Cipla, Reliance Capital, Pantaloon & Bayer CropScience
Cipla
Reco Price: Rs 313,
Target Price: Rs 311
Cipla continued its disappointing performance in Q3 FY11 with a 20 per cent yoy decline in net profit (adj) at Rs 230 crore, which was the fifth consecutive quarter of weak bottomline growth. This decline was due to lower technology knowhow fees at Rs 15 crore (Rs 70 crore in Q3 FY10) and a rise in employee expenses (up by 52 per cent yoy) and other expenses (up by 17 per cent yoy). Cipla’s domestic formulations sales rose 11.5 per cent yoy to Rs 2,170 crore during the nine months of FY11. Growth was driven by branded formulations and partly offset by low growth in generic formulations. Analysts expect domestic formulations to grow at a modest 12 per cent CAGR until FY13 on the back of a significantly large base. Maintain sell.
—Reliance Securities
Reliance Capital
Reco Price: Rs 442,
Target Price: Rs 563
Reliance Capital (RCap) reported a profit of Rs 106 crore in Q3FY11 (down 5 per cent QoQ). Earnings traction in core businesses was strong — profitability in asset management and consumer financing grew 30 per cent QoQ and for securities/distribution business, it grew 40 per cent QoQ. Life insurance business reported profits due to sharp decline in opex and increased share of high margin policies. Losses continued in general insurance business (Rs 24 crore vis-à-vis Rs 28 crore in Q2FY11). In the asset management business, unconducive capital markets resulted in AUMs coming off 5 per cent QoQ. Upgrade to buy.
—Edelweiss Securities
Pantaloon
Reco Price: Rs 256,
Target Price: Rs 338
Pantaloon’s retail demand continues to be buoyant as same-store sales (SSS) growth for lifestyle, value and home remained strong at 21, 12 and 18 per cent yoy, respectively in Q2FY11. Overall, core retail revenues rose a healthy 31 per cent yoy. Ebitda margin contraction of 150 bps yoy to 8.6 per cent for core retail was led by 220 bps gross margin decline yoy — disappointing, as management had guided to an improvement in margins in Q2 on account of the full-price sales in the festive season. Consequently, core retail net profit rose a modest 6 per cent yoy to Rs 47 crore. E-zone would move into a step-down subsidiary, in which management would induct a strategic partner. E-Zone reportedly had an Ebitda loss of Rs 12 crore – its hive-off should improve profitability in the core Home Business (which is Ebitda positive). Maintain buy .
—Citigroup
Bayer CropScience
Reco price: Rs 776,
Target price: NA
For 3QFY2011, Bayer CropScience’s (BCS) results were marginally ahead of estimates. Total sales grew by 38 per cent yoy to Rs 531 crore, while Ebitda margin rose 112 bps to 11.8 per cent. Net profit came in at Rs 36 crore, up 66 per cent yoy. Going ahead, analysts expect BCS to be on a strong growth trajectory on the back of high agro-commodity prices. BCS’s staff cost and other cost rose only 12.5 per cent and 19 per cent, respectively, which led to margin expansion. During the quarter, sales were affected due to late and slightly above-normal monsoons. However, analysts believe the same will be booked in Q4FY11. Maintain Neutral.
—Angel Brokin
Cipla
Reco Price: Rs 313,
Target Price: Rs 311
Cipla continued its disappointing performance in Q3 FY11 with a 20 per cent yoy decline in net profit (adj) at Rs 230 crore, which was the fifth consecutive quarter of weak bottomline growth. This decline was due to lower technology knowhow fees at Rs 15 crore (Rs 70 crore in Q3 FY10) and a rise in employee expenses (up by 52 per cent yoy) and other expenses (up by 17 per cent yoy). Cipla’s domestic formulations sales rose 11.5 per cent yoy to Rs 2,170 crore during the nine months of FY11. Growth was driven by branded formulations and partly offset by low growth in generic formulations. Analysts expect domestic formulations to grow at a modest 12 per cent CAGR until FY13 on the back of a significantly large base. Maintain sell.
—Reliance Securities
Reliance Capital
Reco Price: Rs 442,
Target Price: Rs 563
Reliance Capital (RCap) reported a profit of Rs 106 crore in Q3FY11 (down 5 per cent QoQ). Earnings traction in core businesses was strong — profitability in asset management and consumer financing grew 30 per cent QoQ and for securities/distribution business, it grew 40 per cent QoQ. Life insurance business reported profits due to sharp decline in opex and increased share of high margin policies. Losses continued in general insurance business (Rs 24 crore vis-à-vis Rs 28 crore in Q2FY11). In the asset management business, unconducive capital markets resulted in AUMs coming off 5 per cent QoQ. Upgrade to buy.
—Edelweiss Securities
Pantaloon
Reco Price: Rs 256,
Target Price: Rs 338
Pantaloon’s retail demand continues to be buoyant as same-store sales (SSS) growth for lifestyle, value and home remained strong at 21, 12 and 18 per cent yoy, respectively in Q2FY11. Overall, core retail revenues rose a healthy 31 per cent yoy. Ebitda margin contraction of 150 bps yoy to 8.6 per cent for core retail was led by 220 bps gross margin decline yoy — disappointing, as management had guided to an improvement in margins in Q2 on account of the full-price sales in the festive season. Consequently, core retail net profit rose a modest 6 per cent yoy to Rs 47 crore. E-zone would move into a step-down subsidiary, in which management would induct a strategic partner. E-Zone reportedly had an Ebitda loss of Rs 12 crore – its hive-off should improve profitability in the core Home Business (which is Ebitda positive). Maintain buy .
—Citigroup
Bayer CropScience
Reco price: Rs 776,
Target price: NA
For 3QFY2011, Bayer CropScience’s (BCS) results were marginally ahead of estimates. Total sales grew by 38 per cent yoy to Rs 531 crore, while Ebitda margin rose 112 bps to 11.8 per cent. Net profit came in at Rs 36 crore, up 66 per cent yoy. Going ahead, analysts expect BCS to be on a strong growth trajectory on the back of high agro-commodity prices. BCS’s staff cost and other cost rose only 12.5 per cent and 19 per cent, respectively, which led to margin expansion. During the quarter, sales were affected due to late and slightly above-normal monsoons. However, analysts believe the same will be booked in Q4FY11. Maintain Neutral.
—Angel Brokin
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