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Earnings Update: Mahindra & Mahindra, GSPL, CEAT, NCC

SI Reporter/New Delhi 11 Feb 13 | 11:08 AM
 Mahindra & Mahindra Ltd
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BSE   19 Dec 14 | 12:00 AM

1222.35  8.15 (0.67%)

NSE   19 Dec 14 | 12:00 AM

1222.25  10 (0.82%)

Mahindra & Mahindra
CMP: Rs 883


M&M's 3QFY13 results (including MVML) were below estimates, impacted by 100bp QoQ decline in Auto PBIT margins, while tractor margins improved by 70bp QoQ on price hikes, better product mix and benign RM cost pressures.

Net sales grew 28.6% YoY (+10.2% QoQ) to Rs 10,640 crore (v/s estimate Rs 11,080 crore). EBITDA Margins (including MVML) declined 40bp QoQ (+20bp YoY) to 13.5% (v/s estimate 14.4%). Adjusted PAT (including MVML) grew 35% YoY (-6.5% QoQ) to Rs 915 crore (v/s estimate of Rs 980 crore).

While over  short term there are no visible catalyst, we remain positive on M&M over medium to long term given, a) market dominance in fairly consolidated UV and tractor industry, b) long term growth potential in tractors and UVs, c) potential turnaround in CVs, 2Ws and Ssangyong, and d) valuation.

We lower standalone (incl. MVML) EPS for FY13E/FY14E/FY15E by 2.3%/0.6%/0%. We downgrade FY13 consol. EPS by 3.7%, but upgrade FY14E/FY15E EPS by 1.1%/2.6% on upgrades in Tech Mahindra and MMFSL. The stock trades at 13.4x/11.8x standalone and 11.1x/9.1x FY14E/FY15E consolidated EPS. Buy with target price of Rs 1,225 (FY15 SOTP).- Motilal Oswal

GSPL
CMP: Rs 68


GSPL’s net profit of Rs1.2bn was exactly in line with our estimate. Transmission tariff increased by 16% yoy to Rs1.04/scm (qoq +5%), which was higher than our estimate of Rs0.95/scm. Higher transmission tariff was on account of take-or-pay contract, whereby consumers continued to pay tariff despite transmitting lower gas volumes. However, we note that GSPL is yet to incorporate the revised transmission tariff announced by PNGRB. GSPL’s volumes continued to fall during the quarter with gas transmission volumes for the quarter declining by 16.8% yoy to 2,508mmscm (qoq -4.7%). The fall in gas transmission volume was on account of falling gas production KG D6. GSPL’s operating profit for the quarter stood at Rs2.3bn (yoy -7.1% qoq -7.2%) which was in line with our estimate.

We increase our FY13e earning by 15.1% to account of higher transmission tariffs and lower transmission volumes during 9MFY13 while we decrease our FY14e estimate by 1.3% to reflect our assumption of lower volume growth. We maintain our BUY rating on the stock with a target price of Rs 89. At the CMP, the stock is trading at 9.5x and 5.3x FY14e EPS and EBITDA respectively.- LKP Research

NCC
CMP: Rs 44

For 3QFY2013, NCC posted a poor performance on the revenue front; however higher other income due to asset sale and lower tax expense helped boost bottom-line growth. The current outstanding order book of NCC stands at Rs 18,799 crore (3.3x trailing revenues), with order inflows of Rs 3,200 crore for 9MFY2013.

On the top-line front, NCC reported a decline of 6.3% yoy to Rs 1,184 crore, which was significantly lower than our estimate of Rs 1,427 crore. This was mainly due to loss in revenue of Rs 200 crore during the quarter on account to slow moving orders. On the EBITDAM front, the company’s EBITDA margins stood at 7.2% (down 116bp sequentially), which were below our estimate of 8.4%. However, on the bottom-line front, NCC reported a PAT of Rs 11 crore (in line with our estimate)  gainst a loss of Rs 9 crore in 3QFY2012. This was mainly on the back of  higher other income owing to asset sale and lower tax expense during the quarter.

For FY2013 the company has given a guidance of 15-20% growth on the revenue front and is hopeful of maintaining the EBITDAM at 8-9%. However based on 9MFY2013 performance we believe it will not achieve its revenue guidance. NCC’s captive power plant is expected to contribute ~Rs 360 crore to FY2013 revenues. Further, NCC reduced its debt by Rs 100 crore during the quarter to Rs 2,522 crore and is in process of reducing its debt to below Rs 2,000 crore through stake sale in one of its road BOT project, continued monetization of its land bank, and stake sale in the Himachal Sorang project. The stock currently trades at a PE of 6x and 4.5x (excluding subsidiaries’ valuation) our FY2013 and FY2014 EPS estimates. Further, on account of the stake sale initiated by the company in some of its projects and decline in its stock price, we upgrade our recommendation on the stock to Accumulate.- Angel Broking

CEAT
CMP: Rs 102


For 3QFY2013, the standalone top-line posted an in-line growth of 2.4% qoq to Rs 1,202 crore driven by 3.9% growth in volumes to ~53,000MT. On a yoy basis though, the top-line grew by a strong 13% led by volume growth of 15.2%. The yoy growth appears strong due to low base of 3QFY2012 which was impacted by a 23-day strike at the Nashik plant.

The net average realization, however, was down by 1% yoy (1.2% qoq) primarily due to unfavorable product-mix (larger share of OEMs in the volume mix). On the operating front, EBITDA margins surged substantially by 180bp qoq (227bp yoy) to 8.5% against our expectations of 7.9%, as raw-material cost as a percentage of sales witnessed a decline of 210bp qoq (470bp yoy) led by correction in natural rubber prices. However on a yoy basis, employee cost (due to onetime gratuity payment of Rs 6.5 crore) and other expenditure as a percentage of sales in croreeased by 100bp and 140bp respectively. Led by strong operating performance, the adjusted net profit jumped 82.2% qoq to Rs 31 crore.

At Rs 103, the stock is trading at an attractive valuation of 2.5x FY2014E earnings. We retain our Buy rating on the stock with a target price of Rs 163, valuing the stock at 4x FY2014E earnings.- Angel Broking

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