Bajaj Finance Ltd (BFL) continues its strong show on all fronts with Net Interest income of Rs 7.4 bn, largely inline with expectation of Rs 7.5 bn led by healthy Asset Under Management (AUM) growth of 35% yoy. As expected, NIMs (calc) declined by 183 bps qoq to 9.4%. Operating profit was marginally ahead of expectation at Rs 4.6 bn, up 35% yoy. Net profit was slightly below expectation at Rs 2.3 bn mainly due to excess provisioning of ~Rs 174 mn. However adjusting for excess provisioning, Net profit was ahead of expectation. Asset quality continues to remain strong at Gross and Net NPA of 1.5% and 0.45% respectively. We tweak our earnings estimates / ABV by -2% / 0-1% for FY16E and FY17E respectively. We continue to maintain BUY with revised target price of Rs 5435, valuing it at 4x FY17E ABV.
At CMP of Rs 367, HSIL trades at PE of 25.1x and 19.6x its FY16E and FY17E earnings of Rs 14.6 and Rs 18.7 per share respectively. The company’s dismal performance is a reflection of bleak demand scenario which is a short term phenomenon in our opinion. The long-term outlook of the building products sector continues to be robust and HSIL should be the key beneficiary in such an event due to its leadership position. Packaging products segment has attained breakeven in FY15 and is likely to improve performance going forward. We remain cautiously optimistic on HSIL due to weak demand scenario in short term. One of the key triggers for the stock would be the demerger of building products and packaging products business which would reduce the volatility in segmental performance and thereby warrant re-rating of the company.
The share price of the company has fallen sharply by 8.3% post Q4FY15 results. This correction provides an opportunity to accumulate the stock as the long term outlook of the sector is still positive. At our target price of Rs 434, the stock provides potential upside of 18.1%. Accordingly, we revise rating to BUY from HOLD earlier. Key risk to our estimates would include increase in power and fuel cost lead by increase in gas prices and continuance of subdued demand.
At CMP of Rs.90, the stock is trading at 13.4x FY16E and 11.6x FY17E Bloomberg earnings estimates. The current valuation offers attractive discount relative to last three years average P/E multiples of 17.2x one-year forward earnings. The revival in flagship brands, premiumisation, and strong macro demand in tier-2 and tier-3 cities, remain positive for the stock. Further, the transformational deal of Diageo plc with United Spirits could provide window of opportunity to Radico. We have a target price to Rs.165 (valuing 16.5x FY17E) with BUY on the stock.
We have seen a 10% rise in top-line in FY15, H2FY15 was little subdued compared to the first two quarters because of annual maintenance shut down in December and slowdown in 2W sales. Contribution of Bajaj auto in total revenue stands at above 40%. As Bajaj Auto sales start to pick up due to better export demand and revival in domestic market(after launch of Pulsar RS200 and new CT100), we expect upsurge in revenue and profitability of Lumax Auto technology going ahead. However, taking into consideration FY15 performance (especially operating margin front), we are revising our numbers downward. We cut 16E/ FY17 EPS by 22% due to reduction in assumption of revenue growth along with EBITDA margin. At CMP of Rs 264, LATL is trading at 8.2x FY16e and 6.0x FY17e EPS. We find current valuation attractive and maintain BUY rating on LATL with revised downward target price of Rs. 448 (10x FY17E EPS) from Rs. 575 earlier.
Indoco Remedies’ (INDR IN) financial performance was below our estimates, led by lower-than-expected sales growth in exports and higher-than-expected other expenses. The overall performance was driven by strong growth in domestic formulation (DF) segment. We maintain our sales and adjusted PAT estimates for FY16 and FY17 as outlook remains intact. We expect earnings in FY16E and FY17E to be driven by increased business, under Watson agreement in US, own dossier filing in Europe and better-than-industry growth in domestic formulation market. At CMP of Rs367, the stock is trading at 22.4x FY16E EPS of Rs16.4 and 18.8x FY17E EPS of Rs19.5. We continue to value INDR at 20x FY17E earnings to arrive at price target of Rs392. However, we downgrade INDR to HOLD rating on the basis of limited upside from current levels.
At CMP of Rs.18, the stock is trading at EV/EBITDA multiple of 4.4x FY16E and 3.5x FY17E estimates. In our view, the current valuations are significantly below 7.5x global peer average. On back of various available triggers (1) debt reduction, (2) margin expansion, (3) higher plant utilization, and (4) favourable business dynamics the stock is poised for re-rating. With revival in business cycle, we have assigned 5.7x EV/EBITDA multiple to arrive at FY17E based price target of Rs.34/ share. Given the huge upside, we maintain BUY on the stock.
JB Chemicals and Pharmaceuticals (JBCP IN) delivered sales in line with our estimates, EBITDA margin better than estimates. However it delivered adjusted PAT much below our estimates. This is mainly due to lower other income and higher tax outgo. The lower other income might be due to lower export related incentive and interest income. We maintain our sales and EBITDA estimates for FY16. We lower EPS estimate by 17.4% for FY16E to factor lower export related incentive and lower interest income. We also introduce FY17E sales and adjusted PAT estimates at Rs14.3bn and Rs1.7bn, respectively. We roll forward our valuation to 14x (unchanged) FY17E EPS of Rs20.4 and arrive at price target of Rs286 (from Rs295 earlier). At CMP of Rs240, the stock is trading at attractive valuation of 13.8x FY16E EPS of Rs17.4 and 11.8x FY17E EPS of Rs20.4. We maintain BUY rating with implied upside of 19% from current levels.