Fw: Investor's Eye: Update - Shree Cement (Earnings in line with estimates ); Viewpoint - Eicher Motors (The rise of a new challenger)

 

 

Investor's Eye [May 16, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Shree Cement Cluster: Cannonball Recommendation: Hold Price target: Rs3,100 Current market price: Rs2,643 Earnings in line with estimates  Result highlights Strong volume growth in cement & power drives overall revenue growth: Shree Cement in its Q4FY2012 results posted a revenue of Rs1,477.8 crore which is higher by 38% on a year-on-year (Y-o-Y) basis. The revenue growth was driven by a 25% growth in its cement business and a sharp jump in the revenue from the sale of power units (around Rs289 crore as compared to Rs120 crore in Q4FY2011). The revenue growth of the cement division was supported by a 20.5% growth in the volume and 3.8% improvement in the average blended realisation. In the power division the robust revenue growth was driven by a 67% increase in the power volume due to commissioning of its second phase of power plant for 150MW. Increase in cost of production results in margin pressure: The operating profit margin (OPM) during the quarter has contracted by 246 basis points YoY to 25.2%. The margin contraction is largely on account of loss posted by the company in its power division to the tune of Rs68.6 crore as against a profit of Rs15.8 crore at the earnings before interest and tax (EBIT) level due to an increase in the production cost of power units. On the other hand the EBIT margin of its cement division has improved significantly to 21.1% from just 1.8% in Q4FY2011. Consequently the operating profit increased by 25.8% YoY to Rs373 crore (as compared to a revenue growth of 38% YoY). On a per tonne basis, the EBDITA per tonne of cement has increased by 17.8% YoY to Rs998 due to the increase in the average realisation.  The other income surged to Rs77.4 crore: The other income of the company increased to Rs77.4 crore as compared to Rs20.7 crore in the corresponding quarter of the previous year due to provision of earlier year amounting to Rs37 crore being no longer required. Hence the surge in the other income has also supported the overall earnings of the company.  Provided full tax rate as compared to write back of tax in Q4FY2011: The effective tax rate during the quarter works out to 33% (higher than our estimates) compared to the overall write-back of tax to the tune of Rs100 crore in the corresponding quarter of the previous year.  Adjusted net profit of Rs117.1 crore in line with our estimates: The reported net profit of the company grew by 72.8% YoY to Rs114.3 crore. The reported net profit also includes Rs2.8 crore of extraordinary items. So adjusting for the same, the adjusted net profit works out to Rs117.1 crore (increased by 161.2% YoY) which is in line with our estimates. The board of directors of the company has recommended a second interim dividend of Rs6/share. Further the company has decided to change the accounting period from the current 12 months ending March to 12 months ending June. We fine tune earnings estimates for FY2013 and FY2014: We are incorporating better than expected volume growth in the power and cement divisions. We are also factoring in cost pressure on the power and fuel front. Overall we are marginally upgrading our earnings estimates, both for FY2013 and FY2014. The revised earnings per share (EPS) now works out to Rs101.6 and Rs129.3 for FY2013E and FY2014E respectively.  Maintain Hold with a price target of Rs3,100: We expect the performance of the company to improve at the operating level due to better than expected volume growth in both, the cement as well as the power division. However, the key concern remains in terms of a) oversupply which is likely to put pressure on the cement realisation and b) cost pressure in terms of higher pet coke price. Hence we maintain our Hold recommendation on the stock with a target price of Rs3,100. At the current market price the stock trades at an EV/EBIDTA of 6.1x FY2013 and 4.9x FY2014 estimated earnings. VIEWPOINT Eicher Motors        The rise of a new challenger Result highlights   Standalone Q1CY2012 results: Strong operating performance coupled with high other income boost profitability  Eicher Motors' standalone revenues in Q1CY2012 grew 46.7% year on year (YoY) on the back of a strong 40.8% growth in volumes. The realisation per vehicle improved 4.2% YoY and 2.9% sequentially. This was primarily on account of a better sales mix (higher sales of 500cc bikes) and a price increase of about 3% taken in January 2012.  The contribution per vehicle improved 5.6% on a Y-o-Y basis and 8.4% on a sequential basis. The operating margin improved 80 basis points on a Y-o-Y basis on account of lower material cost; it came 200 basis points higher than our estimates. A higher other income of Rs26.4 crore further boosted profitability. The profit after tax (PAT) at Rs45.3 crore more than trebled on a Y-o-Y basis. VECV Q1CY2012 results: Higher other expenditure impacts operating performance  Volvo Eicher Commercial Vehicles (VECV)' revenues grew 19% YoY on the back of a 12.4% Y-o-Y growth in volumes. The realisation per vehicle grew 5.9% YoY but declined 6.3% sequentially. The contribution per vehicle however improved 10.9% on a Y-o-Y basis. This was primarily on account of a lower proportion of Volvo trucks where the company gets only a distribution margin. However an increase in other expenditure/sales to 10.9%, which is the highest in the last three years, restricted the operating leverage benefits and restricted the operating margin at the 10% mark. A higher other income and lower tax rate resulted in a 9.3% Y-o-Y growth in the net profit.  Valuation We arrive at the consolidated EPS estimates of Rs147 and Rs170.8 for CY2012 and CY2013 respectively after adjusting for minority interest.  Given the bright prospects of the company after its association with Volvo, the stock can trade at 11x CY2013E earnings. We give only a book value per share of Rs100 to the Volvo engine venture on account of the longer than expected gestation period of the business. Even as the current price factors in the positives, we are bullish on the business from a longer term investment perspective. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Update - Shree Cement, Larsen & Toubro, Kewal Kiran Clothing, Ashok Leyland; Viewpoint - Liberty Phosphate

