SNI MARKET OUTLOOK UPDATE 21ST OCTOBER 2013 : Expect market to open on a positive note on account of global cues. U.S. stocks rose, with the S&P’s 500 Index extending a record, as results from Google and General Electric topped estimates and data showed China’s economic growth accelerated. Most of the Asian markets are up by half percent amid speculation the Federal Reserve will delay stimulus cuts. USDINR is stable at 61‐62. L&T’s 2QFY14 operating performance was above estimates. We believe that the operating performance is commendable, especially given the constrained macro environment. Maintain Buy with SOTP‐based target price of INR1,007/sh (14% upside). Research Updates: ULTRATECH CEMENT 2QFY14: Below est with EBITDA decline of ~34% YoY impacted by higher cost push; Downgrade to Neutral UltraTech Cements 2QFY14 performance is below estimates with blended EBITDA/ton of INR704 (‐INR360 YoY, ‐INR320 QoQ) v/s est INR889/ton, impacted by lower realizations and higher cost. Net sales de‐grew 4%YoY (‐9% QoQ) to INR45b (v/s est INR44.9b). Grey Cement volumes stood at 9.23mt (‐0.6% YoY, ‐9% QoQ v/s est 9.06MT), while white cement (incl Putty) volume grew by 15% YoY (+10% QoQ). Downgrade to Neutral with target price of INR1,904 (10x FY15E EV/EBITDA). L&T’s 2QFY14 operating performance was above estimates, with revenues at INR145b (+ 10% YoY, above EST of +7.1%), adj EBIDTA margins at 10.3% (down 30bps YoY, above EST of 10%) and adj Net profit excluding dividend from subs at INR8.2b (down 4% YoY, above EST of INR7.9b). We believe that the operating performance is commendable, especially given the constrained macro environment. Key highlights are: I) Uptick in domestic revenue growth at 4.5% (vs flattish on ttm basis) ii) E&C margin expansion to 13.3% (up 97bps) iii) property development revenues at INR1.1b / EBIT margins ~45% (first quarter of meaningful contribution from Powai real estate development). The constraining factors remain I) increased losses in shipbuilding at INR2b (cumulative losses booked at ~INR5b during FY13/1HFY14) ii) NWC at 18.2% of revenues and iii) incremental investments of INR6.4b in subsidiaries (target INR20b in FY14). Maintain Buy with SOTP‐based target price of INR1,007/sh (14% upside). We value L&T standalone at 15x FY15E earnings and subsidiaries at INR287/share. For more details log on to sainthinvestment
Posted on: Mon, 21 Oct 2013 03:37:56 +0000
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