Valuation: Fairly Valued at TTM P/E 33.81x.
Reasons to consider: Timken India (TIL) reported strong Q3FY19 numbers. TIL is now reporting merged entity numbers, i.e. Timken + (erstwhile) ABC Bearings.TIL has executed capex for railway bearings and tapered railway bearings at a cost of Rs.125 crore and Rs. 64 crore, respectively. Both capacities are now operational. In the railway segment, TIL expects new opportunities to open up in the passenger coach segment.
Drivers: Indian Railways is planning to outsource maintenance of bearings for existing wagons/locomotives to large OEMs. TIL being a frontrunner in this space, intends to capitalise on this as well.
Financial: On the financial front the revenues came in at Rs.384.9 crore, up 38.1% YoY.Gross margins were at 45.6% vs. 36.9% YoY. EBITDA margins were at 14.4% vs. 7.4 YoY. Gross margins, EBITDA margins were lower in Q3FY18 due to a change in product mix and high input prices during the quarter.Accordingly, absolute EBITDA and PAT grew 168.1% and 188.2% to Rs. 55.6 crore and Rs. 26.4 crore, respectively.
Reasons to consider: The management highlighted completion of two greenfield facilities in India that have the potential to achieve | 1000 crore of sales in next three years. BFL continues to focus on new technology and is well equipped to adapt to changing industry dynamics (mainly lighter vehicles) due to stringent emission control norms, EV space, usage of aluminium in PV and upcoming defence & aerospace opportunity.
Drivers: The company has a strong order backlog with class 8 trucks production expected at ~335,000 units in CY19E over ~325,000 units in CY18. This will ensure double digit topline growth will sustain, going forward.
Financial: On the financial front, the revenue for the quarter Q3Fy19 has jumped 21.7% to Rs.1692.5cr. It has reported a healthy profit of 35.9% to Rs.309.8cr from Rs 228 crore in same period last year.Domestic revenue in Q3FY19 grew by 17 percent YoY to Rs 673.9 crore and exports increased by 25 percent to Rs 975.5 crore.
Valuation: Undervalued with TTM P/E 12.52x.
Reasons to avoid: The revenue has declined due to reversal in the MHCV sales cycle.The domestic MHCV industry volumes fell 11% in Nov18-Jan19, compared with a 22% increase in YTD FY19. This decrease was attributed to surplus capacity with fleet operators, deferment of purchases during elections, increasing cost of ownership, and a high base.Ashok Leyland has lost its share from 34.2% in FY18 to 32.5% in FY19 YTD.
Financial: On the financial front the revenue for the quarter Q3Fy19 has drastically declined by 15.26% YoY to Rs.6245.21cr. Its net profit has declined by 21.44% to Rs.381 cr YoY. Operating profit margins for Q3FY19 contracted 140 bps y-o-y to 10.3%, pushing down the Ebitda (earnings before interest, tax, depreciation and amortisation) by 22.5% y-o-y to Rs.650 crore.
Reasons to avoid: TATA has highly profitable operations in India, but its capital allocation and the track record of turning around acquired assets have been poor. Both Bhushan Steel and Usha Martins steel business acquisition has been expensive, which will drag earnings for years.Recent loss of iron ore production at Vale post breach of tailing dam has pushed up iron ore and scrap by 15-20%, which will eventually move steel prices higher on the slightest recovery in steel demand and can drive up the stock for some time, but it is unlikely to be sustainable. Hence we urge investors to avoid the particular scrip.
Financial: On the financial front the revenue for the quarter Q3Fy19 grew by 24.5% yoy to Rs41,220cr,EBITDA stood at Rs6,734cr, up 16.4% yoy.EBIDTA margin fell by 115bps yoy to 16.3%. Adjusted Net Profit stood at Rs1,714cr .Net debt at the end of Q3FY19 stood at Rs1.01 lakh cr with cash and current investments at Rs8,549cr.
Reasons to consider: The company is expected to benefit from the capex (addition of ~2,500 beds, 30% of its current capacity) it completed over FY14-17. While 11 new hospitals are yet to breakeven, its existing hospitals enjoy RoCE of 21.6%, which will increase with improving efficiency.
Drivers: Positive industry macros and maturing hospital profile will act as a major driver.
Reasons to avoid: Muted revenue performance and network opex were the key reasons for the subdued performance.Competitive intensity is expected to remain high, Idea and Vodafone are more vulnerable to lose subscriber base during merger integration.
Financial: Vodafone Idea on reported a consolidated net loss of Rs 5,004.60 crore for the third quarter ended December 31, 2018.As on December 31, 2018, Gross debt stood at Rs 1,23,660 crore, including deferred spectrum payment obligations due to the Government of Rs. 91,480 crore. Cash and cash equivalents were Rs 8,900 crore, resulting in net debt of Rs 1,14,760 crore.