 

 

Investor's Eye [May 15, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Shree Cement Cluster: Cannonball Recommendation: Hold Price target: Rs3,100 Current market price: Rs2,657 Q4FY2012 results: First-cut analysis  Result highlights Strong volume growth in cement and power drives overall revenue growth: Shree Cement in its Q4FY2012 results posted a revenue of Rs1,477.8 crore which is higher by 38% on a year-on-year (Y-o-Y) basis. The revenue growth is driven by a 25% growth in its cement business and a sharp jump in the revenue from the sale of power units (around Rs289 crore as compared to Rs120 crore in Q4FY2011). The revenue growth of the cement division is supported by a 20.5% growth in the volume and 3.8% improvement in the average blended realisation. In the power division the robust revenue growth has been driven by a 67% increase in the power volume due to commissioning of its second phase of power plant of 150MW. Increase in cost of production results in margin pressure: The operating profit margin (OPM) during the quarter contracted by 246 basis points YoY to 25.2%. The margin contraction is largely on account of loss posted by the company in its power division to the tune of Rs68.6 crore as against a profit of Rs15.8 crore at the earnings before interest and tax (EBIT) level due to an increase in the production cost of power units. On the other hand the EBIT margin of its cement division has improved significantly to 21.1% from just 1.8% in Q4FY2011.  The other income surged to Rs77.4 crore: The other income of the company increased to Rs77.4 crore as compared to Rs20.7 crore in the corresponding quarter of the previous year. The increase is due to provision of earlier year amounting to Rs37 crore being no longer required. Hence the surge in the other income has also supported the overall earnings of the company.  Provided full tax rate as compared to write back of tax in Q4FY2011: The effective tax rate during the quarter works out to 33% (higher than our estimates) as compared to the overall write back of tax to the tune of Rs100 crore in the corresponding quarter of the previous year.  Net profit increased by 73.6% YoY; in line with estimates: The net profit of the company grew by 72.8% YoY to Rs114.3 crore which is much in line with our estimates. The board of directors of the company has recommended a second interim dividend of Rs6 per share. Further the company has decided to change the accounting period from the current 12 months ending March to 12 months ending June. We shall come out with a detailed update post our interaction with the management. Currently we have a Hold rating on the stock with a target price of Rs3,100. At the current market price the stock is trading at an EV/EBDITA of 6.7x its FY2013E earnings. Larsen & Toubro Cluster: Evergreen Recommendation: Buy Price target: Rs1,416 Current market price: Rs1,223 Price target revised to Rs1,416  Result highlights Q4 results exceed expectations; order inflow disappoints: Larsen and Toubro (L&T)'s Q4FY2012 results were better than our expectations mainly on account of a robust performance in its engineering and construction (E&C) division and lower tax rate. The operating margin at 13.9% was also better than our expectation. However, the order inflow for Q4 was disappointing, registering a year-on-year (Y-o-Y) decline of 30% to Rs21,159 crore, falling behind market expectations. The company has given an aggressive growth guidance of 15-20% in order inflow for FY2013 although it missed its guidance of 5% growth in FY2012. Aggressive guidance for FY2013, E&C segment to support growth in FY2013: The company has given a robust Y-o-Y growth guidance of 15-20% in revenue and order inflow for FY2013. We feel that achieving the target for FY2013 would be an uphill task for the company, given the slowdown in the demand environment and policy paralysis in the infrastructure sector. The slow moving orders' share in the total order book (around Rs1,45,723 crore) is at 9-10% which could face cancellation in future. The company's growth guidance in revenue is backed by the robust execution plan of its E&C projects. The company is expecting a robust growth of 15-20% in this segment without compromising on margins. It is also said that the growth is likely to be lower, ie in the range of 8-12% in the other two segment- electrical and electronics (E&E) and the machinery and industrial products (MIP). The company also expects the margins to sustain at the FY2012 level of 11.8% with +-50 basis point deviation because of fluctuation in material cost. The working capital cycle may see some pressure in FY2013 also because of a tough business environment and tightening liquidity situation. The company would be undertaking a capital expenditure (capex) of approximately Rs2,000 crore (Rs1,700 crore in FY2012).  