Reco price: Rs 50;
Target price: Rs 69
Essar Oil Ltd (EOL) reported a loss of Rs 515 crore for Q4, below expectations, primarily due to lower clean gross refining margins (GRMs) of $4.6 versus expectations of $5.7 (higher crude prices and lower L-H differential). Net profit was impacted by a one-time hit of Rs 348 crore on account of CDR exit. FCCBs worth $262 million have now been made compulsorily convertible, providing some much-needed boost to net worth. Debt/equity still stands at 3.7 times and could go up even further as debt has not yet been raised to pay the sales tax liability. Management expects GRMs to increase by a substantial $4.8/barrel, going forward, including a saving of $0.8, which is expected post-commissioning of a coal-based captive power plant. Maintain Neutral.
Reco price: Rs 420;
Target price: Rs 420
A steep erosion in backlog underscores weak outlook; even with stronger execution, sales are likely to fall 12 per cent in FY13. Analysts forecast a modest decline of four per cent in inflows in FY13. Material cost savings are unlikely to offset volume decline. Analysts expect margins to fall 40 basis points and drive EPS decline of 18 per cent. Consolidated Ebitda margin is also likely to decline by 40 basis points to 9.8 per cent in FY13. HSBC has modestly raised its estimates and increased its target price to Rs 420 from Rs 400. Analysts believe the macro environment remains difficult, order book visibility has shrunk, and while earnings have shown resilience, downside risk has deepened. Maintain Underweight.
HSBC Global Research
Reco price: Rs 54;
Target price: Rs 75
Navneet Publications Ltd (NPL) reported strong results that were better than analysts’ estimates. Revenue was up 27.5 per cent year-on-year to Rs 120 crore during Q4, driven by strong growth in the stationery business. This business, which went through a slowdown in the first half saw revival in order flows from international as well as domestic markets. Going forward, both the publication business and the stationery segment are likely to deliver strong growth. Centrum has marginally revised its estimates for both these businesses considering order flow expectations in the next two years. Attractive valuations, high growth visibility and dividend yield are key positives. Maintain Buy.
SUTLEJ TEXTILES AND INDUSTRIES
Current market price: Rs 190
Current Intrinsic Value: Rs 255
CARE Equity Research assigns a fundamental grade of 3/5 to Sutlej Textiles and Industries Ltd (STIL). This indicates ‘good fundamentals’. STIL’s revenues are concentrated more towards the yarn segment. However, sales are skewed more towards the domestic market (contributing around 66 per cent of revenue for the period FY09-FY11). CARE Equity Research believes key catalysts for STIL would be increase in realisation from the yarn business and increased revenue share from segments other than yarn. The turnaround of the fabric & apparel segment would be critical, going forward. CARE Equity Research assigns a valuation grade of 5/5 to STIL, indicating ‘considerable upside potential’.
CARE Equity Research