Analysts' corner

Marico
Reco price: Rs 112
Target price: Rs 125 Marico’s consolidated sales (Rs 600 crore) grew 6 per cent (volume growth of 14 per cent), driven by flagship brands Parachute and Saffola. Deflation in value growth was due to the price cuts effected in Parachute and Saffola during the year. Value-added hair oils recorded 27 per cent volume growth, while international division and Kaya posted 22 per cent and 13 per cent growth (sequentially flat) respectively. Ebitda (earnings before interest, taxes, depreciation and amortisation) margins improved by 80 basis points (bps) year-on-year (y-o-y) to 14.1 per cent, led by gross margin expansion on account of decline in costs of key inputs, copra and safflower. Higher ad spends and other expenses restricted the Ebitda margin expansion to 80 bps. The brokerage revised estimates marginally downwards by 2 per cent at sales and profit after tax (PAT) level for FY11E (financial year 2011, estimated) and FY12E as a result of lower-than-expected top-line growth. The stock is trading at 22x FY12E earnings per share (EPS) of Rs 5.7. Maintain buy.

 

— Prabhudas Lilladher

Balaji Telefilms
Reco price: Rs 59
Target price: NA Balaji Telefilms (BTL) posted yet another quarter of a disappointing top line, which declined 32 per cent y-o-y and 14 per cent quarter-on-quarter (q-o-q) to Rs 33.5 crore, as both commissioned and sponsored programmes registered a decline. However, on a sequential basis, average realisations registered an improvement. After another disappointing quarter of results and volatility in the show pipeline, estimates for FY2011E and FY2012E are revised downwards, factoring in lower programme revenues, pressure on margins, due to higher production costs (new programmes expected to launch in first half of FY2011E and a modest movie pipeline). While BTL is ramping up its production slate, the rising competition in content production and lower shelf lives for TV shows are likely to keep realisations and programming hours volatile. Moreover, rich valuations at 15.8x FY2012E EPS cannot be justified given BTL’s highly unstable and volatile earnings scenario. Maintain neutral. 

— Angel Securities

Dhanlaxmi Bank
Reco price: Rs 138
Target price: Rs 170 Dhanlaxmi Bank, an old private sector bank, predominantly concentrated in South India, is set for a higher growth trajectory with its new management. Core banking parameters are improving appreciably, like credit/deposit (C/D) ratio that was hovering at around 53 per cent in FY04 and is now 72 per cent for 9MFY10 (nine months of 2009-10). With a higher concentration on corporate loans, asset quality improved radically with gross non-performing assets (GNPA) from over 10 per cent in FY04 to 1.8 per cent for 9MFY10. The bank is expected to grow its business mix at 2x industry growth for the next couple of years. This will help it to post a 42 per cent compounded annual growth rate (CAGR) in balance sheet over FY09-12E to Rs 16,309 crore. Expect PAT to register 23 per cent CAGR over FY09-12E to Rs 108 crore. Maintain buy.

— ICICI Direct

United Phosphorous
Reco price: Rs 148 
Target price: Rs 220
United Phosphorus (UPL) reported a net profit of Rs 187 crore in Q4FY10 (fourth quarter of 2009-10, a y-o-y growth of 24 per cent. However, adjusting for restructuring costs and foreign exchange gains, the adjusted net profit comes to Rs 152.6 crore. The consolidated income from operations went up 9 per cent y-o-y to Rs 1,515.9 crore, led by a robust 20 per cent y-o-y growth in volumes. The operating profit margin (OPM) shrunk 120 basis points y-o-y to 19.8 per cent in the quarter due to a higher raw material cost on a y-o-y basis. Further, the OPM is likely to improve over the next few quarters owing to restructuring gains accruing from Cerexagri. The stock is trading at 8.9x its FY2011E EPS and 5.8x its FY2011E EV/Ebitda (enterprise value/earnings before interest, taxes, depreciation and amortisation). Maintain buy.

— Sharekhan