Analysts' corner

Apollo Tyres & Jain Irrigation Systems Ltd

APOLLO TYRES
Reco price: Rs 82;
Target price: Rs 100
Apollo Tyres Ltd’s (APTY) consolidated top line jumped 18.4 per cent year-on-year (y-o-y) to Rs 3,231 crore, driven by 8.8 per cent y-o-y growth each in total volumes and net average realisation. While domestic operations witnessed strong 14 per cent growth in volumes, South Africa volumes fell 18 per cent due to a planned shutdown and rising threat of imported tyres. Lower raw material prices led the Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin to expand by 110 basis points sequentially, to 11.1 per cent. Net profit declined 18.6 per cent y-o-y to Rs 157 crore, due to higher interest and depreciation expenses. Analysts expect APTY to deliver a healthy revenue CAGR (compound annual growth rate) of 11.8 per cent over 2012–14, led by production ramp-up at the Chennai facility and a revival in South Africa operations. Maintain Buy.

Angel Broking

JAIN IRRIGATION SYSTEMS LTD
Reco price: Rs 76;
Target price: Rs 90
IIFL has lowered Jain Irrigation Systems’ FY13-14 earnings per share by 19-18 per cent, following softer-than-expected Q4’FY12 results. Earnings growth will likely remain under pressure in FY13 due to lower micro irrigation system (MIS) sales and elevated interest expense. The Q4 results missed analysts’ estimates, mainly due to a decline in MIS sales. Margins fell, too. Tax benefits boosted net profit, but these are largely one-time in nature, although the tax rate is seen lower in FY13. Faster growth in other businesses may mitigate MIS softness. But the resultant shift in business mix may weigh on margins. Meanwhile, interest expense also remains elevated, pressuring earnings growth. Add.

IIFL