Estimates fine-tuned: In view of low order inflow in FY2012 and the current macro headwinds, we have marginally downgraded our order inflow and revenue estimates. We have also trimmed our margin assumption to reflect the impending margin pressure particularly in the E&C and the MIP divisions. However, the tax rate is expected to be lower because of a higher capex and research and development (R&D) expenditure. Our stand-alone estimates for FY2014 have decreased by about 7% while our FY2013 earnings estimate is largely unchanged. Our revised consolidated earnings per share (EPS) estimate stands at Rs94.6 and Rs102.6 for FY2013 and FY2014 respectively. We expect the company's stand-alone earnings to grow at a compounded annual growth rate (CAGR) of 9% over the next two years.  Price target revised to Rs1,416: While the company reported overall decent results for the quarter, the order inflow guidance would be highly subjective to an uptick in infrastructure development activities in the country and in the Middle East region. We also feel that its diversity continues to cushion the overall financials in a tough business environment. At the current market price the stock is trading at 11.9x on its FY2014 consolidated estimate. Our sum-of-the-parts (SOTP) based price target stands revised downwards to Rs1,416 on account of revised estimate of the standalone business, fine tuning of the target multiple and estimates from L&T InfoTech and L&T Finance Holding. We continue to believe that L&T is the best proxy play on India's infrastructure growth theme and maintain our Buy rating on the stock. The key positive triggers in the stock remain uptick in business sentiments, winning of big-ticket orders in the power/ infrastructure sector and easing of margin pressure.  Kewal Kiran Clothing Cluster: Ugly Duckling Recommendation: Hold Price target: Rs700 Current market price: Rs592 Price target revised to Rs700  Result highlights   Q4FY2012 results - resilient in difficult times In spite of the the present difficult macroeconomic environment, Kewal Kiran Clothing Ltd (KKCL)'s Q4FY2012 performance was resilient. The top line, operating profit as well as the earnings grew by 22.1%, 12.6% and 11.8% respectively on a year-on-year (Y-o-Y) basis.  The revenue growth of 22% YoY was led by a strong volume performance from the apparels (+19% YoY; rose from 7.6 lakh pieces in Q4FY2011 to 9 lakh pieces in the current quarter), while realisation grew by a mere 2.4% YoY from Rs703 a piece to Rs720 a piece. A strong performance on the revenue front could not result into an equally good profitability, whereas the operating profit was up, but only by 10% YoY (margins contracted by 220bps YoY). This was largely due to a higher raw material to sales ratio. The gross profit margin for the quarter came off by 580bps from 60.6% in Q4FY2011 to 54.9% in the quarter under consideration. The balance sheet continues to be strong with cash and cash equivalents at about Rs102 crore (about Rs82 per share; constituting 13.7% of the current m-cap). The return on capital employed (RoCE) and return on equity (RoE) stood at 23% and 24% respectively.  Downgrading earnings estimates: Though the results were resilient in spite of the weak macro environment, the same lagged behind our expectations on the profitability front. Going forward, for the next two quarters, we expect the discretionary environment to remain subdued till the arrival of the festive season. Hence, building the same into our estimate, we have revised our FY2013 estimates, and further have introduced our FY2014 estimates for the company. Our earnings per share (EPS) for FY2013E and FY2014E stand at Rs48.0 (Rs53.6) and Rs58.4 respectively.  Maintain Hold: KKCL's superior business model (strong brands sold on outright basis via various distribution channels) coupled with its management's financial acumen (profitable growth approach and abidance to superior corporate governance practices) keep us bullish on its business. We ascribe a price/earnings ratio (PER) of 12x our FY2014E EPS of Rs58.4 to arrive at a price target of Rs700. Though we continue to like the business, the near-term sluggishness in the discretionary spent category makes us stick to our Hold rating on the stock.  