Buy stocks of Ipca Labs; target of Rs 435

“For 4QFY2012, Ipca Labs (Ipca) reported lower -than-expected results. The top line grew by 16.7% yoy to Rs553cr, below in-line with our estimates. Also, OPM came in lower than expected at 18.7%. This also resulted in adjusted net profit growth coming in at 14.8% yoy, ending the period at Rs77cr. We recommend Buy on the stock.”

“Ipca reported net sales of Rs553cr, up 16.7% yoy, lower in-line with our estimate of Rs673cr. The company posted OPM of 18.7% vs. expected 20.7%.Recurring profit came in at Rs77cr, lower than our estimate of Rs114cr. Segment wise, for 4QFY2012, the overall formulations business grew by 9.0% to Rs386cr (Rs356cr), contributing 70.0% to the company’s total revenue. The API business witnessed 8.0% growth during the quarter to Rs127.7cr, contributing 22.9% to the total revenue. Adjusted net profit for the quarter grew by 14.8% yoy to Rs77cr.”

“We expect net sales to post a 22.5% CAGR to Rs3,474cr and EPS to register a 28.7% CAGR to Rs36.3 over FY2012�"14E, driven by the U.S. and domestic markets and the API segment. At current levels, the stock is trading at 10.7x and 9.4x FY2013E and FY2014E earnings, respectively. We recommend Buy on the stock with a price of Rs435,” says Angel Broking research report.

Buy stocks of Indoco Remedies; target of Rs 82

“For 4QFY2012, Indoco Remedies (Indoco) declared in-line results at the revenue front, reporting growth of 22.6% yoy. However, on the net profit front, growth came in lower than expected, growing by only 3.0% yoy. This was mainly on account of lower than expected other income. The domestic formulation segment grew by 13.4% yoy during the quarter, contributing 55.5% to the total revenue, whereas formulations exports increased by 49.0% yoy. We recommend Buy on the stock.”

“Indoco reported net sales of Rs148cr (Rs120cr), up 22.6% yoy, almost in-line with our expectation of Rs155cr for 4QFY2012. The growth for the quarter came in mainly on back of exports, which grew by 49.0% yoy. The domestic formulations, which accounted by 55.5%, grew by 13.4% yoy. Gross margin came in at 56.1%, in-line with expectations of 55.8%. Also, the OPM expanded by 170bp yoy to 14.6% (12.9%), just-in-line our estimates. Net profit for the quarter came in at Rs12.5cr, 21.9% below our estimate of Rs16cr.”

“We expect net sales to post a 22.3% CAGR to Rs837cr and EPS to post a 33.3% CAGR to Rs8.9 over FY2012-14E. At Rs54, the stock is trading at 7.0x and 5.9x FY2013E and FY2014E earnings, respectively. We recommend Buy on the stock with a revised target price of Rs82,” says Angel Broking research report.

Buy stocks of Gujarat Industries Power; tgt of Rs 77

“For 4QFY2012, GIPCL posted better than estimated performance on account of healthy Plant Availability Factor (PAF) and Plant Load Factor (PLF) reported by the 250MW SLPP station II. PAF and PLF for SLPP station II stood at 93.2% and 90.1% respectively for the quarter. For FY2012 as a whole PAF and PLF for SLPP station II stood at 73% and 66% respectively. This along with higher PAF reported by Gas-based Vadodara Station I and II boosted the OPM’s, which was higher by 554bp and 2,026bp on yoy and qoq basis respectively. We maintain our Buy recommendation on the stock.”

“For 4QFY2012 GIPCL posted a 15.8% yoy decline in net revenue to Rs263cr, on account of shut down of 125MW SLPP Unit-I due to damaged rotor. On account of this, 250MW SLPP Station I (Comprising Unit-I & II of 125MW each) posted low PAF and PLF of 48.2% and 47.8% respectively, with generation down by 42% yoy to 260.9MU. Vadodara station I reported a robust PAF of 97.3% and 97.7% for the quarter and year respectively. While Vadodara station II reported a PAF of 81.7% for the quarter. However, PLF for the plant stood at a low 19.6% due to low off-take.”

“GIPCL is well placed in terms of fuel security, with the entire fuel requirement of 500MW SLPP stations I and II met from captive lignite mines. Further, power generated by the company has assured offtake through PPAs signed under the cost-plus model, ensuring RoE of 14% (excl. generation linked incentives) at 75% and 80% PAF for lignite and gas-based plants. At the CMP of Rs59, the stock is trading attractively at 0.5x FY2014 P/BV. We have assigned a P/BV of 0.7x on FY2014 book value to arrive at a target price of Rs77. We maintain our Buy recommendation on the stock,” says Angel Broking research report.

