Linc Pen & Plastics

This article has been authored by Amarjeet S Maurya

Linc Pen & Plastics’ (LPPL) 2QFY2016 results outperformed our estimates on the bottom-line front. The company’s top-line grew by ~5% yoy to ~Rs88cr (our estimates was of ~Rs89cr), mainly due to growth in domestic and exports segment. On the operating front, the company reported margin expansion (up by 96bp yoy to 9.1%), primarily on account of lower raw material costs. The reported net profit grew by 23% yoy to ~Rs5cr (our estimates was of around ~Rs4cr) on account of strong operating performance and lower interest cost.

Going ahead, we expect LPPL to report a top-line CAGR of ~8% over FY2015-17E to ~Rs371cr owing to strong domestic as well as export sales. On the bottom-line front, we expect the company to report ~17% CAGR over FY2015-17E. This would be on account of expansion in operating margin on the back of lower material prices and higher exports, which is a high margin business. Further, the company has reduced its debt significantly, which will lead to cost saving for the company. Currently, we are positive on LPPL and recommend a BUY rating on the stock.

Tree House Education & Accessories

This article has been authored by Amarjeet S Maurya

Tree House Education & Accessories’ 2QFY2016 results underperformed our estimates on all parameters. Its top-line grew ~15% yoy to ~Rs57cr, mainly due to growth in existing pre-schools and addition of new pre-schools. The company added 73 pre-schools in various cities like Ahmednagar, Goa, Gurgaon, Jalgaon, Noida, and Ratnagiri, during the quarter. The operating profit came in at ~Rs30cr, up ~2% yoy. However, operating margins contracted by 700bp yoy to 52.7%, as the company opened 73 new centres during the quarter, which is the highest ever in the history of the company in a single quarter. The reported net profit grew by only ~1% yoy to ~Rs13cr, due to the poor operating performance. Post the recent correction in the stock price, given the attractive valuation, we maintain our Buy rating on the stock

MT Educare Result Review – 2QFY2016

MT Educare’s 2QFY2016 results outperformed our estimates on all parameters. Its consolidated top-line grew by a healthy ~26% yoy to ~Rs83cr (our estimate was of Rs78.6cr), mainly due to strong growth in Robomate product sales as well as Government Projects segment. However, core coaching business was subdued during the quarter. The company reported a consolidated operating profit of ~Rs22cr, up 19% yoy. The operating margin contracted by 163bp yoy to 27.0%, primarily on account of higher other costs. The consolidated reported net profit grew by ~21% yoy to ~Rs14cr (our estimate was of Rs12.1cr), due to strong top-line growth.

Going forward, we expect MT Educare to report strong top-line and bottom-line growth in the coming financial years (FY2016E and FY2017E) on back of healthy growth in the coaching business. We expect additional revenue growth from execution of government projects, Robomate product, and tie up with Shri Gayatri Educational Society (SGES) in Hyderabad. Currently, we have a BUY rating on the stock.

Mr. Bharat Gianani (Sr. Research Analyst – Automobile, Angel Broking) on Tata Motors 2QFY2016 Results

Tata Motors 2QFY2016 results were below estimates on the operating front. Consolidated revenues grew marginally by 1% YoY to INR 61,318 cr (coming slightly ahead of our estimates of INR 57,484 cr). Growth was subdued mainly due to flattish growth in JLR. JLR volumes were grew a healthy 12% during the quarter but an adverse mix led to lower realization, thereby dragging the topline. The operating margins at 11.2% were below our estimates of 13.4%. JLR EBIDTA margins at 12.2% were significantly below our estimates of 15%. JLR margins were impacted by lower China sales, adverse product mix and higher launch expenses. During the quarter, Tata Motors reported a loss at the net level due to a one off charge of INR 2,493 cr due to JLR vehicles which were destroyed in explosions caused at the China port location. The company has put an insurance claim for the same which would take some time for processing but has recognized the loss in the current quarter. During the quarter, Tata Motors realized tax credit to the tune of INR 704 cr which resulted into Adj profit at INR 2,223 cr coming in better than our estimates of INR 2,041 cr. We currently have ACCUMULATE rating on the stock but would review our estimates post the disappointing performance at JLR.”

For any further information you may get in touch with Mr. Gianani. He can be reached at 9702970280/ 30940000 / Extn 6817.

2QFY2016 Result update on BEML

This article has been authored by Mr. Santosh Yellapu

BEML reports PAT level losses

BEML reported standalone sales of `617cr, up 38.0% yoy (ahead of our expectation of `599cr). We were expecting EBITDA level losses at `13.1cr, and the company has reported EBITDA level losses of`13.4cr. Noteworthy, the company has reported lower EBITDA losses from the year-ago levels of`31.1cr. Impact of EBITDA level losses was seen at the PAT level too, as the company reported net loss of `30.2cr, against our loss expectation of `12cr. This PAT level loss has narrowed down from previous year’s `55.1cr. Despite 2QFY2016 losses, considering the company’s strong market positioning across business segments and improving award activity environment, we are optimistic that BEML should report order wins going forward. Increase in the order book, should translate to better execution and again lead to turn-around in profits. We continue to maintain our NEUTRAL rating on the stock.

