Dear All,
Forwarding you the Result Update on Bajaj Hindusthan for 2QSY2011 with a Neutral recommendation.
For 2QSY2011, Bajaj Hindusthan (BJH) reported an increase of 116% yoy in its total revenue to `1,262cr. PAT for the quarter grew by 131% yoy to `73cr. Numbers are not comparable on a yoy basis due to merger of the company’s subsidiary. We remain Neutral on the stock.
EBITDA margin improves due to lower cane cost and higher contribution from distillery and power: EBITDA margin improved by 720bp yoy to 25.4% in 2QSY2011 from 17% in 2QSY2010 and 18% in 1QSY2011, on account of lower cane and other costs. Raw-material cost as a percentage of sales fell to 63.7% in 2QSY2011 compared to 73% in 1QSY2011. Revenue contribution from the sugar division declined to 84% in 2QSY2011 from 90% in 1QSY2011. However, revenue contribution from the distillery and power divisions increased to 6% and 10% in 2QSY2011 compared to 5% and 4% in 1QSY2011, respectively.
Outlook and valuation: Going ahead, we expect sugar prices to remain at
`28–30/kg. Domestic ex-mill prices have corrected from the highs of `42/kg to `28–29/kg currently, while cost of inventory is at `28/kg. However, due to declaration of SAP by the UP Government, margins in the sugar business would be under pressure; however, the same is likely to be compensated by higher contribution from the power and distillery divisions. At current levels, the stock is trading at fair valuations of 0.6x P/BV and 0.8x EV/IC on SY2012 estimates. Hence, we maintain our Neutral view on the stock.
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If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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