Brokerage Calls: Godrej Consumer, Coal India, MOIL
Godrej Consumer Products
Godrej Consumer Products Ltd (GCPL), in its 2QFY2013 results, reported an impressive top-line growth of 34.5% yoy to '1,595cr. The organic business’ net sales growth came strongly at 24%. The Indian subcontinent business registered a growth of 19% yoy on account of strong growth across categories. The international business registered an organic growth of 32%, aided by an impressive performance by Indonesia business which grew by 37% yoy as well as favourable foreign exchange translation impact.
On the domestic front both personal wash and home care segments posted healthy growth of 24% yoy (volume growth of 6%) and 20% (1.5x category) respectively. The hair colour business grew by 10% yoy. The company’s focus on innovation continues and during 2QFY2013 it relaunched the Cinthol range of products (comprising soaps, deo sprays, talks and shower gels) with an objective to connect with the young population. In early October it launched the easy to use Godrej Expert Rich Creme hair colour. On the profitability front, despite a 24bp expansion in the gross margin (aided by fall in vegetable oil prices) GCPL reported a 214bp yoy decline in OPM to 15.3% impacted by higher staff costs, advertising costs and other expenses. The recurring PAT for the quarter grew by 24.8% yoy to '159cr.
At the current market price, the stock is trading at 25.4x FY2014E consolidated earnings. After valuing the company’s various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock.- Angel Broking.
Target Price: Rs 375
Coal India (CIL) reported Q2FY13 earnings in-line-with our expectation. However, we were deeply disappointed with the sharp fall in E-auction realisations. The impact of the same was contained by one-time write-back of prior year provisions. We downgrade the stock from ‘BUY’ to ‘Accumulate’ with revised TP of Rs375 (earlier Rs390) on the backdrop of concerns associated with approval of proposed MMDR bill in the upcoming session of parliament, continued weakness in E-auction realisations and strong likelihood of disappointment on volume and cost guidance.
E-auction realisations dropped by ~11% QoQ or Rs280/t (6% YoY/Rs150/t) to Rs2,282, way below our expectation of Rs2,530. The encouraging part was better than expectation Eauction volumes at 11.7mt. Thanks to better-than-expected grade and price increase in WCL, FSA realisations fared better than our expectation at Rs 1,287. CIL reported 15% YoY growth in EBITDA at Rs 28.6bn.
PAT grew by 19% to Rs30.8bn on the back of 17% rise in other income and 32% drop in depreciation due to appreciation of rupee.- Prabhudas Lilladher.
Target Price: Rs 261
During 2QFY2013, MOIL’s net sales decreased by 7.6% yoy to '229cr (slightly below our estimate of '237cr). While volumes were lower than our estimate, realizations were higher than our expectations due to lower-than-expected sales of fines. Volumes declined by 11.8% yoy to 238,992 tonnes, while realizations increased by 8.6% yoy to '8,852/tonne.
During 2QFY2013 the company’s raw material consumed declined by 77.6% yoy. This, coupled with higher realizations led to EBITDA declining by just 2.7% to '108cr and EBITDA margin improving by 239bp yoy to 47.1%. Net profit increased by 7.6% yoy to '109cr which was in-line with our estimate.
After declining steadily since January 2011 manganese ore prices have stabilized over the past six months. MOIL’s realizations improved sequentially during 2QFY2013 mainly aided by lower sales of low-priced fines. Going forward, we do not foresee further meaningful rise in manganese ore prices in the coming one year. Hence, valuing the stock at 4.0x FY2014 EV/EBITDA, we recommend an Accumulate rating on the stock with a target price of '261.- Angel Broking.
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