Sadbhav Infrastructure Project Ltd. – Result Review 2QFY2016

Reports PAT level losses

For 1HFY2016, Sadbhav Infrastructure Project Ltd (SIPL) reported a consol. top-line of `274cr (vs `500cr in FY2015). The Reported top-line (for 1HFY2016), on a yoy basis, benefitted from (1) 16.0% toll income growth across Hyderabad-Yadagiri project, (2) 69% toll income growth across Maharashtra Border Check Post project (4 new check posts commenced operations in 2QFY2016), and (3) 11% toll income growth across Ahmedabad Ring Road project. The reported EBITDA for 1HFY2016 stood at `179cr while the EBITDA margin for the same period was at 65.7% (vs 56.7% for FY2015). The overall debt increased in 1HFY2016 as the company pursued stake purchases at some of the SPVs. This resulted in higher interest expenses (`284cr for 1HFY2016 vs `526cr for FY2015). Accordingly, SIPL incurred a bottom-line level loss of `159cr for 1HFY2016. Since its IPO in (Sep-2015), we have maintained a NEUTRAL rating on the stock and we reiterate the same factoring in the perceived near term prospects of the company.

Sadbhav Engineering Ltd. – Result Review 2QFY2016

SEL reports robust numbers for 2QFY2016

Sadbhav Engineering Ltd. (SEL) reported a strong set of numbers for 2QFY2016, on the back of (1) stronger execution, (2) operating margin expansion and (3) reduction in interest expenses. The company posted a strong 25.4% yoy increase in its top-line to `746cr, with in-house BOT projects witnessing strong execution. This, coupled with benefits of lower aggregate prices, led to an 80bp yoy EBITDA margin expansion to 10.8%. The PAT for the quarter came in at `26cr (vs `10cr in 2QFY2015), which is a strong growth. On adjusting for an exceptional item of `12cr, SEL’s Adj. PAT for the quarter stood at `38cr. The Adjusted PAT margin has come in at 5.1% for the quarter vs 1.7% in the corresponding period a year ago. The quarter’s Adj. PAT numbers also benefitted from lower depreciation and interest expenses and higher other income. During the quarter, SEL reported order inflows of `1,548cr, taking the total order inflows for 1HFY2016 to `2,624cr. Accordingly, we estimate the company’s order book to be at `9,249cr as of 2QFY2016-end (OB to LTM sales ratio is at 2.8x). We maintain our positive view on the stock.

Indoco Remdies- 2QFY2016 Result Review

Results lower than expected on all fronts

Stock up 0.1%

Indoco Remedies (CMP: `324 / TP: /Upside : )

For 2QFY2016, the company posted numbers lower than expected. The company posted an 9.4% growth in sales to end the period at `248cr V/s `272cr expected and `226cr in 2QFY2015, on back of domestic and exports posting a growth of 1.2% and 23.6% respectively. In domestic markets (`146cr), posted a growth of 1.2% yoy, mainly on back a tepid formulation sales (`138cr), a yoy growth of 0.5%, while API sales (`7.6cr), posted a 11.7% yoy growth. In exports (`101cr), a yoy growth of 23.6%, on back of formulation exports (`92.8cr) a growth of 23.7% yoy, while API exports (`6.9cr) posted a yoy growth of 3.6%.

On operating front, the EBITDA margins came in at 15.5% V/s 20.9% expected V/s 20.6% in 2QFY2015, on back of lower than expected sales and 28.3% yoy and 82.6% yoy rise in staff expenditure and R&D expenditure respectively. The R&D expenditure during the quarter was 3.6% of sales V/s 2.2% of sales in 2QFY2015. Thus, the Adj. net profit came in at `22.6cr V/s `33.4cr expected and `22.4cr in 2QFY2015, a yoy growth of 0.9%. The lower than expected net profit is on back of lower than expected sales and OPM. On back of valuations, we maintain our neutral stance on the stock.

Ms. Sarabjit Kour Nangra (VP Research – Pharma, Angel Broking) on Dr Reddys 2QFY2016 Results

For 2QFY2016, the company posted sales in line while, the net profit grew higher than estimates. The company, posted an 11.2% growth in sales to end the period at INR 3989cr V/s INR 4000cr expected and INR 3588cr in 2QFY2015, mainly driven by global generics. Global generics (INR 3276.8cr), posted a growth of 15% YoY, while PSAI (INR 591.8cr) posted a dip of 7% YoY. In global generics, the key markets- USA, Europe, India and Emerging markets, posted a growth of 32%, 65%, 14% and -22% YoY.

On operating front, the EBIT margins came in at 22.4% V/s 18.7% expected V/s 17.3% in 2QFY2015, driven by the expansion in gross margins (285bps) and moderate growth in SG&A and R&D expenditure, which rose by 8.8% and 3.6% YoY respectively. Thus, the net profit came in at INR 722cr V/s INR 631cr expected and INR 574cr in 2QFY2015, a YoY growth of 25.7%. The stock has seen decent up move, making valuations, fair, thus we maintain our NEUTRAL stance on the stock.”

For any other information you may get in touch with Ms. Nangra. She can be reached at +919820842031 / (022) 30940000 / Extn- 6806.

GPPL 2QFY2016 Result Review

For the quarter ended Sep-2015, Gujarat Pipavav Port Ltd (GPPL) reported a 10.6% yoy decline in revenue to `140.4cr, which is below our expectation of `179.8cr. This is mainly owing to fall in both, Container (-24%) as well as Dry Bulk volumes (-39%). On account of lower volumes, the EBITDA margin fell to 48.2% vs our expectation of 53%. A poor operating performance, an exceptional item of `60cr and deferred tax charges of `68cr, led to a sharp decline in the PAT by 42.4% yoy. The Reported PAT margin stood at 37.8% vs our expectation of 47.9%. Currently we have a Neutral rating on the stock.

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