Buy stocks of Bank of Baroda; target of Rs 864

“Bank of Baroda delivered another healthy performance during FY12 even though the year posed tough economic challenges in the form of acute industrial slowdown, high inflation and elevated interest rates. The Bank’s Total Income registered a healthy growth of 34% (y-o-y) to reach the level of Rs 33,096.05 cr in FY12 proving again the Bank’s ability to produce sufficient earnings even during tough market conditions. While, Net Interest Income increased by 17.2% (y-o-y) to Rs 10,317.01 cr, Other Income (or Non-Interest Income) grew by a 21.8% (y-o-y) to Rs 3,422.33 cr, primarily driven by impressive treasury gains and strong recovery from the written off accounts. Tax Provisions, however, declined this year due to an income tax refund (a usual seasonality) received by the Bank during Q4FY12. Book Value stood at Rs 639.79 per share in FY12 as compared to Rs 504.43 per share in FY11.”

“Bank of Baroda reported a healthy growth for Q4FY2012. However management is confident that the asset quality of the bank continues to be robust. Going forward Bank is not going to see further incremental slippages or restructuring. On the margins front, Bank has guided that NIM to stay near 3.4% in FY12-13. For Deposits and Advances, growth will be in the range of around 20-21% as against RBI guidance on deposit and advances to grow by about 16-17% in the current fiscal year. We have raised our estimates by 20% for FY12-13. At CMP of Rs 700.00, the stock is trading at valuation of PE of 5.1x of FY13E EPS and at an adjusted P/BV of 0.97x FY13E BV. Historically, the stock has traded at 0.9x�"1.5x one-year forward P/ABV multiple. We have valued the Bank at P/BV of 1.2x FY13E & maintain our BUY rating on the stock with a revised target price Rs 864 from Rs 889 with an upside potential of 23% from current levels,” says Magnum research report.

Buy stocks of ONGC; target of Rs 300

“ONGC revenue increased 20.1% Y-o-Y and 4.4% sequentially to Rs.193.4 bn ahead of estimates of our estimates on account of lower than the expected subsidy burden coupled with higher revenue from gas sales value added products. For the quarter, the subsidy burden of the company increased 16.8% Y-o-Y and 13.0% sequentially to Rs. 141.7 bn. for 4QFY12, EBIDTA increased 45.2% Y-o-Y and 4.8% sequentially to Rs. 115.8 bn while, for FY12, the EBIDTA increased 8.8% Y-o-Y to Rs. 306.2 bn. In the quarter, PAT increased 102.1% Y-o-Y but declined 16.3% sequentially to Rs.6.6 bn while, for FY12, the PAT increased 32.8% Y-o-Y to Rs. 251.2 bn, partly due to the Rajasthan royalty re-imbursement.”

“In Q4 FY12, ONGC's crude output declined 3.0% Y-o-Y and 2.3% sequentially to 6.59 mmt which was marginally lower than our estimate of 6.93 mmt while gas production increased 3.9% Y-o-Y and 2.4% sequentially to 6.56 bcm, ahead of our estimates. In FY12, the oil production from the company's domestic fields declined 2.9% Y-o-Y to 23.71 mmt, on account of the natural decline; however, gas production increased 1.0% Y-o-Y to 23.32 bcm. It should be noted that, in FY12, the IOR/EOR techniques resulted in an incremental gain of 8 mmt of oil. By FY12, ONGC had accrued ~72 mmt of incremental gain and envisages cumulative gain of 171 mmt. We expect the revenue to grow at a CAGR of 9.1% over FY12-14E to Rs. 1753.1 bn, however EBIDTA is expected to increase at a modest CAGR of 5.4% during the same period as the EBIDTA margin likely to remain under pressure on account of costs pressures and lower net crude oil realization. The increase in the cess burden has increased the cost of production from $ 38 / bbl to $ 44 / bbl. We estimate APAT to increase at CAGR of 4.3% to Rs. 283.5 bn over FY12-FY14E. We have modeled for an EPS (Ex-extraordinary) of Rs. 30.0 and Rs. 33.1 for FY13E and FY14E respectively. However, any rationalization in the subsidy sharing mechanism and increase in the prices of the subsidized fuel will lead to upside to our estimates.”