Ashok Leyland Cluster: Ugly Duckling Recommendation: Hold Price target: Rs28 Current market price: Rs26 A "Dost" comes to rescue growth  Result highlights For Q4FY2012, the realisation from the medium and heavy commercial vehicle (MHCV) segment for Ashok Leyland Ltd (ALL) was flat on a sequential basis. This is on account of lower sales to the defence segment where the realisations are high. ALL sold 63 vehicles to the defence in Q4FY2012 as against 171 in Q4FY2011. Employee costs/sales was the lowest in the last four years. This was on account of lower provisioning requirement as per actuarial valuation to the tune of Rs20 crore. Other expenditure/sales increased 220 basis points on a year-on-year (Y-o-Y) basis. This was primarily on account of increase in advertising and brand building expenses and higher research and development (R&D) spend during the quarter. Also transportation of vehicles from the Pantnagar facility to the southern market increased costs by Rs25 crore. ALL was impacted by a foreign exchange (forex) loss of Rs15 crore on mark to market liabilities. The EBIDTA margin, impacted by a higher other expenditure, was down 240 basis points sequentially. ALL missed its FY2012 margin guidance of 10.5% by 70 basis points. Interest cost increased 31.6% on a sequential basis impacting profitability. The tax rate was lower in Q4FY2012 and FY2012 on account of higher R&D expenditure.  ALL took a price hike of 1% in May 2012 apart from price increases of about 2% on account of increase in the excise duty in the budget. Valuation For FY2013, we expect MHCV volumes to grow by 5.8% YoY while Dost's volumes are expected to grow by 19.2% YoY. Our margin assumption for FY2013 is of 9.9% - ie, a marginal improvement over FY2012. We expect the earnings per share (EPS) for FY2013 and FY2014 to be at Rs2.47 and Rs2.70 respectively. Given the challenging business environment and mid single digit growth prospects, we recommend Hold on the stock with a target price of Rs28.3/share, discounting its FY2014 earnings by 10.5x.  VIEWPOINT Liberty Phosphate        Strong performance continues; maintain our preference for SSP manufacturers Strong result; way ahead of expectation Liberty Phosphate posted a good revenue growth in Q4FY2012 which was way ahead of expectations. The same was on account of higher volumes generated due to good demand. The total revenue in Q4FY2012 increased by 126.6% year on year (YoY) to Rs149.5 crore. The volume of SSP was robust, increasing from 80,000 tonne in Q4FY2011 to 1.49 lakh tonne in Q4FY2012, ie an increase of 86% YoY. In Q4FY2012 the reported profit after tax (RPAT) stood at Rs16.7 crore which is 89.6% higher than Q4FY2011's. The results include foreign exchange (forex) gains of Rs1.8 crore. Adjusting to this the profit after tax (PAT) stood at Rs15.2 crore which is 71.6% higher than in the corresponding quarter of the previous year. Going ahead we believe that the company will maintain good growth in terms of volume and realisation.   Surge in input cost results in margin contraction The operating margin in Q4FY2012 declined by 760 basis points to 16.4%, mainly due to higher prices of key inputs - rock phosphate and sulphuric acid. Despite the rising input cost (accentuated by the weakening rupee) and pressure on margins, the company posted a 55% growth in operating profits and 90% growth in its net profits to Rs16.7 crore during the quarter. During the quarter the maximum retail price of SSP remained at Rs4,800 per tonne which is 34% higher than Q4FY2011's price.  Future expansion to drive growth ahead: Liberty Phosphate is planning to enhance its capacity for manufacturing SSP from 5.6 lakh tonne in FY2012 to 9.24 lakh tonne by the end of FY2013, which amounts to an increase in the installed capacity by 64%. This will make Liberty Phosphate the largest player in the SSP industry. Going ahead, capacity expansion will drive the volume growth. Currently the company is working at 75% capacity utilisation and going ahead it will maintain the capacity utilisation at around the same level.    Outlook and valuation SSP is one of the cheapest fertilisers available in India after urea. SSP manufacturers have seen a turn-around at operating levels after the introduction of the nutrient based subsidy for non urea fertilisers. We believe that going ahead SSP will be the growth driver for the fertiliser industry and it may also replace the incremental usage of DAP which costs three times the cost of SSP. At the current market price the stock trades at 2.3x its FY2013 earnings and 2.1x FY2014 rough-cut earnings estimates. We continue to have a positive stance on the company and the SSP industry. Liberty Phosphate has appreciated by over 53% since we introduced the stock with a positive bias in the "Viewpoint" section of our daily online publication "Investor's Eye" on September 7, 2011. We maintain our positive bias on the stock. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Stock Idea: Oil India (High on cash, low on valuation)