Valuation: Over valued with TTM P/E 48.30x.
Reasons to consider: Bayer CropScience recorded 29% yoy revenue growth to Rs6.2bn in Q3FY19 driven by strong performance from rice, fruits and the vegetables segments. Bayers recently announced merger with Monsanto India will lead to product portfolio expansion. Management remains confident on positive growth in FY20E driven by product innovations.
Drivers: Better product mix and merger may add speed and efficiency and will drive the stock further.
Reasons to consider: Agro-speciality chemicals reported solid growth on a yoy basis, helped by new product additions and improved demand from key global agro innovators. Management is optimistic on better performance from the speciality chemical segment in the coming quarters along with margin expansion led by an improving global agro-chemical market. As a result, management continues to maintain ~40% yoy growth visibility in the Agro-speciality chemicals segment for FY19.
Drivers: Growth in chemical segment with addition capex of Rs.2.2bn backed with spurt in packaged film business will drive the stock further.
Financial: On the financial front, the revenue for the quarter Q3FY19 has substantially increased by 40.6% yoy to Rs.1964.04 crore as compared to the same quarter of the previous corresponding year.The operating profit for the quarter stood at Rs331cr, up 42.9% yoy. The EBITDA margin (excluding forex impact) for the quarter expanded ~27bps yoy to 16.9% in Q3FY19.The net profit for the quarter stood at Rs165.71cr, up 26.3% yoy.
Reasons to avoid: Sharp decline in gross margin as well as power segment (contributes 78% to sales), registered muted growth of 3% YoY,Order inflow for the quarter stood at INR77b (-36% YoY) and we build in order inflow of INR340b for FY19. 9MFY19 order inflow stood at INR172b, rising long term receivables is a key concern to avoid the stock.
Financial: On the financial front the revenue for the quarter Q3fy19 has marginally increased by 10.1 per cent to Rs.7336 cr, as compared to the same quarter of the previous year. EBITDA stood at Rs219cr, down 17.5% yoy , EBIDTA margin fell 100bps yoy to 3%. Net profit in the quarter ended December 2018 stood at Rs192cr.
Reasons to consider: The companys entry in the biosimilars business is a long term positive for the company.Biocon-Mylan has recently received an approval for Trastuzumab and Pegfilgrastim in US, this will help the company to grow its profit over next five years.
Drivers: The key growth driver is its biosimilars as most product under this segment are gaining market share and generating healthy revenue.
Financial: On the financial front the revenue from operations stood at Rs 1,540.8 crore for the quarter Q3fy19, against Rs 1,057.9 crore.EBITDA grew by 71.7% yoy to Rs380.7cr in Q3FY19 vs. Rs221.7cr in Q3FY18. EBITDA margins in Q3FY19 stood at 24.7% vs. 21% in Q3FY18 and 25.7% in Q2FY19. PAT grew by 136.3% yoy to Rs217.2cr in Q3FY19 vs. Rs91.9cr in Q3FY18.
Valuation: Fairly valued with TTM P/E of 46.72x.
Reasons to consider: :Company's consolidated sales grew 27% YoY as the company added 7.5k associates and ~4k NETAP trainees. The company is likely to get benefit from growth of organised flexi-staffing,We estimate TeamLease to end FY19 with employee associates of 155k plus and we assume 17-18k addition in FY20, implying 10% plus headcount growth.
Drivers: Improving margin and lower tax rate (sec 80JJAA) will act as a major driver to further ramp up its business.
Financial: On the financial front the revenue for the quarter Q3FY19 grew by 27.7% yoy and 7.5% qoq to Rs1,172.23cr. EBITDA came in at ~Rs25cr, up 37.1% yoy and 2.0% qoq.The EBITDA margin expanded 14bps yoy, but contracted 11bps qoq to 2.1%. Reported PAT grew by 37.3% yoy and 1.3% qoq to ~Rs25cr.
Drivers: Through the acquisition and joint venture, major traction in the top-line and margins is expected in the near term. Also, the demand for copper wires is increasing on the back of growth seen in electric power sectors.
Financial: On financial front, standalone revenue for Q2FY19 came in at Rs. 296.81 crore as compared to Rs. 236.15 crore for same period last year, registering 25.7 percent yoy increase. At operating level EBITDA for the quarter fell by 17.3 percent yoy to Rs. 13.7 crore from Rs. 16.57 crore with a corresponding margin contraction of 240 bps. EBITDA margin for the quarter stood at 4.6 percent. This margin contraction was aided by higher depreciation along with higher manufacturing costs. Net profit for the quarter came in at Rs. 3.48 crore which was Rs. 7 crore in same quarter of last fiscal, registering yoy decline of 50.5 percent. PAT margin saw contraction of more than 180 bps.