Visit us at www.sharekhan.com May 20, 2014 Index Stock Update >> Aditya Birla Nuvo Sector Update >> Construction For Private Circulation only Regd Add: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai – 400042, Maharashtra. Tel: 022 - 61150000. Fax: 67481899; E-mail: [email protected]; Website: www.sharekhan.com; CIN: U99999MH1995PLC087498. Sharekhan Ltd.: SEBI Regn. Nos. BSE- INB/INF011073351 ; CD-INE011073351; NSE– INB/INF231073330 ; CD-INE231073330; MCX Stock Exchange- INB/INF261073333 ; CD-INE261073330; DP-NSDL-IN-DP-NSDL-233-2003 ; CDSL-IN-DP-CDSL-271-2004 ; PMS-INP000000662 ; Mutual Fund-ARN 20669 ; Commodity trading through Sharekhan Commodities Pvt. Ltd.: MCX-10080 ; (MCX/TCM/CORP/0425) ; NCDEX-00132 ; (NCDEX/TCM/ CORP/0142) ; NCDEX SPOT-NCDEXSPOT/116/CO/11/20626; For any complaints email at [email protected] ; Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and Do’s & Don’ts by MCX & NCDEX and the T & C on www.sharekhan.com before investing. investor’s eye stock update Aditya Birla Nuvo Reco: Buy Stock Update Price target revised to Rs1,550 CMP: Rs1,243 Company details Result highlights Price target: Rs1,550 Aditya Birla Nuvo Ltd (ABNL)’s Q4FY2014 result is not directly comparable on a Market cap: Rs16,170 cr Y-o-Y basis, as last years’ performance included the carbon black business, which was sold off in April 2013. Excluding the impact on a like-to-like basis, 52 week high/low: Rs1,290/996 the overall performance was good, with a revenue growth at 10% YoY. Led by NSE volume: 1.5 lakh efficiencies in the business verticals (barring the acquired Pantaloons and (no. of shares) fertiliser businesses owing to a plant shut-down), the operating profit grew by BSE code: 500303 23.8% YoY, while the net earnings were impacted by one-offs. Excluding the NSE code: ABIRLANUVO one-offs, the adjusted profit grew by 42% YoY from Rs199 crore in Q4FY2013 to Sharekhan code: ABIRLANUVO Rs283 crore in Q4FY2014. Free float: 5.6 cr The company sounded confident on its non-banking finance business and (no. of shares) continues to nurture its plans to grow the loan book size. Further, on the life Shareholding pattern insurance vertical, it sounded positive on the product portfolio front and expects a revival in the business with a recovery in the macro-economy front, while the Public & Others acquired Pantaloons business would be in the investment mode for FY2015 as 10% Foreign well. 19% ABNL’s strong positioning in each of the business verticals it operates in (life Institutions insurance, telecommunication, lifestyle and asset management) along with its 12% quest for profitable growth and attractive valuation keeps us positive and hence Non-promoter we maintain our Buy rating with a revised price target of Rs1,550 (valuation corporate based on SoTP method). Promoters 2% 57% Price chart Results (consolidated) Rs cr 1290 1230 Particulars Q4FY14 Q4FY13 YoY % Q3FY14 QoQ % 1170 Total income from operations 7,111.8 6,996.0 1.7 6,544.8 8.7 Operating profit 1,167.2 943.2 23.8 1,224.0 -4.6 1110 Other income 96.2 109.5 -12.1 72.5 32.6 1050 Interest 471.8 383.7 23.0 355.7 32.6 990 Depreciation 429.9 345.2 24.5 407.1 5.6 PBT 361.7 323.7 11.7 533.7 -32.2 Feb-14 Nov-13 May-13 Aug-13 May-14 Tax 160.1 124.6 28.5 157.7 1.5 Price performance Minority interest 6.8 0.2 2843.5 30.7 -77.9 Net profit 238.9 198.9 20.1 345.3 -30.8 (%) 1m 3m 6m 12m Exceptional & One off items 44.1 0.0 0.0 Adjusted PAT after MI 283.0 198.9 42.3 345.3 -18.0 Absolute 12.0 15.2 2.1 12.3 EPS 21.8 16.5 26.5 OPM (%) 16.4 13.5 293BPS 18.7 -229BPS Relative 4.0 -2.1 -12.8 -8.0 to Sensex PATM (%) 3.5 2.8 61BPS 5.7 -229BPS Tax rate (%) 44.3 38.5 578BPS 29.6 1472BPS Sharekhan 2 May 20, 2014 Home Next investor’s eye stock update Valuations (stand-alone) crore on the broking business coupled with a one- Particulars FY12 FY13 FY14 FY15E FY16E time interest payment of Rs88 crore on Minacs Revenues (Rs cr) 8675.3 9595.2 7950.5 9237.3 10260.1 shadowed the strong operating performance, and Net profit (Rs cr) 426.6 423.1 656.9 538.3 584.2 resulted in a reported earnings decline of 20.1% on a Shares in issue (Cr) 11.4 13.0 13.0 13.0 13.0 Y-o-Y basis. After adjusting for the one-offs, the net Adj. EPS (Rs) 32.8 32.5 50.5 41.4 44.9 earnings grew by 42% on a Y-o-Y basis. Growth YoY % 12.4 -0.8 55.3 -18.0 8.5 Key result positives PER (x) 37.9 38.2 24.6 30.0 27.7 Book Value (Rs) 500.2 527.1 561.2 602.6 647.5 A