 

 

Stock Idea [May 11, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK IDEA Oil India Cluster: Apple Green Recommendation: Buy Price target: Rs600 Current market price: Rs460 High on cash, low on valuation Key points  Holds substantial hydrocarbon reserves with a fairly healthy reserve-replacement ratio: Oil India Ltd (OIL), the state-owned upstream oil exploration company, has several commercialised onshore hydrocarbon discoveries across reserves in Rajasthan and the north-eastern region of India. It also has international presence through participatory interest in oil blocks in the Middle East and Africa. The total 1P (proven) and 2P (proven and probable) reserves of the company stood at 505 million barrels (mmbbls) and 944mmbbls as on March 2011. In addition to the huge oil reserves, the company's reserve-replacement ratio (RRR) is quite healthy at 1.42x which implies a comfortable level of accretion of oil reserves through new discoveries.  Rising subsidy burden is a drag on valuation but largely priced in: The under-recoveries of the oil marketing companies are estimated to have shot up to Rs140,000 crore in FY2012 as the government has been unable to revise the retail price of the petroleum products. This is likely to almost double the subsidy burden of the upstream exploration companies. We believe that the same is already reflected in the recent underperformance of the upstream stocks like OIL and ONGC. Plus there is scope for positive surprises in the form of the cooling off of the crude oil prices and/or the achievement of political consensus by the government to at least partially pass on the impact of firm crude oil prices to the consumers through a revision in the petroleum prices. Healthy balance sheet with huge free cash; impressive dividend yield: As per our estimates, OIL would have net cash of around Rs11,511 crore (ie over $2.2 billion or Rs191 per share) as on March 2012, which amounts to 41% of its market cap and over 100% of its annual net revenues. Despite a healthy dividend pay-out (estimated Rs20 per share for FY12 on post-bonus equity-yield of 4.3%), a higher share of subsidy burden and the exploration related capex, the free cash accretion would remain strong and limit the downside risk from the current level. Valuation attractive; recommend Buy with price target of Rs600: We prefer OIL because its huge reserves and healthy RRR would provide a reasonably stable revenue growth outlook. Further, its valuation is attractive as it is trading at its lowest valuation since its IPO. In terms of valuation, the fair value works out to Rs600 per share (based on the average fair value arrived at using the DCF, PE and EV/EBIDTA valuation methods). This offers around 30% upside from the current level. Hence, we initiate coverage on OIL with a Buy recommendation and price target of Rs600. At the current market price the stock trades at PE of 7.5x its FY2013E EPS of Rs61 and 7x its FY2014E EPS of Rs66. Click here to read report: Stock Idea   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Additional Long and Short margin required

 

This is to inform you that , exchange has levied additional margin on below mentioned commodities. Therefore you are requested to give additional Long and Short margin by Monday May 14, 2012 till 12.00 pm.

Please note if the same is not complied ,positions will be squared off.

