>GODREJ INDUSTRIES (CENTRUM)

Godrej Properties - the next trigger

■ Higher raw material costs impact PAT: Net sales (consolidated) for the full year (FY09) grew 16.3% YoY to Rs34.2bn vs. our estimate of Rs32bn. However, PAT plunged 33.6% to Rs1.1bn (vs. estimate of Rs1.8bn) mainly due to increased raw material costs.

■ Revised rating and target price: The stock has achieved our target price of Rs120. Hence, we have changed our rating to Hold and set a revised target price of Rs129 on SOTP valuation. Currently the stock trades at 19x FY10 EPS of Rs19 and 15.6x FY10EV/EBIDTA.

■ Godrej Sara Lee stake merged with GCPL; SOTP value revised: GIL’s stake in Godrej Sara Lee is being merged with Godrej Consumer Products (GCPL) at a 1:1 swap ratio. This would consolidate the FMCG businesses under GCPL. Further GIL’s holding in GCPL would increase to 25%. We have revised our SOTP value to Rs163 and revise our target price, post a 20% conglomerate discount, to Rs129.

■ Godrej Properties results in-line: Godrej Properties reported revenues of Rs2.5bn (excluding other income), exactly in-line with our estimates. We believe revenues were booked mainly from the Planet Godrej project at Mahalaxmi in Mumbai and Bangalore projects. PAT stood at Rs750mn vs. our estimate of Rs583mn.

■ Chemicals division dampens results: The slump in the chemicals business, which contributes 22% to topline, impacted overall results. Fluctuations in commodity prices and currencies, curtailment of natural gas supplies to factories and sluggish business environment impacted the division on the cost and margin fronts.

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