strong performance reported by Madura Garments, P/BV (Rs) 2.5 2.4 2.2 2.1 1.9 a robust 35.1% Y-o-Y growth in the revenues, led by EV/EBIDTA (x) 23.4 22.2 21.4 17.5 15.8 the store expansion and a healthy 7% same-store sales RoCE (%) 8.1 8.2 9.6 8.6 8.7 growth. RoNW (%) 7.5 6.2 9.0 6.9 6.9 The telecom business reported a strong performance with the revenues (up 15.5% YoY), and earnings before Excluding carbon black, revenues grew by 10% YoY: interest and tax (EBIT; up 42.7% YoY). On a reported basis, ABNL’s consolidated Q4FY2014 posted a 1.7% growth on a year-on-year (Y-o-Y) basis. The financial services business grew strong on the The result was not comparable on a Y-o-Y basis as revenue as well as profitability front (EBIT up 77.1% last year the carbon black business revenues were YoY). included. Excluding the carbon black business, the The overall life insurance revenues rebound to a revenues grew by 10% on a Y-o-Y basis. On a business positive territory after seven consecutive declining performance basis, barring the fertiliser business that quarters (albeit led by renewal premium as the new witnessed a 37.3% Y-o-Y decline in the earnings owing business premium continues to decline). to a plant shut-down of 41 days, all the other businesses reported a healthy revenue growth with The net debt to the earnings before interest, tax, the financial services business growth at 33.6% on a depreciation and amortisation (EBITDA) improved to Y-o-Y basis. The lifestyle business of Madura Garments 2.6x in FY2014. grew at 35% year on year (YoY) in a challenging environment. Key result negatives The Pantaloons business continued to struggle both Operating efficiencies led to margin expansion: The on the revenue (reported a 1.6% Y-o-Y decline in the margin improvement across a slew of businesses— same-store sales front) as well as earnings front financial services, telecommunication (telecom) and (reporting enhanced loss from Rs31 crore in Q4FY2013 manufacturing (like insulators, textile and rayon)— to Rs46 crore in Q4FY2014). aided in a strong 293-basis-point (BPS) margin improvement for the quarter, consequently the The life insurance business profitability continues to operating profit grew by 23.8% on a Y-o-Y basis. In deteriorate owing to a change in the product mix (EBIT Q4FY2014, the margin stood at 16.4% vs 13.5% in declined by 10% YoY). Q4FY2013. The fertiliser business showed a lackluster Reported earnings includes one-offs; adjusting the performance on the revenues as well as profitability, same net earnings grew strong 42% YoY: The one- owing to a plant shut-down and higher energy cost. offs for the quarter like the impairment of Rs18.6 Sharekhan 3 May 20, 2014 Home Next investor’s eye stock update Consolidated segmental performance Segmental results Particulars Q4FY14 Q4FY13 YoY % Q3FY14 QoQ % Segment revenues (Rs cr) Branded apparels 1243 1062 17.0 1,232 0.9 Rayon yarn 223 209 6.7 220 1.3 Insulators 159 115 38.6 135 17.7 Other textiles 345 283 22.0 331 4.0 Fertilisers 408 651 -37.3 754 -45.9 Financial services 533 399 33.6 494 7.9 Life insurance 1739 1637 6.2 983 76.9 IT and ITeS 724 614 18.0 742 -2.4 Telecom 1752 1516 15.5 1,670 4.9 Total revenues 7112 6996 1.7 6,562 8.4 Segmental PBIT (Rs cr) Branded apparels 36.1 44.6 -19.1 97.9 -63.2 Rayon yarn 44.8 35.2 27.1 43.6 2.8 Insulators 22.6 4.1 453.1 17.7 27.7 Other textiles 37.2 30.1 23.8 41.5 -10.4 Fertilisers (30.2) 17.9 -268.8 31.2 -196.8 Financial services 89.5 50.5 77.1 99.2 -9.8 Life insurance 80.4 89.3 -10.0 80.2 0.2 IT and ITeS 52.8 43.3 21.9 46.5 13.5 Telecom 274.4 192.3 42.7 224.7 22.1 Total segmental PBIT 607.5 527.0 15.3 682.5 -11.0 PBIT margin (%) Branded apparels 2.9 4.2 -130BPS 7.9 -505BPS Rayon yarn 20.1 16.9 322BPS 19.8 29BPS Insulators 14.2 3.6 1066BPS 13.1 111BPS Other textiles 10.8 10.6 16BPS 12.5 -174BPS Fertilisers (7.4) 2.7 -1015BPS 4.1 -1154BPS Financial services 16.8 12.6 412BPS 20.1 -329BPS Life Insurance 4.6 5.5 -83BPS 8.2 -354BPS IT and ITeS 7.3 7.1 23BPS 6.3 102BPS Telecom 15.7 12.7 298BPS 13.5 221BPS Blended 8.5 7.5 101BPS 10.4 -186BPS Key management takeaways Guided for about Rs900 crore capex for FY2015 on a to lay a strong foundation for strengthening and consolidated basis: The management guided for a communicating the brand values and identity with the consolidated level capital expenditure (capex) of Rs900 consumers, which the company is strongly undertaking.