Call Success Update Reports + Stocks To Buy & Sell After Q1FY16 Results By Amar Ambani Of IIFL

Torrent Pharmaceuticals (Q1 FY16) – BUY
CMP Rs1,400, Target Rs1,610, Upside 15.0%

• Massive beat on our estimates driven by launch of generic Abilify; US business revenues up 230% yoy on an estimated ~US$90-100mn contribution from Abilify
• Revenues up ~75% yoy while operating leverage tailwinds pushed up margins to ~47%; reported PAT up ~75% yoy
• Upgrade FY16/17E estimates on strong Abilify-led Q1 showing; retain BUY with revised 9-12mth target of Rs1,610, based on 21x FY17E EPS

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Maruti Suzuki (Q1 FY16) – BUY
CMP Rs4,196, Target Rs4,850, Upside 15.6%

• Net sales rise 18.1% yoy owing to 13.8% yoy rise in volumes and 3.8% higher realizations. Domestic volumes were higher by 13% yoy while export volumes jumped 21.8% yoy
• Reported OPM at 16.3% was way tad lower than our and street expectations but represented an increase of 462bps yoy and 42bps qoq, driven by lower raw material prices, fall in discounts, favorable currency movements and better product mix
• PAT at Rs. 1,193cr was tad lower than our estimates owing to higher than estimated tax rate
• Company aims to grow at a faster rate when compared with the industry in FY16 with several new launches lined up
• We maintain our BUY rating with a 12-month target of Rs4,850

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Punjab National Bank (Q1 FY16) – Accumulate
CMP Rs142, Target Rs153, Upside 7.8%

• Retail loans continue to lead domestic credit growth; bank better capitalized than most peers
• NIM improve a bit from the lower level; near term outlook stable
• Fee growth was poor; cost/income ratio sustained at lower level aided by decline in opex
• Asset quality woes abated; near-term outlook still uncertain
• Upgrade rating to Accumulate; see low probability of an incremental valuation de-rating

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M&M Financial Services Ltd. (Q1 FY16) – Accumulate
CMP Rs258, Target Rs279, Upside 8.1%

• AUM growth remains muted as expected
• Disbursement growth improved further, pointing towards a gradual AUM growth recovery in the near term
• A sharp NIM decline was largely driven by asset quality deterioration; to expand in the longer term
• Negative surprise on asset quality, near-term outlook remains clouded
• Cut earnings and BV estimates for FY16/17 materially; Retain Accumulate rating with lowered 12m target of Rs279

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Ashok Leyland – Call Success
Reco Price Rs71.0, Call Closure Price Rs84.0

We had recommended a BUY on Ashok Leyland in Q4 FY15 result update released on May 14, 2015 with a target price of Rs84. The stock surpassed our target in today’s trading session. While we remain bullish on the prospects for Ashok Leyland’s core business of manufacturing commercial vehicles, we will review our estimates, rating and target in Q1 FY16 result update. Results are expected to be announced on August 12, 2015.

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Torrent Pharmaceuticals – Call Success & Update
Reco Price Rs1,320, Previous Target Price Rs1,460, New target price Rs1,610

We had extended our target to Rs1,460 on Torrent Pharmaceuticals in our call update dated April 15, 2015. The stock has surpassed our target and has delivered ~75% return since our recommendation given in India Strategy Report “Diwali Dhamaka” released on October 22, 2014. Meanwhile company has posted a stellar Q1 FY16 on back of gAbilify launch in April and accordingly we have upgraded our FY16 and FY17E EPS estimates by ~50% and 15% respectively. We continue with our BUY reco and advise investors to hold on to the stock with revised 9-12mth target of Rs1,610.

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KEC International Ltd – Call Success & Update
Reco price Rs138, Previous target price Rs154, New target price Rs175

We had recommended KEC International in our Q4 FY15 result update released on May 08, 2015 for a target price of Rs. 125 and extended our target price to Rs. 138 in a call update released on June 09, 2015 and to Rs. 154 in a call update released on July 06,2015. The stock has touched a high of Rs158 in today’s trading session yielding a total return of 11.6% from previous update and 57% from our recommendation. We remain bullish on the stock and advise investors to hold for an extended price target of Rs. 175.