Symbol	Normal Margin	Special Cash Margin (Long) %	Special Cash Margin (Short) %
BARLEYJPR	11.43	20	0
CHARJDDEL	10.61	35	5
POTATO	12.27	30	5
PPRMLGKOC	8.08	15	5
RMSEED	10.16	10	0
SYBEANIDR	10.08	10	0

 If you require any clarifications or assistance, you may please write to us at comm@indiainfoline.com or Reach our Customer Care Desk at (022) 40071000 or at our zonal customer service numbers: North -011-49315020, East - 033-44048600, Maharashtra-022-40609292, Gujarat and Madhya Pradesh -079-40271800, South-080-40547030 

Regards,
Loveena Khatwani
Head, Customer Service
India Infoline Commodities Limited

 

Fw: Investor's Eye: Pulse - Inflation for April 2012 climbs to 7.23% ; Update - Larsen & Toubro, Divi's Laboratories, Thermax, Federal Bank, Greaves Cotton

 

 

Investor's Eye [May 14, 2012]  Sharekhan www.sharekhan.com

Summary of Contents PULSE TRACK Inflation for April 2012 climbs to 7.23% The Wholesale Price Index (WPI)-based inflation for April 2012 came in at 7.23%, ahead of the Street's expectations. The inflation rate for February 2012 too has been revised upwards to 7.36% from the provisional figure of 6.95%. Outlook The inflation pressures have come to fore again due to a sharp jump in primary article prices and fuel price though the government is yet to announce hike in fuel prices. Given the high crude price and depreciating rupee the inflation pressures are likely to persist. This could result in further revision in growth outlook for FY2013 which is expected to be anywhere between 7.1%-7.5%. Going ahead in spite of the weak IIP numbers, the Reserve Bank of India could hold on the rates as now inflation control hinges more on government action.    STOCK UPDATE Larsen & Toubro Cluster: Evergreen Recommendation: Buy Price target: Rs1,588 Current market price: Rs1,160 Q4FY2012 results: First-cut analysis  Result highlights Q4 results exceed expectations; guidance for FY2013 order inflows surprises positively: Larsen and Toubro (L&T)'s Q4FY2012 results were better than our expectations mainly on account of a robust performance in its engineering and construction (E&C) division. However, the order inflow for Q4 was disappointing, registering a year-on-year (Y-o-Y) decline of 30% to Rs21,159 crore, falling behind market expectations. The company has surprised positively with its order inflow guidance for FY2013. It expects a 15-20% growth in fresh order inflow revenue for FY2013.  Standalone sales up 22%: L&T has reported a strong rise in its revenues (stand-alone) for Q4FY2012 which was slightly higher than our expectation of a 20% Y-o-Y growth. This was mainly on account of strong execution in the E&C segment. The E&C division reported a 23% growth in the revenues, which was above our and the street's expectations. The electrical and electronics (E&E) division reported a 14% Y-o-Y growth in revenue while the machinery and industrial products (MIP) division lagged reporting a fall of 6% YoY in revenue.  Operating margin declined: The operating margin declined to 13.9%, beating our expectation of 13.2% and lower than 15.4% in Q4FY2011. This was primarily due to a rise in employee cost (up 22% YoY) and input cost (up 25% YoY) and was partially offset by the containment in selling and administration costs. The company has indicated that the current fiscal year's margin would be maintained, although it could see a margin pressure of about 50 basis points in FY2013 on account of volatility in the input cost, mainly metal prices.  Adjusted net profit up by 28%: After excluding an one-time income of Rs55 crore from the sale of stake in one of its subsidiaries, L&T's adjusted net profit stood at Rs1,865 crore (up 28% YoY), which exceeds our as well as the street's expectations.  Order inflow subdued at Rs21,159 crore: The order inflow has been modest at Rs21,159 crore (fall of 30% YoY). Overall the order inflow in FY2012 fell by 12% YoY, which is much lower than the 5% growth guidance given at the start of the year. The current order book stands at Rs1,45,723 crore (up 12% YoY and flattish quarter on quarter [QoQ]).  Outlook and view: While the street was worried about L&T's margins and interest cost amid the rising interest rate scenario, the company has outperformed on these parameters during the quarter. However, the lackluster fresh order inflows continue to remain a drag on the valuations. The street would look for signs of revival in the investment cycle before factoring in the higher than expected order intake and revenue growth guidance for FY2013. At the current level the stock is trading at 12.5x its FY2013E earnings. We maintain our Buy recommendation on the stock and would soon come out with a detailed note taking a thorough account of the Q4FY2012 results. Divi's Laboratories Cluster: Apple Green Recommendation: Buy Price target: Rs1,122 Current market price: Rs883 Incremental contribution from DSN SEZ units fuels growth  Result highlights Bumper Q4: Divi's Laboratories (Divi's Labs) reported a 49.7% year on year (YoY) rise in revenue to Rs718 crore during Q4FY2012, mainly due to additional revenue from the newly commercialised DSN special economic zone (SEZ) unit at Vishakhapatnam (Vizag) and with the favourable currency contributing near to 5% of the growth. The operating margins remained flat YoY at 39.9% during the quarter; however, they were healthier than in the sequential previous quarter during FY2012. Despite the jump in the effective tax rate by 1,320bps YoY to 20.3%, the net profit jumped by 24% YoY to Rs216.9 crore, which is substantially higher (48%) than our estimate of Rs146 crore.  