CP | Dalal Street

Nestle – Results Don’t Justify Stock Premium

November 3, 20091 min read

Nestle India’s Revenue growth was healthy at 18% Y/Y; driven by 18% domestic growth (both volumes and pricing led) and 11% in exports. Reported PAT rose c39% Y/Y to Rs1.83bn and was lower than our estimate (Rs1.9bn) as EBITDA margin expansion of 160 bps to 20.3%.

Gross margins may witness some pressure ahead, as prices of key commodities (milk solids and sugar) are firming up. While Nestle’s expansion into rural markets is a positive long-term opportunity but with issues of deteriorating product mix.

Nestle is expected to report an EPS of Rs 85 to 87 and 100 to 106 for fy 10 and fy11 respectively according to various FII estimates. Nestle is a good play on India’s urban consumption story, current valuations at 30x one-year forward P/E leave no room for Investors.

Economy, Markets and Macro Views

Hindustan Unilever – Too Much expectations by Investors

November 3, 20091 min read

Hindustan Unilever Ltd – HUL reported recurring PAT at R5bn (+9.7%Y/Y) Despite strong margin expansion (+166bps Y/Y), overall EBITDA rose c17%, as revenue growth was a disappointing 5% – with overall FMCG volume growth of ~1% – despite the lower base.

Market share in both hair and skin remains fairly stable; oral market share [personal wash, skin care and toothpaste] continues to deteriorate. This segment remains the bulwark of profitability. We expect ad spends (as % of sales) to continue to accelerate, as mgmt refocuses on these categories. (more…)

Equity Research

Voltas – Q2 Lower Cost Boots PAT – But Order Inflow Cools Down

November 3, 2009April 18, 20201 min read

Voltas’ 2QFY10 Sales at Rs10bn Grew 9% YoY and 2QFY10 PAT at Rs807mn grew 36% YoY. The earnings beat was primarily due to higher than expected EBITDA margins of 10.6% (up 296bps YoY and 282bps ahead of estimates) as the company benefited from lower cost inventory in this quarter and continued cost reduction efforts.

The sales in 2QFY10 were affected by a sharp decline in revenue in the Engineering (more…)

Breaking Corporate India Earnings News

Hindalco – Q2 Results Hit by Costs

November 2, 20091 min read

Hindalco Industries 2QFY10 adj. standalone PAT was Rs2.2bn down 34% q-o-q, -52% yoy. Adjusting for MTM gains (net) of Rs1.2bn, recurring PAT was Rs2.2bn, -69% yoy.

The decline was on: 1) a 35% drop in aluminium LME prices, 2) high cost e-auction coal and poor quality linkage coal, 3) high caustic soda prices, 4) sharp fall in copper by-product prices. Adj margin was 10% vs 18%.

Aluminium EBIT falls 64% yoy – Reported EBIT margin fell to 16% from 34% last year. Like Nalco, Hindalco was also hit by lower LME prices (US$1,807/t) and higher coal costs. The negative impact was partly offset by rupee deprecation (48.8 vs. 43.8), and a 7% increase in production.

Hindalco is expected to report an EPS of Rs 10 and Rs 13 for fy10 and fy11 respectively according to Citi. However, BoFA-Merrill is expecting just Rs 8.5 and Rs 8.9 for fy 10 and fy11 respectively.

Economy, Markets and Macro Views

Benchmark ETF – Advantage Volatile Markets

November 2, 20093 min read

Going forward we expect Volatility in the Movement. There can be sharp downward spikes on intra-day basis and a recovery at the end. As a small investor, how can you take advantage of this spike since you can’t avail this benefit with Mutual Funds which transact on the NAVs on closing basis. You can take Delivery of these units which will be held in your DEMAT A/C. For example, on 31/10/08, Nifty Bees made a Spike downwards and hit a low of 230 and lets since then has more than doubled beating every other mutual fund.

Benchmark Funds ETFs can be of great help. NAV of these ETFs keep moving with the market. The ones available and recommended for investment are – Nifty Bees, Junior Bees, Bank Bees (more…)

Equity Research

DLF Sales Inline – Value Housing the new Landscape

November 2, 20092 min read

DLF reported sales of Rs17.5bn, 6% growth qoq supported by 2m sq ft of sales in Delhi project. While the EBIDTA margin of 52% was higher than our expectation of 47%, net profit at Rs4.4bn was 9% below our estimate due to higher interest cost and taxes.

DLF plans to launch Value housing under a new brand to mark its entry into affordable housing. We think the move has been prompted by subdued demand for DLF’s mid income housing projects, while other developers have seen phenomenal demand for (more…)

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