“At CMP, ONGC is trading at 8.4x FY13Eand 7.6x FY13E EPS of Rs. 30.0 and Rs. 33.1 respectively and at an EV/EBIDTA of 3.2x FY13E and x 2.9FY14E. We value ONGC standalone business at Rs.224 per share implying an EV/ EBIDTA of multiple 4x and OVL at Rs.61 per share at EV/ boe of $5 per bbl for its 2P reserves. We value investments at Rs 15 per share, a 20% discount to the current market value. We maintain buy rating on the stock. Based on sum-of-parts valuation, we arrive at a revised fair value of Rs.300, implying an 18.8% upside from the current levels,” says FinQuest Securities research report.

Angel Broking stays neutral on Sun TV

For 4QFY2012, SUN TV (STNL) reported a decline in its top-line and bottom-line. The company’s top-line declined by 7.3% yoy to Rs427cr. OPM contracted by 216bp yoy to 76.9%. Consequently, Net Profit posted sharp decline of 23.7% yoy to 159cr.”

“STNL posted a decline in its top-line due to an 8.9% yoy fall in advertising revenues to Rs235cr and a loss of cable revenues from Tamil Nadu. The omission of Sun TV channel bouquet from Arasu Cable TV has impacted the cable revenues. However, the DTH segment grew by 4.9% yoy and contributed Rs86cr to the top line. The increase in other expenditure by 37.6% to 32cr led to OPM contraction. On the earnings front, STNL reported a sharp decline in profit due to higher base as as Endhiran had contributed ~Rs23cr in 4QFY2011.”

“The continued loss of analog revenues from Tamil Nadu and the expected delay in digitalization in Chennai remains matter of concern. Accordingly, we believe the stock price would remain range-bound. At the CMP, STNL is trading at 10.3x FY2014E consolidated EPS of Rs22.1. We maintain our Neutral view on the stock

Hold stocks of ACC; target of Rs 1220

ACC, after a dismal CY09-10 volume growth (where volumes barely grew at 1%) ACC took off and registered volume growth of 11% in CY11 i.e. 2X the industry growth rate. However the company volume growth plummeted to 2% in April-May 2012. We met ACC’s management to understand key reason for company’s slower volume growth and also take stock of recent competitive pricing scenario. The company expects aggregate cement demand to increase at rate higher than GDP (with GDP growth expectation of 6.5-7%). In FY12 cement demand grew 6.5% yoy in line with GDP growth. However over last 6 months (Dec-11 to May-12), ACC’s volumes growth has averaged ~6% yoy which is significantly lower than the 12% yoy growth recorded by its peers (Top-5) and also lower than 10.3% yoy recorded by industry.”

“The company highlighted that the two key reasons for its volume underperformance is a) increasing competitive intensity from Tier- II brands particularly in Southern and Eastern region and b) sand mining ban impacting volumes in states like Andhra Pradesh, Punjab & Haryana. This has lead to ACC losing market share which currently stands at 10.5% 2QCY12YTD as compared to 11.2% in CY11. The company expects that given current scenario it will be difficult to achieve volume growth expectation of 9-10%.”
“In our May-12 sector update we had highlighted that All India Cement prices in May down were down 4% over recent peaks. Usually in May pricing scenario remains benign as the construction activities peak before the onset of monsoon. The pricing trend is surprising given the fact that May volume growth (top 5 players grew 14% yoy) was much stronger than better than April-12 growth of (Top 5 players 5%). ACC management highlighted that the surplus capacity in the industry remains high and the recent increase in share of Tier ��" II brands has led to increasing competitive intensity which in turn has negatively impacted cement prices in May-12. We notice that in 1QCY12 Top 5 players on an average grew 6% higher than the reaming players in the industry. However in April-12 dispatch growth for the top 5 player’s stood at 5% vs 9.8% for the remaining industry, clearly indicating market share gains for smaller players.”

“We downgrade our earnings estimates for CY12E and CY13E by 6.3% & 3.9% led by lower volumes assumption. We also lower our target price for ACC to Rs1220 (Rs1260 earlier) to factor in earnings downgrade. Though we still maintain ACC as our relative preferred pick vs Ultratech, on an absolute basis stock’s valuations at 8.2X EV/E & EV/T of USD126 for CY13 numbers leaves little upside from current levels. Maintain HOLD