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Sharekhan report on ICI India:
Friday, June 8, 2007
Broking house, Sharekhan is bullish on ICI India and has recommended buy rating on the stock with a target of Rs 581. At the current market price of Rs 520, the stock trades at 18x its FY2008E EPS of Rs 29 and 15.7x its FY2009E EPS of Rs 33.
Result highlights
The net revenues grew by 5.7% year on year (yoy) to Rs201 crore despite the discontinuation of the surfactant businesses (Uniqema). w The sales from the continuing businesses (ie paints and chemicals) have shown a growth of 23%. The paint business grew by 26% yoy to Rs170 crore. The continued chemical business grew by 13% yoy to Rs31 crore.
The profit before interest and tax (PBIT) from the continued businesses grew by 51% in the quarter under review on the back of improved PBIT margin of both the businesses. The PBIT in the paint business grew by 67% yoy with a 170-basispoint expansion in the margin. The PBIT in the residual chemical business grew by 11.5% yoy with an 20-basis-point expansion in the margin.
The overall operating profit (including all businesses) dropped by 10% yoy with a 150-basis-point contraction in the operating profit margin (OPM).
With a higher other income (due to a dividend income of Rs31 crore) and stable depreciation, the net profit grew by 20% yoy to Rs12.7 crore.
ICI Indiaís Q4FY2007 net profit (adjusted for extraordinary items and taxes) at Rs12.7 crore was slightly below our expectations. The net profit grew by 20% yoy.
The company has announced that it would be utilising Rs 210 crore to buy back its own shares from the minority shareholders at a price not exceeding Rs575 per share through market operations.
Taking into account the sell-off of Quest International and the auto refinish business, we are also introducing our FY2009 numbers. At the current market price of Rs 520, the stock trades at 18x its FY2008E EPS of Rs29 and 15.7x its FY2009E EPS of Rs 33. In view of the cash per share of Rs202 and 21x FY2008 core earnings per share (EPS) of Rs 18, we have revised upward our price target to Rs581. We maintain our Buy recommendation on the stock
Result highlights
The net revenues grew by 5.7% year on year (yoy) to Rs201 crore despite the discontinuation of the surfactant businesses (Uniqema). w The sales from the continuing businesses (ie paints and chemicals) have shown a growth of 23%. The paint business grew by 26% yoy to Rs170 crore. The continued chemical business grew by 13% yoy to Rs31 crore.
The profit before interest and tax (PBIT) from the continued businesses grew by 51% in the quarter under review on the back of improved PBIT margin of both the businesses. The PBIT in the paint business grew by 67% yoy with a 170-basispoint expansion in the margin. The PBIT in the residual chemical business grew by 11.5% yoy with an 20-basis-point expansion in the margin.
The overall operating profit (including all businesses) dropped by 10% yoy with a 150-basis-point contraction in the operating profit margin (OPM).
With a higher other income (due to a dividend income of Rs31 crore) and stable depreciation, the net profit grew by 20% yoy to Rs12.7 crore.
ICI Indiaís Q4FY2007 net profit (adjusted for extraordinary items and taxes) at Rs12.7 crore was slightly below our expectations. The net profit grew by 20% yoy.
The company has announced that it would be utilising Rs 210 crore to buy back its own shares from the minority shareholders at a price not exceeding Rs575 per share through market operations.
Taking into account the sell-off of Quest International and the auto refinish business, we are also introducing our FY2009 numbers. At the current market price of Rs 520, the stock trades at 18x its FY2008E EPS of Rs29 and 15.7x its FY2009E EPS of Rs 33. In view of the cash per share of Rs202 and 21x FY2008 core earnings per share (EPS) of Rs 18, we have revised upward our price target to Rs581. We maintain our Buy recommendation on the stock
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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.
