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Nomura on RIL
RIL’s Q1 results were operationally in line. EBITDA was 2% below our estimate. However, due to sharply lower interest expense (down ~60% q-o-q on lower translation impact) and reduced depreciation (down 11% q-o-q, as per the new companies act) reported PAT was 5.5% ahead. While some concerns remain, we highlight that RIL’s near-term earnings growth will likely be driven by refining/petchem expansion, and these remain on track. We maintain our positive stance and view the recent under-performance (down 13% from end-May vs Nifty up 4%) as an opportunity to accumulate.
Kotak Securities on Bajaj Auto
Bajaj Auto (BAL) reported weak set of results in Q1FY15. While topline was on expected lines, there was disappointment on the EBITDA margin front. Adjusted EBITDA margin declined both - YoY and QoQ. Accordingly, adjusted net profit came in slightly below estimates. Weak Discover brand volumes continue to impact Bajaj Auto’s performance in the domestic two-wheeler market. BAL, through launch of new Discover model, is hopeful of gaining market share in the executive segment.
Going ahead, demand for sports/premium motorcycle is expected to be healthy on the back of pick-up in the economy and BAL with its dominance in this segment, should benefit. Resumption of exports to Egypt from 2QFY15 will give further impetus to exports. We revise our estimates downward to factor in weaker than expected operating margin performance and depreciation impact under new Companies Act (2013). We retain ACCUMULATE on the stock with revised price target of Rs2,254 (earlier Rs2,361).
Karvy on UltraTech Cement
UltraTech’s net sales surged 14% y-o-y while its EBITDA and PAT declined 2% and 7% YoY, respectively. While sales came in-line with our expectations, EBITDA and PAT were 12% lower versus our estimates. Sales volume increased 15% y-o-y (2% ahead of our estimates led to 18 days of JP Gujarat asset amalgamation impact which we had not incorporated). We will revise our estimates as we will incorporate the amalgamation of the JP Gujarat assets (4.8 mnMT) in UltraTech’s standalone capacity of 54 million MT. We currently have “BUY” recommendation on the stock with a target price of Rs 2,837 valuing it at $193 per MT (FY16E) which discounts its FY16E/17E EBITDA at 11.5x and 9x respectively and implies replacement cost of $187 per MT (FY17E).
Motilal Oswal Research on Oberoi Realty
Key overhangs viz. Mulund MoEF, Worli hotel operator, JVLR project conversion approval, and new land acquisition (at Borivali) etc was addressed to a meaningful extent. It should pave the way for a new monetization cycle and better cash flows H2FY15 onwards. Seamless execution over last two years should benefit its cash flow with ready assets once demand turns favorable in Mumbai. It trades at 11.3x FY16E EPS, 1.5x FY16E BV. Buy with a target price of Rs 297.
Motilal Oswal Research on Zee Entertainment
ZEE continues to lead the industry in advertising growth. Domestic subscription growth is expected to remain resilient, although significant acceleration in growth is likely only from FY16 on phase III/IV digitization and potential ARPU increases by operators in phase I/II. We are no longer deducting preference dividend outlay from our PAT estimates as we now separately value the preference share liability for our target price calculation. The stock trades at P/E of 28.9x FY15 and 21.3x FY16. Maintain Neutral with a revised target price of Rs 330 based on 25x FY16 EPS less Rs 18/sh (~Rs 17b) towards preference share liability.
