Stocks To Buy & Sell After Q3FY15 Results: Amar Ambani Of IIFL

Marico (Q3 FY15) – BUY
CMP Rs349, Target Rs402, Upside 15.1%

• Marico recorded healthy 21%/18% yoy increase in revenues and net profit at Rs14.5bn /Rs1.6bn respectively during Q3 FY15
• Parachute’s rigid portfolio registered 48% yoy growth in revenues driven by ~8% yoy volume growth, while Saffola revenues grew by 9% yoy led by subdued volume growth of 3%
• International business recorded mere 4% yoy growth in revenues at Rs3.6bn with constant currency growth 6% yoy mainly due to disruption in Egypt business and subdued growth in South Africa
• OPM declined by 50bps to 16.4% due to sharp 290bps increase in raw material cost on account of sharp rise in copra prices. 150bps/60bps decline in overhead and advertising cost restricted further margin erosion
• We expect Marico to witness revenue/PAT CAGR of 13%/21% respectively over FY15-17. Maintain Buy with a 9-month target price of Rs402

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Indian Hume Pipe Co (Q3 FY15) – BUY
CMP Rs349, Target Rs440, Upside 26.1%

• Indian Hume Pipe’s operational results were lower than expected due to slower execution
• Orderbook for the company declined 20% qoq as the company has removed slow moving orders worth Rs2.9bn and there were no major order wins during the quarter
• Topline growth of 13.5% was lower than our expectations due to slower execution
• Operating margins expanded 211bps, quite higher than expectations; but overall operating profit was lower than expected due to lower revenues
• PAT growth of 96.9% yoy to Rs124mn was largely led by a jump in other income
• Maintain Buy with a price target of Rs440

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Hero Motocorp (Q3 FY15) – BUY
CMP Rs2,812, Target Rs3,250, Upside 15.6%

• Revenues were flattish with 0.5% yoy fall and 1.1% qoq decline, Volumes declined 1.9% yoy and 2.6% qoq as motorcycle volumes declined by 6.2% yoy which was offset by 11.8% yoy growth in scooters in domestic market
• Realizations were higher by 1.4% yoy and 1.5% qoq on the back of price hikes implemented and better product mix
• Margins at 12% were substantially below our expectations of 13.7% owing to lumpy advertisement costs in the festive season and higher staff costs due to Diwali bonus and commencement of Neemrana plant
• Cost cutting initiatives to add an estimated 200bps to margins by FY17
• Revise estimates to factor in lower than estimated Q3 FY15 performance
• Maintain BUY with a revised 9-month price target of Rs3,250

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Lupin (Q3 FY15) – BUY
CMP Rs1,545, Target Rs1,800, Upside 16.7%

• Margin uptick of ~150bps qoq key surprise especially in a weak topline as qoq revenues flat, +5.2% yoy
• Regulatory delays hinder revenue growth with US sales up just 3.8% yoy; Europe, India post sequential declines while Japan INR sales down 8% though JPY sales up 4% yoy
• US business to benefit from key products like Nexium (awaiting approval); co expects 15-20 launches in the next fiscal
• Revise up our FY16/17 estimates and retain BUY with fresh 9-12mth target of Rs1,800

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Punjab National Bank (Q3 FY15) – Reduce
CMP Rs177, Target Rs170, Downside 3.9%

• Domestic loan growth decelerates to 8% yoy; Retail, SME and Agri post good growth while the corporate book contracted further sequentially
• Domestic CASA ratio stable at 40%; NIM was flat
• Core fee growth improves; but C/I ratio deteriorates
• Influx of impaired assets remained concerning; significant write-offs contain increase in Gross NPLs
• Stock to continue to underperform in the near term; Maintain Reduce

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TVS Motors (Q3 FY15) – Accumulate
CMP Rs285, Target Rs300, Upside 5.3%

• Net sales surge 28.9% yoy owing to 23% yoy growth in volumes and 4.8% jump in realizations, Sales were in line with our expectations
• OPM at 6% was below our and street expectations, OPM was higher by 4bps yoy but fell by 3bps qoq
• APAT was at Rs902mn was lower than estimates
• Growth in volumes was on account of sharp jump of 51.5% yoy in scooters and 37.5% yoy jump in three-wheeler volumes
• We maintain our Accumulate rating with a revised price target of Rs300 as valuations seem expensive at current levels

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ACC (Q4 CY14) – Reduce
CMP Rs1,509, Target Rs1,442, Downside 4.5%

• Suspension of mining operation drags performance; volume de-grows at 1.4% yoy. Revenue growth at 1.6% was below our estimate.
• OPM stood at 9.1%; Higher clinker purchase led to jump in RM and freight cost.
• Pre-tax profit at Rs1.4bn (down 41%yoy) was lower than our estimates.
• Tax write back boost PAT by Rs1.8bn, which stood at Rs3.2bn (a jump of 19% yoy).
• Maintain reduce as ACC continues to disappoint on operational performance.

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