Recommendation: Buy
CMP = Rs 745
Price target: Under review
- HDFC Bank's net interest income (NII) grew by 52.6% year on year (yoy) for Q3FY2006 on the back of a 58.8% growth in its advances to Rs 38,000 crore driven by a 75.6% increase in its retail advances.
- The bank's deposits grew by 36.8% yoy during Q3FY2006. However, the growth came on the back of high-cost term deposits, which put pressure on the net interest margin (NIM).
- The operating expenses went up by 61% as the bank aggressively expanded its branch network during the quarter. The benefits of this expansion will accrue in the quarters to come.
- The net profit for the quarter grew by 31.3% to Rs 224.4 crore. The growth could have been higher but for the higher provisioning made for the non-performing assets (NPAs).
At the current market price of Rs 753, the stock trades at 21x its FY2007E earnings per share (EPS) and 4x its consolidated book value. i maintain Buy recommendation on the stock.
Recommendation: Buy
CMP = Rs 500
Price target: Rs 700
- Hyderabad Industries Ltd (HIL) reported a 5.2% increase in its net sales in Q3FY2006 to Rs 95.4 crore. However, on a like-to-like basis, the building product division's revenue grew by 18.8%.
- Despite a 5.2% increase in the top line, HIL reported a flat growth in the operating profit. The operating profit margin (OPM) declined by 59 basis points to 11.6%. The decline in the OPM was primarily due to an increase in the raw material cost. The raw material cost as a percentage of sales increased from 43% in Q3FY2005 to 48.2% in Q3FY2006.
- HIL is utilising its strong cash flows from operations to pay a large portion of its debt. The reduction in the debt lowered its interest cost by 61.2% to Rs0.9 crore in Q3FY2006.
- The company has reported a net profit growth of 22.5% for Q3FY2006 to Rs 5.7 crore. However, the numbers are below our expectation and we are downgrading our FY2006 and FY2007 estimates. Let us expect the company to report a net profit of Rs 42.9 crore in FY2006 and of Rs 46.5 crore in FY2007.
Recommendation: Buy
CMP = Rs 373
Price target: Rs 420
- For Q3FY2006 ICI India reported impressive results that are much better than our estimates.
- The company's revenues grew by 17.7% year on year (yoy) in Q3FY2006 to Rs 257 crore on the back of a splendid performance by its paint business.
- The operating profit grew by a sharp 62.3% yoy to Rs 37.0 crore as the operating profit margin (OPM) expanded by a whopping 395 basis points.
- However, the reported net profit was much lower at Rs 8.3 crore as during the quarter ICI India sold its rubber chemical business to a joint venture and booked a notional loss of Rs 10.1 crore. However, adjusted for the one-time extraordinary items, the net profit grew by 72.7%.
- At the current market price of Rs 373, its stock is quoting at 15.5x its FY2007E earnings per share (EPS) and at 11.9x if one adjusts the value of its cash and cash equivalents. We believe that these valuations are attractive and the stock is available at a good discount to its peers. I maintain Buy recommendation on the stock with a revised price target of Rs 420.