DSN SEZ unit boosts revenue and margins: The DSN SEZ unit which got commercialised in June 2011 contributed nearly Rs200 crore to its revenue stream in FY2012. This resulted in a 42% rise in the revenue during FY2012 to Rs1,858.6 crore. The improved utilisation of the new unit also helped improve operating margins during the year by 75bps to 36.9%.  We revise our estimates upward, maintain target price: We revise our earnings estimates upward by 8.8% and 10% for FY2013 and FY2014 respectively in view of the additional revenue and improvement in margins from the new unit. We maintain our target price of Rs1,122, which implies 20x average earnings for FY2013E and FY2014E.   Thermax Cluster: Emerging Star Recommendation: Hold Price target: Rs447 Current market price: Rs426 Price target revised to Rs447  Result highlights Results below expectation: Thermax' Q4FY2012 results were below our expectation led by revenue sluggishness in the power segment; however other income boosted the overall profit after tax (PAT). The group order inflow for the quarter remains muted at Rs918 crore (down 25% on a yearly basis). As the FY2012 closing order backlog has fallen by 25% year on year (YoY), the management indicated that the revenue for FY2013 could fall from FY2012 levels.  Top line fell by 5%: Thermax' net income from operations fell by 5 % YoY versus our expectation of a 7% growth. This was because of a fall in the energy segment's revenue by 8% YoY. The company had been reporting sluggishness in order inflow for the past few quarters, which has translated in a revenue slowdown in Q4FY2012. The environment division posted a Y-o-Y growth of 10% in revenues for the quarter. Exports for the year have also risen by 7% YoY to Rs1,143 crore and formed 22% of annual sales.  OPM under pressure: Employee and input costs were lower on a yearly basis, which partly compensated for the increase in other expenses. The margin in Q4FY2012 was stable at 11% on a yearly basis but has come off from the historical levels of 12-13%.  Net profit rose by 3%: A higher other income and lower tax rate boosted the net profit by 3% YoY to Rs129.8 crore, which was below our estimate of Rs134 crore. The interest cost jumped to Rs3 crore led by a rise in short-term borrowings. The company availed of working capital loan, which is reflected in rise in interest cost. The same is likely to exert further pressure on the margins going forward. Muted order intake position yet again: Order finalisation in the infrastructure sector has not yet picked up. The company's current order backlog at the group level stands muted at Rs4,828 crore (down 25% YoY) owing to lack of any large-ticket order acquisition. The order inflow during the quarter was subdued at Rs918 crore (down 40% YoY). In the stand-alone order inflow of Rs809 crore (down 36% YoY), energy contributed Rs536 crore and the environment segment Rs273 crore. The metallurgy sector accounted for 35% of the order book. The other major sectors contributing to the order book were power (10%), textiles (14%), sugar (10%) and cement (10%). While order inflows are still showing a downward trend due to the sluggish industrial capital expenditure (capex) cycle, the management indicated that there are a few good enquiries in the pipeline in the captive power space.  Estimates downgraded by 10-11%: Led by a slowdown in the order inflow in recent times, we have cut our revenue and order inflow assumption. Overall, we have downgraded our estimates by 10-11% each for FY2013 and FY2014. Overall, we are expecting the company to post a compounded annual growth rate (CAGR) of 0.4% in profit over FY2012-14. We also feel that the company could aggressively bid for projects in the coming times to keep its order book ringing though competition is rising. This would adversely affect its margins leading to margin pressure in the coming quarters.  