Stocks To Buy & Sell After Q4FY15 Results: Amar Ambani Of IIFL

Glenmark Pharmaceuticals (Q4 FY15) – BUY
CMP Rs861, Target Rs1,000, Upside 16.2%

• Revenues, margin in line but PAT marred by one off settlement claim in US
• US portfolio is set for strong rebound on back of key upcoming launches including Zetia
• Revise estimates but maintain conviction BUY with fresh 9-12mth target of Rs1,000

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Indian Hotels (Q4 FY15) – Accumulate
CMP Rs101, Target Rs110, Upside 8.8%

• Sluggish demand environment, supply growth lead to modest 5.7% yoy rise in standalone Q4 revenues
• Q4 and FY15 margins under pressure on the back of negative operating leverage headwind
• Lackluster performance likely to continue until ARRs, occupancies show traction; retain Accumulate

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Reliance Communications (Q4 FY15)
CMP Rs66, Target Rs70, Upside 6.5%

• Q4 revenues at +4.8% qoq ahead of estimate on sequential growth in India and global operations
• India traffic growth up robust 4.5% qoq while voice pricing declines; India EBIDTA margin fell 60bps qoq while Global EBIDTA margin jumps ~850bps qoq
• Lacks near term triggers would potentially restrict stock upside; retain Accumulate with revised 9-12mth target of Rs70

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National Aluminium Co Ltd (Q4 FY15) – BUY
CMP Rs48, Target Rs62, Upside 26.5%

• NALCO’s operational numbers were lower than our estimate due to lower external alumina sales
• Alumina sales volume declined 24% yoy due to delay in shipment and higher internal consumption
• Aluminium production improved by 7.8% yoy due to improving coal supply
• Operating profit of Rs4.3bn was lower than our estimate due to a miss in alumina sales
• Alumina sales to drive earnings; Maintain BUY with a price target of Rs62

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Kalpataru Power Transmission Ltd (Q3 FY15) – Accumulate
CMP Rs222, Target Rs240, Upside 8.1%

• KPTL’s standalone results were disappointing on account of 7% decline in revenue
• The decline in topline was largely due to shrinking order book and a miss in execution in the Transmission & Distribution (T&D) space
• Margins improved marginally by 33bps to 9.8%, lower than our estimate
• Order inflow at Rs. 845cr in Q4 FY15 was largely on account of orders in the T&D space and from the MENA region. The company is also L1 in orders worth Rs. 2,000cr
• Management remained confident of delivering margins above 10% in FY16 and 15% growth in topline for the standalone entity
• Near term earnings to remain subdued; Maintain Accumulate with a price target of Rs240

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Indraprastha Gas (Q4 FY15) – BUY
CMP Rs400, Target Rs500, Upside 25.0%

• Net sales at Rs. 917cr were lower than estimates owing to weaker than expected CNG and PNG volumes
• CNG volumes at 200mn kgs were higher by 4.5% yoy but declined 2% qoq. PNG volumes were at 79scm a fall of 13.4% yoy and 4.1% qoq
• Gross margins/unit improved by 9.1% yoy and 0.5% qoq to Rs11.2/unit. This was in line with our expectations
• OPM at 19.2% came in lower than our expectations and was lower by 67bps yoy and 115bps qoq
• Maintain BUY with a price target of Rs500

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ONGC (Q4 FY15) – BUY
CMP Rs328, Target Rs400, Upside 22.0%

• Net sales rise 1.6% yoy and 14.4% qoq owing to higher net realizations of crude oil
• Discount on crude oil was nil for the quarter as compared to US$73.9/bbl in Q4 FY14 and US$40.4/bbl in Q3 FY15
• Natural gas realization was at Rs12,096/tscm v/s Rs10,358/tscm in Q4 FY14
• For Q4 FY15 upstream contribution towards under recoveries was nil
• We maintain our BUY rating with a 9-12 months target price of Rs400 as higher net realizations for the standalone entity will offset the impact of lower realizations on JV and OVL production

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NMDC Ltd (Q4 FY15) – Accumulate
CMP Rs131, Target Rs136, Upside 4.1%

• Higher than expected sales volume lead to an outperformance in topline
• Sales volume were lower by 18.3% yoy due to lower demand; Production decreased 19.5% yoy to 7.9mn tons
• Operating profit of Rs. 1,421cr was lower than our estimate of Rs. 1,530cr due to higher other expenditure
• NMDC has decreased its lump ore prices by Rs. 950/ton and fines prices by Rs. 400/ton during the quarter
• Iron ore prices have corrected sharply over the last two months due to increase in supply from imports and higher domestic production
• Earnings cut on lower volumes and lower realisations; Maintain Accumulate with a revised price target of Rs136

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Hindalco Industries Ltd (Q4 FY15) – Reduce
CMP Rs132, Target Rs125, Downside 5.1%

• Hindalco’s standalone operating performance was marginally lower than our estimate due to weaker performance of aluminium division
• The impact of higher than expected copper EBIT was offset by weaker aluminium EBIT
• Company registered its best ever quarterly production for both, copper and aluminium
• Aluminium sales volume growth was also boosted by some liquidation of previous quarter inventory
• Copper business EBIT remained strong on the back of rising Tc/Rc margins and an improvement in by-product credits
• Near term earnings to remain subdued due to high power costs; Maintain reduce rating with a price target of Rs125

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Balrampur Chini Mills (Q4 FY15) – Reduce
CMP Rs44, Target Rs40, Downside 7.4%

• Vast gap between cost of cane and sugar prices continues to make sugar operations unviable; Q4 sugar realization down 9.4% yoy
• Distillery volumes decline offset by better pricing; overall PAT down 60% yoy
• Cane price reform remains the key catalyst to watch out; retain Reduce rating and revised 9-12mth target of Rs40

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GAIL (India) Ltd (Q4 FY15) – REDUCE
CMP Rs381, Target Rs360, Downside 5.5%

• Net sales fall 2% yoy to Rs. 14,271cr in line with our expectations; revenues were higher for all segments except LPG & Liquid Hydrocarbon segment
• Gas transmission volumes fall 9.3% yoy as gas production volumes declined from KG-D6 and PMT blocks. Gas trading volumes also fell by 9.6% yoy
• OPM at 4.5% was substantially below our and street estimates on back of substantial jump in other expenditure
• Petrochemical segment reported a negative EBIT of Rs. 154crs as while polymer prices declined in line with crude oil price decline, its feedstock price (R-LNG) was higher
• We maintain our Reduce rating on the stock with a revised price target of Rs. 360

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Coal India (Q4 FY15) – Accumulate
CMP Rs383, Target Rs412, Upside 7.5%

• Coal India’s operational performance was better than expected due to higher FSA prices and higher revenues from by-products
• Blended realisations were higher than expected even after the sharp correction in e-auction and washed coal prices
• During the quarter, coal production was higher by 6.2% yoy and dispatches were higher by 3.9% yoy
• Operating profit of Rs. 5,965cr was higher than expected due to higher contribution from by-product sales and higher than expected increase in FSA prices
• Proxy play on the reform story; Recommend Accumulate with a revised price target of Rs412

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United Spirits (Q4 FY15) – Reduce
CMP Rs3,485, Target Rs3,200, Downside 8.2%

• Net sales improve 5.6% yoy on lower excise duty and higher other operating income; gross revenues declined 3% yoy
• Encouragingly, gross margin improves 480bps yoy though write offs and provisions still remain an overhang on profitability
• Remain +ve on potential business turnaround but earnings have to play catch up to justify lofty valuation; retain Reduce with unchanged 9-12mth target price of Rs3,200

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