The Morning Meeting Notes as on 26h February, 2010.
Contents
n Research Views
Advanta India CY09 (Conso) Results- Below estimates due to lower topline and higher than expected interest costs
Advanta India's CY09 results were below estimates due to lower than expected topline and higher than expected interest costs.
For Q4CY09, the company reported net revenues of Rs 1.8 bn, -3% YoY (below estimates). EBITDA margins for the quarter declined massively by 1010 bps YoY to 7.7% (below estimates of 18.5%). EBITDA for the quarter declined by 58% YoY to Rs 142 mn resulting in APAT of Rs 141 mn and AEPS of Rs 8.4.
Results for CY09 were also below estimates. Topline for the full year at Rs 7.0 bn was marginally below estimates. EBITDA for the full year declined by 11% to Rs 1.1 bn resulting in EBITDA margins of 14.5% (below estimates of 17.5%).Interest costs at Rs 620 mn were higher than expected which affected bottomline even further. APAT for CY09 stood at Rs 301 mn, -43% YoY resulting in an AEPS of Rs 17.9.
(Note : # Q4CY09 Numbers are derived from reported CY09 numbers)
Pfizer Q4CY09 results (CMP- Rs 913, PFIZ@IN, Mkt Cap- Rs 27bn)
n Pfizer Q4CY09 PAT at Rs288mn was below our expectation of Rs366mn mainly because of poor operating performance. For CY09, the PAST was down by 6% to Rs1448mn. Ebidta margins during the quarter was 15% (expansion of 50bps) vs. our expectation of 21.3% (operating margins in Q3CY09 was 24%). This is mainly because of significant increase in other expenditures (38% of revenue vs. 25% of revenue in Q3CY09). For CY09, the operating margins were 19.9% vs. our estimate of 21.8%.
n Revenue grew by 10.6% to Rs1949mn (in-line with our estimates)), driven by 22% growth in the Animal Healthcare segment and 9% increase in Pharma business. For CY09, the company reported a growth of 13% to Rs7723mn on the back of 27% growth in Animal healthcare business and 12% growth in Pharma business.
n The company reported an exceptional item for compensation paid to employees under VRS of Rs 44.3mn and Rs109.2mnmn for Q4CY09 and CY09 respectively.
n At the CMP of Rs 913, the stock is trading at 19.9xCY09 EPS of Rs 46, 15.8x CY10E EPS of 57.8 and 13.8xCY11E EPS of 66.3. Our earning estimates for CY10E and CY11E and rating is under review.
n Research Update included
Indian railway budget 2010-11; High on vision, low on provision
Rail Budget 2010-11, presented by Union Railway Minister Ms Mamta Banerjee, through the 2020 vision, laid the roadmap for long term plans of railways. The railways has set an ambitious target of adding 25,000 km new lines over the next 10 years (2500 km / year as against last 5 years average of mere 219 km / year). While higher reliance on Public Private Partnership (PPP) model should help in achieving these optimistic targets, low provisions for funding and slow execution remain key concerns.
Broadly, it remains positive for the industry with no increase in freight rates. Industries like cement, power, metals to gain, since industry was worried about increase in freight rates. Rail companies like Kalindee, Hind Rectifiers, Texmaco, BEML, Kernex etc should benefit from 2020 vision, target of 1000 km new track in next year, gearing up execution on Dedicated Rail Freight Corridor (DRFC) in longer run, while opportunities in near term remained subdued due to lack of clear guidelines and execution capabilities. Gross traffic receipt is estimated to increase by 4.3% driven by 6.1% growth in freight loading volumes and 8.6% growth in passenger earnings. Despite increase in gross earnings, net margins are likely to remain stable at ~8% with insignificant increase in internal accruals. As a result, dependency on external sources of funding is likely to increase.
Mphasis Limited Jan'10 Result Update; Anticipated risks play out; Maintain HOLD; Target Price: Rs 650
Mphasis's Jan'10 quarter results reflected one of the key risks pointed out by us in the previous note on the company (please refer Mphasis:Downgrade one notch further to HOLD citing full valuations' dated Nov 20'09) as company saw price cut imposed by HP/EDS on the ITO side. We have tweaked our Oct'10/Oct'11 estimates for (1) slightly higher revenues (we now build in ~23.5%/18% YoY revenue growth or Oct'10/Oct'11 V/s 21.6%/18% earlier), (2) price cuts in the ITO business and (3) rest in US$/INR assumptions to Rs 45/$ ( V/s 47/$/46/$ for Oct'10/Oct'11 earlier) and thus change our Oct'10/Oct'11 earnings estimates marginally to Rs 49.5/Rs 53.6 V/s Rs 50/53.8 earlier. We continue to believe that valuations at ~13x Oct'11E earnings remain full with little room for positive surprises (albeit risks remain weighed on the downside from actions similar to what we have seen in the form of pricing cut on the ITO business from HP/EDS). Although we maintain our HOLD rating on the stock with an unchanged price target of Rs 650, we would not rule out further correction in the stock despite ~9% cut today given the heightened expectations/ wider institutional ownership as Mphasis has remained investor's preferred pick in the mid cap IT services space.
n Technical Comments
Dull day
After an extremely dull session, finally Nifty ended the day on a flat note with a gain of just one point. The charts say that the triangular consolidation of Nifty is yet to see a breakout on either side. However as the triangle is part of an inverse H & S, breakout is anticipated on upside. 4930 and 4805 are the respective resistance and support levels for the coming session.
BSE Cap Good:
BSE Cap Good index outperformed the broader markets and finally closed at 13333 with a gain of 1.27%. Going forward now this index has resistance at 13463 levels, thus we will witness further upside in this index only if it starts trading above the mentioned level. However downside this index has support at 13030 levels.
BSE Oil & Gas:
Selling was witnessed in the BSE Oil & Gas index and broke the recent low of 9529 and further closed below that at 9493 with a loss of -1.05%. On the daily chart this index is continuously making lower top and lower bottom, thus it is still looking weak and we maintain our downside target of 9367 and below that 9318.
Regards,
Emkay Research
Emkay Global Financial Services Ltd.
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