Analysts' corner

Hindalco Industries, Voltas, Everest Kanto Cylinders & Jain Irrigation

HINDALCO INDUSTRIES
Reco price/date: Rs 96/August 19;
Current/target price: Rs 96/95
Avendus has cut its FY14-FY15 EPS estimate by up to 16.2 per cent due to pricing pressure in the North American and Asian region for Novelis products as well as higher interest provisioning on increased borrowing and the commissioning of low-margin greenfield projects. The brokerage values Hindalco Industries at a 20 per cent discount to the historical (August 11-August 13) EV/earnings before interest, taxes, depreciation, and amortisation (Ebitda) of 9.6x and P/E of 10.1x, considering the weak demand environment and pricing pressure. Risks to these estimates are lower-than-estimated volumes, weak aluminium prices and product premiums. Maintain Hold

-Avendus Research

VOLTAS
Reco price/date: Rs 70/August 19;
Current/target price: Rs 67.20/81
Voltas reported profit numbers that were lower than our expectations. Apart from the continued weak business scenario for commercial air conditioning projects, the company's profitability has been impacted by losses at various projects. On the positive side, capital engagement has reduced. The company has around Rs 860 crore in cash surplus (Rs 27 per share). Despite the disappointing performance and the reduction in earnings, we maintain our faith on the company as its earnings has the potential to surprise on the upside if the claims from some of its international projects are allowed by the client. Maintain Buy

-Kotak Securities

EVEREST KANTO CYLINDERS
Reco price/date: Rs 9/August 19;
Current/target price: Rs 8/9
Everest Kanto Cylinders (EKC) reported 2.5 per cent year-on-year (YoY) fall in revenues, in line with expectation. The company reported a negative operating profit margin in the quarter, which was primarily due to lower volumes in India and lower margins in major subsidiaries such as Dubai. The compressed natural gas (CNG) volumes declined in India by 38 per cent YoY whereas overall volumes in India declined by nine per cent YoY. Adjusted loss (before forex) stood at Rs 382.1 million and was higher than expectations. Analysts believe tough times will continue for EKC due to lack of demand visibility from its key markets (India and Iran). Order inflows in Dubai subsidiary and demand pick-up for CNG cylinders in India remain the key. Maintain Hold.

-IDBI CAPITAL

JAIN IRRIGATION
Reco price/date: Rs 50/August 16;
Current/target price: Rs 50.35/84
Jain Irrigation's (JISL) Q1FY14 adjusted profit after tax (PAT) (standalone) surpassed our estimate owing to tax reversal. However, sales and Ebitda came in line with expectations. After five consecutive quarters of YoY sales decline, the micro-irrigation (MIS) business grew 21 per cent YoY in Q1FY14, spurred by exports (up 238 per cent YoY). The management maintained its FY14 forecast of 20 per cent YoY growth in the MIS business, driven by projects as well as exports. Further, JISL reiterated that it would reduce debt by Rs 5 bn, which will lower interest outgo by Rs 0.8 bn in FY14E. We anticipate the MIS business to stabilise and post positive growth in the coming quarters, along with an improved balance sheet. Maintain Buy

-Edelweiss Securities Ltd