Price target cut to Rs447: The growth in the company's order book remains highly dependent on momentum in the capex cycle of India, making it highly susceptible to swing in investment sentiments. Further, the optional value in its power equipment venture is also fading out. In the event of no order win in this segment, this venture involving Rs850 crore of capex would be a drag on the company's resources. The company also indicated that the annual running cost of this plant could run as high as Rs100 crore. Marred by poor order inflow and tough business environment, the stock has languished in the last one and a half year period. At the current market price, the stock trades at 13.0x and 12.4x its FY2013 and FY2014 estimated earnings respectively. Based on our revised earnings and target multiple of 13x (past 1 year average) we have revised our target price to Rs447. In view of the limited upside potential, we maintain our Hold rating on the stock. The key positive triggers in the stock remain the winning of big-ticket power equipment orders. However, a pick up in capex activities would augur well for the company. Federal Bank Cluster: Ugly Duckling Recommendation: Buy Price target: Rs522 Current market price: Rs413 NPAs decline, growth outlook improves  Result highlights Federal Bank's Q4FY2012 earnings were ahead of our estimates as they grew by 38.2% year on year (YoY; 17.7% quarter on quarter [QoQ]) to Rs237 crore. This was on account of a sharp decline in provisions (81% YoY). The net interest income (NII) growth was short of our estimates as it grew by 9.7% YoY (- 7% QoQ) to Rs491 crore. The sharp sequential decline in the net interest margin (NIM; to 3.56% vs 3.94% in Q3FY2012) was due to a rise in deposit cost and interest reversal (Rs25 crore). The same impacted growth in NII. Business growth remained healthy as advances grew by 18.2% YoY (13.7% QoQ) led by corporate and small and medium enterprise (SME) segments. The deposits grew by 13.8% YoY while the current account savings account (CASA) ratio declined to 27.4% from 29%. The bank's management has raised the loan growth target to 20-22% in FY2013 from approximately 18% earlier. The asset quality improved as the gross and net non performing assets (NPAs) declined to 3.35% and 0.53% respectively driven by moderation in slippages and better recoveries. However the bank restructured Rs960 crore worth of loans in the quarter (mainly pertaining to state electricity boards [SEBs] and Air India) taking the total restructured loans to Rs2,036 crore (5.4% of advances). The non interest income grew by 13.7% YoY (16.4% QoQ) led by a strong growth in the treasury income. The cost to income ratio increased to 42.9% from 37.1% in Q3FY2012 due to a 22% Q-o-Q increase in the non employee expenses. Outlook Federal Bank's Q4FY2012 results were notable in terms of decline in slippages and pick up in recoveries, though restructured loans increased in line with the industry. We expect the earnings to grow at a compounded annual growth rate (CAGR) of 16% over FY2012-14 leading to return on equity (RoE) of 15.5% in FY2014. We continue to maintain our Buy recommendation with a price target of Rs522. Greaves Cotton Cluster: Emerging Star Recommendation: Hold Price target: Rs83 Current market price: Rs74 Are the engines steaming out?  Result highlights GCL Q4FY2012 result highlights: Strong operating performance and exceptional items boost profitability  Greaves Cotton Ltd (GCL)'s revenues at Rs445.4 crore were 11.3% below our estimates largely on account of a sharp deceleration in the construction equipment segment (down 41.2% year on year [YoY]) and slowdown in the engine sales mainly of three-wheelers. However, the company reported a strong operating performance with a margin of 13.4% as against our expectation of 12.8%. GCL received price hikes from the original equipment manufacturers (OEMs) in the engine segment leading to a strong margin expansion. The core engine segment reported an EBIT margin of 18.6% (up 190 basis points sequentially). The construction equipment segment continued to witness lower offtake thereby impacting profitability. The segment has disappointed in FY2012 as losses widened. GCL took a charge of Rs20.3 crore in Q4FY2012 on account of devaluation of inventories. Further advertisement and brand building expenses led to an increase in other expenditure/sales, which is the highest in the last two years. During the quarter, the company had an exceptional gain of Rs43 crore (profit on sale of land), thereby resulting in a higher reported profit after tax (PAT). The recurring PAT (adjusted for exceptional items), however was 9.2% below our estimates. Valuation Considering the muted growth expectation of 5% for FY2013 on account of a sharp deterioration in the three-wheeler business; we are downgrading our earnings per share (EPS) estimates for FY2013 and FY2014 to Rs5.9 and Rs6.9 respectively. We are also cutting our target price on the company to Rs83 per share discounting FY2014E earnings by 12x. We recommend a Hold as of now as existing segments are facing growth challenges. Any breakthrough with an OEM customer in the four-wheeler segment would act as a re-rating factor for the stock. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.