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Maruti Suzuki – Call Success & Update
Reco price Rs3,800, Previous target price Rs4,280, New target price Rs4,850

We had included Maruti Suzuki in our theme report India Strategy: Size Matters! – 12 Bluechips to ride on released on August 27, 2014 where we had assigned a 2-year target of Rs3,800. We raised the target to Rs 4,280 in our Q3 FY15 result update and maintained it in Q4 FY15 result update and a call update released on April 28, 2015. In our Q1 FY16 result update released today, we have maintained our BUY rating and have assigned a 1-year target of Rs4,850. MSIL is one of the best proxy-play on the expected economic recovery in the country. Macro headwinds in the past couple of years had weakened demand for passenger cars. However, during this phase MSIL has emerged stronger with 1) market share gains, 2) line up of new launches, 3) increased localization and 4) deeper presence in domestic markets. While economic recovery and existing latent demand will result in robust volume growth for MSIL, its profitability will improve further with 1) increase in localization, 2) reduct! ion in discounts and 3) weakening of Yen. We expect MSIL to see revenue and PAT CAGR of 16.3% and 36.7% respectively during FY14-17E.

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TFCIL Ltd. (Q1 FY16) – BUY
CMP Rs58, Target Rs82, Upside 43.0%

• Growth in Q1 FY16 was weak as expected; company remains confident of healthy assets expansion in FY16
• NIM to remain steady in the longer term
• Asset quality performance was resilient again
• Retain Buy rating and 12-month price target to Rs82

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Yes Bank (Q1 FY16) – BUY
CMP Rs816, Target Rs1,005, Upside 23.2%

• Loan growth was surprisingly sustained at robust 36% yoy; mix moved back towards Corporate Banking
• Deposit franchise continues to improve; CASA crosses 23%
• NIM improvement was a pleasant surprise; outlook is strong too
• Trend in non-interest income growth disappointed; opex growth remains high on aggressive network investments
• Uptick in stress assets was in-line with the trend seen in preceding quarters
• Retain BUY and 12-month target price of Rs1,005

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JSW Steel (Q1 FY16) – BUY
CMP Rs812, Target Rs1,081, Upside 33.1%

• JSW’s results were higher than our estimate supported by higher contribution from subsidiaries and marginally higher than expected EBIDTA/ton for the standalone operations
• Standalone revenue declined higher than expectations due to a sharp drop in blended realisations
• Volume growth was strong led by an increase in share of retail sales
• Blended realisations were quite weaker than our expectations due to a sharp fall in HRC prices and higher discounts to boost retail sales
• Standalone EBIDTA/ton was marginally higher than estimate as the impact of higher than expected decline in realisations was offset by higher than expected decline in raw material costs and other expenses
• JSW Coated reported strong numbers as the decline in value added product prices was lower than that of HRC
• Maintain Buy with a revised price target of Rs. 1,081

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Vedanta Ltd (Q1 FY16) – Accumulate
CMP Rs130, Target Rs145, Upside 11.9%

• Vedanta’s operational performance were marginally weaker than our estimate due to a miss in its aluminium business
• The outperformance of copper and zinc international division was offset by lower contribution from aluminum division
• Aluminium division performance was impacted by the sharp fall in aluminum prices and product premiums and higher coal costs
• The strong performance in copper division extended further as Tc/Rc margins continue to rise and acid realisations have improved
• SEL’s power production improved on a qoq basis; However, output at TSPL was lower due to temporary shutdown
• Domestic zinc business operating profit was dented by higher provisioning for DMF and increase in costs due to purchase of renewable power
• International zinc business performance improved on the back of higher refined metal production at Skorpion and lower costs
• Aluminium expansion would be slower than previous guidance due to the sharp fall in realisations and higher costs at BALCO
• The company is still awaiting clearance for the expansion of its alumina refinery and conversion of IPP unit to CPP for the aluminium business
• Merger with Cairn and HZL would be positive trigger for the company
• Maintain accumulate rating on attractive valuations with a price target of Rs142

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