Category: Breaking Corporate India Earnings News

GPIL’s adjusted net profit was lower-than-expectations at Rs24.9mn, declining 92.7% YoY and 80.7% QoQ. This was primarily on account of (1) lower price realizations from power which dropped almost 50% QoQ to Rs3.5 per unit, (2) 10% QoQ decline in power generation to 70.9mn units (3) 13% QoQ decline in production volumes of sponge iron to 60680 tonnes.

Net Sales was reported at Rs1531.1mn, declining 53.8% YoY.

However, analysts expect a significant improvement in earnings only from Q4FY10. GPIL’s 600,000 tpa pellet plant and an additional 20MW power plant are expected to get commissioned in Dec’09. This along with ramp up in iron ore mining is likely to significantly expand GPIL’s margins and earnings from Q4FY10.

In FY11, increased utilisation of its captive raw material assets (iron ore mines and pellet plant) and increased power generation are expected to not only lead to significant growth in GPIL’s earnings but also reduce the past cyclicality in its earnings. GPIL is expected to earn an EPS of Rs 18 and Rs 40 for fy10 and fy11 respectively.

IRB Infra could largely benefit from the road infra-layout of the Government if it continues to exercise restrain and focus on bagging high RoEs orders only. The company is embarking on a new strategy that could give it additional management bandwidth for execution.

NHAI appears to be on course to award road projects at a run-rate of 4,000-6,000 kms per year for the next five years. With a market share of ~8% for projects awarded so far, IRB could largely benefit from the increase in road projects.

2QFY10 results were ahead of estimates primarily on better than expected margins. Construction margin at 20.7% recorded an improvement of 230bps QoQ.

EPS estimates of IRB Infra:
Nomura – 10 and 13 for fy10 and fy11 respectively
Deutsche Bank – 12 and 17 for fy10 and fy11 respectively
UBS – 11 and 13 for fy10 and fy11
Kotak – 11 and 14 for fy10 and fy11 respectively

It appears to be slightly higher at 240 levels.

Ashok Leyland reported lower financial income and a higher tax rate than expected. Operationally, EBITDA was ~7% below forecasts. Sales were ~2% above estimates due to higher realizations.

Mgmt. guided to ~15% volume growth (upped from single-digits in 1QFY10), driven by confluence of recovery in industrial activity, better utilisation of trucking fleet. Margin guidance of 350 bps improvement was not stated this Q (as it was in 1Q) but mgmt noted that 10.5% EBITDA margin in 2Q could be improved on slightly.

On the back of sharp increase in earnings is driven by a) lower tax rates (benefits at the Uttaranchal plant) and b) mgmt guidance on profitability is better than anticipated, Citi revised EPS estimates to 2.91 and 3.46 for fy 10 and fy11 respectively.

JP Morgan expects EPS of Rs 2 and Rs 2.7 for fy10 and fy11 respectively.

Anand Rathi pegs EPS estimates at Rs 2.6 and Rs 2.95 for fy10 and fy11.

Morgan Stanley is expecting 2.45 and 3.62 for fy10 and fy11 [Remember, Morgan’s underlying tone on India is extremely bullish and hence EPS estimates will be higher than the rest]

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.

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.

Ambuja’s poor performance continued with profits missing our estimates by 15% on higher clinker purchases and high coal costs. ACEM’s 3Q09 PAT grew 27% YoY on account of one-offs.

Domestic volumes increased 9.1% YoY while exports declined 50% YoY. The average realisation improved 10.5% YoY and 1.6% QoQ on account of a lower proportion of exports and higher realisations in the North and East.

Costs in 3Q09 surprised negatively. Ambuja is short of clinker capacity in the East and had to purchase clinker from the market given the strong demand in the region. Coal cost per tonne was flat sequentially, as the high-cost coal inventory was fully
consumed in the quarter.

Ambuja’s EPs is expected to drop for 12-2010 to Rs 7.79 from Rs 8.25 this year (12-2009).