Bartronics India
Reco price: Rs 173
Current market price: Rs 179.70
Target price: Rs 249
Upside: 38.6%
Brokerage: Angel Broking
Bartronics India (BIL) reported a 370 per cent yoy jump in revenue to Rs 120 crore in Q1 FY09, on the back of excellent growth in its automatic identification and data capture solutions business, global expansion and revenues booked from the smart cards business (1/3rd of the total revenue).
During the quarter, BIL reported a strong 320 bps yoy expansion in EBITDA margins on account of cost efficiencies, mainly arising from streamlining the smart card production.
Raw material costs fell substantially as a percentage of sales to 52.1 per cent (73.3 per cent in Q1 FY08). As a result, the company’s bottomline jumped by 393.5 per cent yoy to Rs 24 crore.
BIL’s total consolidated outstanding order book position at the end of Q1 FY09 stood at a significant Rs 500 crore, constituting over 185 per cent of total FY08 revenues.
Going ahead, BIL is expected to record a CAGR growth of 60.4 per cent in revenues and 51.1 per cent in earnings over FY08-10E. At Rs 173, the stock is trading at 5.7x FY10E earnings. Maintain Buy.
Biocon
Reco price: Rs 351
Current market price: Rs 367.75
Target price: Rs 430
Upside: 16.9%
Brokerage: Religare Securities
Biocon's Q1FY09 results were below estimates as contract services witnessed another flat quarter and the absence of licensing income caused a sharp contraction in EBITDA margin, which reduced by 410 basis points (bps) year-on-year (yoy) to 24.2 per cent.
The company booked Rs 6.4 crore as forex losses for the quarter and made a provision of Rs 25.5 crore towards mark-to-market (MTM) losses, which had a significant impact on profitability.
The net profit decreased by 71.7 per cent yoy to Rs 15 crore in Q1FY09. The company has hedged 50 per cent of its export receivables for FY09 and 70 per cent for FY10 at Rs 41-41.5/$.
Although there are no near-term triggers for the stock, over the longer run (18–24 months), Biocon's business offers triggers in terms of the launch of biosimilars in the EU, licensing out of its lead diabetes and psoriasis molecules, increasing penetration of branded formulations (target of Rs 500 crore-plus in sales by 2010), and listing of its subsidiary Syngene.
The stock is trading at 11.4x FY10E earnings and offers limited downside from these levels. Maintain Buy but reduce price target to Rs 430 (14x FY10E earnings) from Rs 573.
Maruti Suzuki
Reco price: Rs 647
Current market price: Rs 617.90
Target price: Rs 615
Downside: NA
Brokerage: India Infoline
Maruti Suzuki (Maruti) reported a 21 per cent yoy increase in revenues to Rs 4,753.6 crore, on the back of a 13.5 per cent yoy increase in volumes to 1,92,584 units in Q1 FY09. With increasing interest costs and high inflation, volumes of the entry-level model Alto seem to be slowing down.
However, volumes of Swift and its sedan version Dzire were robust. Average realisations improved by four per cent yoy during the quarter.
Maruti’s EBITDA margin declined 450 bps yoy and 150 bps qoq, largely on account of increased raw material costs and higher selling and distribution expenses. Staff costs increased 38 per cent yoy as the company added employees at its R&D centre, engine shop and the Manesar plant. As a result, net profit declined seven per cent yoy to Rs 465 crore, despite a 47 per cent yoy increase in other income (Rs 328.8 crore in Q1 FY09).
Volumes are expected to remain flat in Q2 FY09 and improve later in H2 FY09, on the back of to-be-launched models such as A-Star and Splash. Margins will also be under pressure in Q2 FY09 as auto-component suppliers pass on further increase in costs.
The stock currently trades at 11.2x and 9.5x its FY09E and FY10E earnings. The brokerage has revised its rating on the stock to Reduce, with a 12-month target price of Rs 615.
Tech Mahindra
Reco price: Rs 745
Current market price: Rs 706.45
Target price: Rs 898
Upside: 27.1%
Brokerage: ICICI Securities
Tech Mahindra reported revenues of Rs 1,116.4 crore for Q1 FY09 with quarter-on-quarter (qoq) growth of 9.2 per cent driven by volume growth of 5.5 per cent and dollar support of 3.7 per cent.
The company’s EBDITA margins increased an impressive 380 bps to 25.7 per cent in Q1 FY09, aided by improvement in utilisation, higher shift towards off-shoring and prudent cost management program.
The company reported net profit of Rs 258.5 crore with sequential growth of 18.2 per cent. The company has also announced a $700 million deal from British Telecom (BT) spanning over the next five years, providing the company a predictable long-term revenue flow of $2 billion plus from BT alone.
The company has shown remarkable improvement in its net utilisation rate over the past two quarters; but with 5,000 freshers likely to join in the coming two quarters, utilisation is expected to dip over the year.
The company has announced a capex worth $150 million spread over three years, for construction of facilities in an SEZ, which will give the company the ability to have additional capacity of 17,000 to 18,000 employees.
The stock has been valued on the basis of the DCF methodology, which gives a target price of Rs 898, thereby discounting the FY09E and FY10E earnings by 11.24 times and 10.17 times, respectively.
LIC Housing Finance
Reco price: Rs 262
Current market price: Rs 303.60
Target price: N.A.
Brokerage: Edelweiss Securities
Defying concerns of industry-wide slowdown in mortgage disbursement, LIC Housing Finance (LICHF) reported strong disbursement growth of 24 per cent yoy in Q1 FY09 to Rs 1,520 crore.
Consequently, loan book grew 25 per cent yoy to Rs 22,758 crore. Net interest income grew 43 per cent yoy to Rs 149.7 crore and net interest margins improved 36 bps yoy to 2.7 per cent. The company’s gross NPA, too, declined by 186 bps yoy to 2.2 per cent during Q1 FY09.
LICHF has recently forayed into distribution of financial products through its subsidiary LIC Housing Financial Services and plans to expand its network to 65 locations across the country in the next two-three years.
In housing loans and insurance, the subsidiary will exclusively distribute parent company’s products, whereas it may adopt broking model for other financial products. Specialised housing financiers, namely HDFC and LICHF, are grabbing market share as some leading banks go slow on mortgages (in FY08, HDFC and LICHF reported 25 per cent plus growth in loan book, whereas ICICI Bank only grew 2 per cent).
LICHF’s disbursement and loan book are poised to grow at CAGR of 21 per cent and 22 per cent, respectively over FY08-10E. The stock currently trades at 1.0x FY09E book and 5x FY09E earnings; Maintain buy.
(Current market price as on July 24.)
