Q4FY16 Results Update By Amar Ambani Of IIFL

CCL Products Ltd (Q4 FY16): Stupendous quarter led by strong volume growth!!! – BUY
CMP: ₹194, Target: ₹301, Upside: 55%

• Consolidated Net sales increased by 22.2% to ₹264cr led by 4.4% increase in the Indian business to Rs180cr and Vietnam increased by 41% to Rs61cr. The result was 20.9%/18.2% higher than our/BBG estimate of ₹219cr/₹224cr, respectively. The key reason behind improvement in revenues was order slippage of previous two quarters booked in Q4FY16.
• Gross margin at Indian operations rose to 270bps to 42.3% while consolidated gross margin rose to 69bps to 41.7%.
• Despite increase in power cost by 135bps, EBITDA margin improved 395bps to 23% due to the decline in Other expenses by 460bps, The margin was 24bps/80bps higher than our/BBG estimate of 22.8%/22.2%, respectively. Hence, EBITDA grew 47.5% to Rs61cr, 22.2%/22.5% higher than our/BBG estimate.
• With lower tax rate as Vietnam reported exorbitant jump in revenue (enjoys tax free status), 27.4% in Q4FY16 as against 34% inQ4FY15, PAT grew by 70.3% to ₹37cr, 23.2%/28.6% higher than our/BBG estimate of ₹30cr/₹29cr, respectively.
• As per management, CCL had achieved 15% volume growth in FY16 as guided in the earlier concall. The management gave a guidance of ~12% growth for FY17. Management is hopeful of achieving 20% growth in bottom-line (excluding export incentives) in FY17 mainly because of product mix improvement.
• The company has chalked a capex of ₹250cr for expanding its freeze dried plant. The plant is expected to become operational by FY19-20. The earnings growth will increase once the capacity utilization of expanded capacity improves.
• We maintain our BUY rating with a target price of ₹301 (based on 18x FY18E).

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Shriram Transport Finance Ltd – Call Success
Reco Price: ₹810, Call Closure Price: ₹1,028

In our Q3 FY16 update, we recommended a BUY on Shriram Transport Fin with a 12-month target price of Rs. 1028. The stock surpassed our target in yesterday’s trading session. Company’s operational performance in Q4 FY16 was better than expected on stand-alone basis and over the longer term it should improve significantly on the back of expected good monsoon and recovery in infra and industrial activity.

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ICICI Bank Ltd. (Q4 FY16): Credit stress to stay – BUY
CMP: ₹237, 1-yr Target: ₹282, Upside: 19.1%

• Domestic loan growth moderates to 16% yoy; retail portfolio continues to expand at brisk pace
• NIM declined materially; pressure to only increase in the near term
• Fee growth continues to be muted; substantial profit from stake sale in insurance subsidiaries boost income
• Asset quality deteriorates sharply; substantial pain lies ahead too
• Reduce earnings and ABV estimates materially for FY17/18; however, retain BUY rating on low valuation

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Idea Cellular (Q4 FY16): Pricing drives a solid quarter – BUY
CMP: ₹119, 1-yr Target: ₹140, Upside: 18.3%

• Idea posts a solid quarter driven by surge in voice pricing, largely in newer circles
• Revenue growth of 5.3% qoq on back of 4.7% qoq rise in voice RPM; volumes unsurprisingly lower at +1.2% qoq
• Data volumes growth muted at 1.5% qoq as blended data RPM jumps 2.7% qoq; margins gain 340bps qoq
• Guides FY17 capex of ₹6,500-7,000cr; revise estimates and retain BUY with revised 1-year target of ₹140

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Granules India (Q4 FY16): Robust operating performance – BUY
CMP: ₹135, 1-yr Target: ₹160, Upside: 17.8%

• Granules posted muted revenue growth at 5% yoy vs. estimated +11% yoy on account of product rationalization measures
• Margin beat estimates on improved products mix and expanded 720bps yoy at 21.2% vs. estimated 19.2%; management commented 19-20% OPM is sustainable.
• Company expects sharp jump in FY17E capex on the back of large expansion plans and complex filings
• Forecast 19% revenue and 30% PAT cagr over FY16-18E; retain BUY with revised 1-year target ₹160 (earlier ₹145), based upon 17x FY18E earnings.

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Vedanta Ltd. (Q4 FY16): Valuations attractive – Accumulate
CMP: ₹104, 1-yr Target: ₹112, Upside: 7.7%

• Vedanta’s operational performance was above our estimate due to higher contribution from iron ore, aluminium and oil & gas business
• Aluminium division performance improved due to a decline in power costs. Led by an increase in availability of cheap domestic coal, CoP at both the plants declined by 4-5% qoq
• Mgmt has given a guidance of 30% yoy growth in aluminium volumes in FY17 led by ramp of new Korba smelter and gradual commissioning of 1.25mtpa Jharsuguda smelter
• Power division performance too improved due to lower coal costs and higher contribution from TSPL and BALCO 300MW plant. Vedanta’s entire 9GW capacity was operational by the end of FY16
• International zinc business volumes were lower due to slower rampup at Scorpion. However, operating profit was better than estimate due to 21.3% qoq decline in CoP. Mgmt has reduced volume guidance for FY17 to 170-190kt and expects CoP to be in range of US$1,200-1,300/ton
• HZL performance was lower than expected due to lower mined metal output. FY17 output to be higher by 5-10% yoy
• The company’s debt decreased by ₹5,000cr qoq due to lower working capital requirement and higher cash at HZL and Cairn.
• Merger with Cairn would face hurdles due to the widening spread. No sweetener announced yet. Earnings growth would be led by volume growth in aluminium and domestic zinc business. Maintain accumulate rating with a revised price target of ₹112

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Orient Cement Ltd (Q4 FY16): In-line with expectation – BUY
CMP: ₹145, 1-yr Target: ₹164, Upside: 13.2%

• Revenue meets estimates, up 14% yoy at ₹449cr, as against our estimate of ₹453cr.
• Total dispatches stood at 1.39mtpa (up 40% yoy as new unit commences operation).
• Despite strong dispatches, realisation fell 6% qoq vis-à-vis our expectation of 2% drop.
• Recent price hike in Telangana and Pune augur well for better realisation in Q1 for OCL.
• Operational efficiency contracted 11.6 ppts, as against our estimate of 14.1 ppts drop, following commencement of commercial production of the new unit.
• PAT of ₹19cr was higher than our estimate of ₹3cr, backed by higher tax credit.
• Upgrade to Buy; revise 12-month price target to ₹164 (as against earlier target of ₹160)

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