Bank of Baroda
Reco price: Rs 314
Current market price: Rs 327
Target price: NA
Brokerage: IDFC-SSKI Securities
Bank of Baroda (BoB) delivered a robust net profit growth of around 172 per cent y-o-y to Rs 753 crore in Q4 FY09. The outperformance was driven by traction in net interest income (NII) and strong treasury gains.
NII came in at Rs 1,470 crore, a 43 per cent y-o-y growth. Non-interest income grew by 54 per cent y-o-y to Rs 854 crore on the back of strong treasury profits of Rs 301 crore. The net interest margin stood at 3.21 per cent on the domestic portfolio, a 40 bps q-o-q decline as deposits re-priced with a lag at higher term rates prevailing during Q3 FY09.
A reduction in bulk deposit rates and a decline in costs in the overseas business offset the decline in yields. However, the CASA ratio came in at 34.87 per cent as of March 09, a decline of 100 bps q-o-q. BOB reported an aggressive loan growth of 35 per cent y-o-y.
Net NPAs remained stable at 0.31 per cent but the loan loss coverage declined by around 60 bps to 74.8 per cent. The brokerage forecasted a profit growth of 13.5 per cent y-o-y in FY11 to Rs 2,800 crore. At Rs 314, the stock trades at 0.8x FY10 its estimated adjusted book value. Maintain outperformer.
GSK Consumer
Reco price: Rs 800
Current market price: Rs 828.90
Target price: Rs 919
Upside: 10.9%
Brokerage: Motilal Oswal Securities
Glaxo Smithkline Consumer (GSK) posted a 20 per cent volume growth in Q1 CY09 driven by domestic volume growth, higher exports, and new launches/pipeline filling. Horlicks and Boost volumes were up 21per cent and 8 per cent, respectively with the biscuits portfolio growing by 27 per cent y-o-y.
Input cost pressures sustained in Q1 CY09, as prices of malt, liquid milk and powder milk were up 14 per cent, 20 per cent and 10 per cent y-o-y, respectively. During the quarter, the company launched products like Horlicks Nutribar.
Net sales grew 31 per cent y-o-y to Rs 540 crore and PAT grew by 48 per cent to Rs 83.9 crore (above estimates). Gross margin declined 220 bps on account of higher input cost; EBITDA margin expanded 230 bps due to lower ad-spend and other expenditure.
The brokerage revised volume growth estimate for CY09 to 14 per cent (earlier 10 per cent) and 10 per cent for CY10 (earlier 8 per cent). It is improving its EPS estimates by 10 per cent to Rs 59 for CY09 and by 13 per cent to Rs 70.7 for CY10. The stock is trading at 13.6x CY09E and 11.3x CY10E earnings. Maintain buy.
Ranbaxy Laboratories
Reco price: Rs 175.75
Current market price: Rs 165.95
Target price: Rs 140
Downside: 15.6%
Brokerage: Macquarie Research
Ranbaxy Laboratories’ Q1 CY09 net sales were down by about 4 per cent y-o-y to Rs 1,560 crore. Developed markets contributed 39 per cent of sales and declined by 6 per cent y-o-y, despite the rupee depreciation. The emerging market portfolio contributed 54 per cent of sales and was down by around 2 per cent to Rs 840 crore.
Recurring EBITDA for Q1 CY09 was a loss Rs 82.2 crore, a sharp decline of 17.70 per cent y-o-y, driven primarily by a hedging forex loss of Rs 84.5 crore and a cost/revenue mis-match due to the ongoing import alert in the US.
The management has guided for sales of around Rs 7,000 crore and a loss of around Rs 800 crore in CY09, which translates to operations just breaking even in the next three quarters.
Discussions with the FDA to resolve the import alert and application integrity policy issues are on and will be impacting sales in 2010 also. The brokerage cuts CY09E and CY10E EPS by 99 per cent and 9 per cent, respectively to account for forex loss and further weakening of the developed market operations. The brokerage expects the stock to be under further pressure, post the results. Target price has been lowered to Rs 140 from Rs 146. Maintain underperform.
Indian Bank
Reco price: Rs 113
Current market price: Rs 101
Target price: Rs 121
Upside: 19.8%
Brokerage: Angel Broking
Indian Bank registered 7.2 per cent sequential decline in net interest income to Rs 668 crore. Non-interest income was higher than estimates partly on account of the moderate treasury gains and also due to the high sequential growth of 28 per cent in fee income. Recoveries from written-off accounts continued to slow down, slipping by 53 per cent y-o-y to Rs 46 crore during the quarter. Operating expenses moved up by 7 per cent y-o-y, enabling the bank to post 21.5 per cent y-o-y growth in pre-provisioning profits.
Provisioning expenses came in much lower than expected at Rs 24 crore, down by more than 80 per cent on a y-o-y and sequential basis. Correspondingly, the bank’s gross additions to NPAs in FY2009 were also much lower than expected at 0.6 per cent of FY08.
In terms of gross and net NPA ratios, asset quality was largely stable sequentially. Capital adequacy is at 14 per cent. The bank delivered net profit growth of 63 per cent y-o-y to Rs 394 crore during the quarter (above estimates). Deposits and advances grew by 19 per cent and 29 per cent, respectively. At Rs 113, the stock trades at 3.9x FY2010E EPS of Rs 29.2 and 0.7x FY2010E. Maintain accumulate.
United Spirits
Reco price: Rs 717
Current market price: Rs 708.75
Target price: NA
Brokerage: Edelweiss Securities
United Spirits’ (USL) net sales grew slower at 19 per cent to Rs 900 crore owing to higher excise pay out of Rs 725 crore, a growth of 32 per cent y-o-y. For FY09, USL reported 21.3 per cent growth in net sales to Rs 3,800 crore driven by 20 per cent growth in volumes. McDowell’s No.1 grew at 15 per cent over FY08 to 31.5 million cases while its Signature premium whiskey recorded a sales volume of over 1 million cases with 27 per cent volume growth.
EBITDA margin has contracted by 184 bps to 16.0 per cent of net sales, primarily due to over 600 bps y-o-y declines in gross margins. Gross margins are unlikely to witness any improvement as the acreage under sugarcane production is likely to drop this year. Q4 FY09 PAT declined 14.6 per cent y-o-y to Rs 55.6 crore while for FY09 PAT declined 5 per cent to 297 crore.
A consolidated debt of Rs 6,900 crore is an overhang on the stock though the expected sale of its treasury stocks to a strategic partner could allay these concerns. At Rs 717, the stock trades at 24.2x and EV/EBITDA of 13.3x its FY09 (standalone) numbers.
Current market price as on April 29, 2009
