-o-y showing of the company owes to base effect since it had witnessed high input and finance costs in Q1 FY05. Operating recovery was evident during the quarter on the back of higher volumes, firm realisation and improved availability of bagasse.

Production during Q2 was 57,179 Mts against 54,396 Mts in corresponding previous quarter. With an objective of augmenting its source of wood supply in the long-term, the company would raise pulpwood plantation in around 6,500 acres through farm forestry and captive plantation programs. Recovery in local paper prices is palpable. The stock trades at 8.7x FY06.

EID Parry: banking on rising sugar demand

Karvy Research, in its report on EID Parry states that sugar prices in retail market have increased by 15.5 per cent y-o-y to Rs 1860 per quintal in the September quarter. The production for sugar season 2005-06 is expected to increase by 41 per cent to 17.9 million tons.

This augurs well for the company. Domestic demand for sugar is expected to increase by 2.5 per cent to 18.9 million tons in 2005-06. The report expects sugar prices to remain firm over next two years considering demand and supply mismatch.

The company has posted a net profit of Rs 28 crore in Q2 this year, up by 10.3 per cent from Rs 25.4 crore in previous September quarter. Net sales grew by 60 per cent to Rs 209 crore, from Rs 131 crore.