Six More Stocks Worth Buying After Q2FY15 Results: Amar Ambani IIFL

Tata Steel Ltd (Q2 FY15) – BUY
CMP Rs468, Target Rs565, Upside 20.7%

• Tata Steel consolidated results were lower than our estimate on account of weaker results in its South East Asia operations
• Standalone operational results were inline as the impact of higher costs was negated by a jump in realisations
• Adjusted EBIDTA/ton at Corus stayed higher at US$46, higher than our estimate of US$43/ton on account of superior product mix
• Performance of South East Asia operations remained below par due to dumping of cheap steel from China and lower steel-scrap spreads
• The company has managed to reduce its debt marginally even after incurring a capex of Rs33.5bn in Q2 FY15
• Near term headwinds persists; However, long term positive view intact; Maintain BUY with a revised price target of Rs565

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Power Grid (Q2 FY15) – BUY
CMP Rs143, Target Rs187, Upside 30.7%

• Power Grid’s operational numbers were a tad lower than our expectations due to the change in norms and lower contribution from consultancy division
• Topline of Rs41.8bn was higher by 6% qoq on account of higher capitalization in Q1 FY15
• Reported PAT was lower by 2.7% yoy and was lower than our estimate due to marginal miss on revenues and higher depreciation
• The company continued to report higher capitalized projects during the quarter at Rs47bn; 125% higher on a yoy basis. Capex for the quarter stood at Rs48.5bn
• Capitalized projects till date jumped to Rs132bn, increasing the upside risks to our estimates
• We maintain our BUY rating on the stock with 2-yr target price of Rs187

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Indraprastha Gas (Q2 FY15) – BUY
CMP Rs430, Target Rs500, Upside 16.3%

• Net sales at Rs9.5bn were higher than estimates owing to stronger than expected CNG volumes and realizations
• CNG volumes at 207mn kgs were higher by 4.2% yoy and 6.7% qoq. PNG volumes were at 90scm a growth of 0.6% yoy and 8.4% qoq
• Gross margins/unit increased by 4.4% yoy but declined 2.5% qoq to Rs11.5/unit. This was better than our expectations owing to decline in LNG prices and hike in CNG prices
• OPM at 22.8% came in line with our expectations and was higher by 289bps yoy but lower by 118bps qoq
• Maintain BUY with a revised price target of Rs500

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Eicher Motors (Q3 CY14) – BUY
CMP Rs13,159, Target Rs15,350, Upside 16.7%

• Consolidated performance better than expected on the back of stronger than anticipated standalone performance and VECV performance
• Royal Enfield reported highest ever OPM of 25%, a surge of 571bps yoy driven by significant benefits of operating leverage
• VECV performance was above estimates as volumes were up 3.7% yoy leading to above estimate OPM
• We upgrade our rating to BUY with a revised price target of Rs15,350 as we believe the company deserves premium multiples given strong earnings growth forecast in both its two wheeler business and the commercial vehicle business

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IPCA Laboratories (Q2 FY15) – BUY
CMP Rs658, Target Rs760, Upside 15.5%

• Q2 much weaker than expected as revenues, PAT miss estimates; sales decline 7.8% yoy
• Gross margins hold up even as overall margin impacted by negative operating leverage in the wake of fall in API, formulation exports
• Cut FY15/16 estimates on potentially delayed Ratlam resolution but retain BUY with revised 9-12mth target of Rs760

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Oil India Ltd (Q2 FY15) – BUY
CMP Rs580, Target Rs720, Upside 24.1%

• Net sales at Rs21.9bn were much lower than estimates owing to substantially higher than projected subsidy burden
• Oil production was at 0.88MT a decline of 4% yoy but sequential rise of 4.1% while gas production was at 0.69bcm a rise of 4.2% yoy and 2.5% qoq
• Net realizations for crude oil were at US$45.25/bbl a fall of 13.5% yoy and 13.5% qoq as crude oil prices have fallen yoy while subsidy burden has remained flat for Oil India; gas realizations were at Rs6,431 flat on both yoy and qoq basis
• OPM was substantially below estimates at 36.9% owing to sharp fall in crude oil realizations
• We maintain our BUY rating with a revised price target of Rs720 as the company would be a big beneficiary of the expected freeing of diesel prices and gas price hike

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Warm Regards,

Amar Ambani