Thursday, May 31, 2012

>RUPEE DEPRECIATION: Net positive for earnings

The sharp depreciation in INR, on balance, is likely to be positive for earnings due to large positive impact on sectors such as Pharma, IT, and Metals, offset by relatively smaller negative impact on sectors like Capital goods, Energy, Media, Telecom and Utilities. At an aggregate level, assuming INR at ~Rs55/USD, this will translate into a ~5% increase each for FY13 and FY14 for Sensex/Nifty.

 INR has depreciated ~25% since late July 2011
INR depreciation in line with other EMs: Although INR has depreciated sharply in the past few months (~25% since July 2011), the depreciation is broadly in sync with that of other EM currencies that also have a current account deficit, as the chart alongside indicates. Thus, the depreciation largely reflects heightened global risk aversion, which is disproportionately impacting all currencies that have a large external gap.

 INR back in fair-value zone on REER basis: The sharp depreciation in INR is largely justified, given the large current account deficit and inflation differentials. However, as of April, on real effective exchange rate (REER) basis, INR has reverted to the FY06 levels and was just 4-5% higher than the FY09-10 levels. Barring any further sharp increase in global risk aversion, there is limited downside to INR from current levels.

■ Within large caps HCL Tech, Wipro, Tata Steel, Hindalco, Cairn will see >10% upgrade to FY13 EPS while Siemens, ABB, HT Media HPCL, IGL will see >10% downgrade to their FY13 EPS

To read report in detail: RUPEE DEPRECIATION

>BPCL: Better GRMs, full compensation by the government and upstream lead to profits

Government support keeps FY12 PAT in black; E&P remains the trigger

Full compensation for under-recoveries incurred in FY12 by the government (~60%) and the upstream (~40%) aided BPCL’s profitability. Devoid of any absorption on regulated fuels (although it incurred losses on sale of petrol which were absorbed), BPCL reported PAT of Rs13.1bn for FY12. BPCL’s E&P initiative is yielding results with incremental discoveries of hydrocarbon in its Mozambique block. We believe the E&P story is likely to drive stock performance going ahead. We remain positive on regulated fuel price hike and BPCL’s successful E&P initiative and hence maintain Buy on the stock.

 Higher petroleum product prices lead to higher revenues: BPCL‘s revenues climbed up by 42.8% YoY and 9.9% QoQ at Rs646.7bn owing to higher product prices (due to higher crude prices) and slightly higher volumes. Sales of petroleum products jumped by 6.1% YoY and 2.4% QoQ at 8.2mmt. Crude throughput jumped by 7.5% YoY but declined marginally by 2.1% QoQ at 6.0mmt.

 Better GRMs, full compensation by the government and upstream lead to profits in both Q4 and FY12: GRMs improved on a QoQ basis and came in at US$4.2/bbl in Q4 against US$3.5/bbl in Q3 which somewhat supported the performance. Due to higher quantum of under-recoveries during FY12, entire under-recoveries were compensated by the government and the upstream without any absorption left for downstream. Due to this, BPCL was able to show profits for both Q4 and FY12. Although, BPCL did not absorb any loss on regulated fuel, it did absorb losses on petrol (deregulated fuel) which was not compensated. BPCL received Rs129.6bn in subsidies from upstream companies and Rs196.7bn compensation from the government for FY12. Thus the company reported PAT of Rs39.6bn for Q4 and Rs13.1bn for FY12.

 Bina to report double digit GRMs, focus on E&P: BPCL’s Bina refinery operated at about 55-60% utilisation rate during Q4 but is currently operated at about 90% and soon will reach its full capacity (6mmt). With expectation of US$9-11/bbl GRMs, Bina is likely to add to BPCL’s consolidated earnings. BPCL is likely to invest over Rs45-50bn during FY13E of which about Rs15-16bn will be invested in E&P. Reserve estimate for Mozambique block is expected by the end of 2013. We believe higher capacity utilisation of Bina and further positive news flows from E&P are likely to drive BPCL’s stock performance going ahead. We like BPCL due to its exposure in E&P and maintain Buy with a price target of Rs861 (earlier Rs857).


>JET AIRWAYS: Q4FY12 results

PRICE TARGET....................................................................................................Unchanged
EPS (FY13E)............................................................................................................... -| 159
EPS (FY14E)............................................................................................................... -| 125
RATING....................................................................................... Changed from Buy to Hold

Earnings in line but challenges remain…
Jet Airways’ (JAL) Q4FY12 results were better than our expectations at operating levels. Its topline growth remained more or less in line with our estimates. Capacity reduction by other private carriers helped the company to improve load factors and yields especially in the domestic segment despite operating in the lean business season compared to the last quarter (i.e. Q3FY12). As a result, its revenue and market share both increased by 2.4% and 280 bps, sequentially. The company reported an operating revenue of | 4578 crore vs. estimated revenue of | 4680 crore. However, higher domestic fuel prices and weak rupee led to operating loss of | 55.2 crore and | 40 crore for Jet’s domestic segment and JetLite, respectively. On the other hand, the international segment’s performance remained healthy and it reported operating profit of | 182 crore. This, in turn, led to net consolidated operating profit of | 86 crore for the quarter vs. our estimated net operating loss of | 77.1 crore. However, at the PAT level, JAL reported a net loss of | 354 crore vs. | 196.5 crore last year due to higher depreciation & interest costs. Going ahead, we believe, operating environment for the company will continue to remain challenging in the wake of higher fuel prices & depreciating rupee despite growth in revenues. Hence, we downgrade our rating to HOLD from BUY.

 ■  Fuel, weak rupee dent margin despite better topline growth
Fuel prices and rupee depreciation continued to remain a cause for concern during this quarter as ATF prices have increased by 5.7% QoQ and the rupee continued to slide further on a sequential basis. As a result, the company was unable to improve its profitability despite better growth in total revenues.

We believe revenue growth would moderate as a rise in fleet supply by other players poses risk, going forward. We expect FY12-14E revenue CAGR of 14% vs. revenue CAGR of 18% during FY10-12. Also, we believe the operating environment will continue to remain challenging in the wake of higher fuel prices and a depreciating rupee in the near term. Hence, we have downgraded our rating from BUY to HOLD and maintain our target price of | 330 (i.e. 0.7x FY14E EV/Sales). A near term upside risk includes positive policy reforms like allowing 49% FDI by foreign carriers. However, that would mainly be sentimental.


>SUN TV: Q4FY12 results

Price Target ........................................................................... Changed from | 348 to | 300
EPS (FY12E)......................................................................... Changed from | 20.5 to | 18.8
EPS (FY13E)..........................................................................................Introduced at | 22.1

Slowing economy darkens Sun…
Sun TV reported its Q4FY12 results, which were in line with our estimates. The topline stood at | 427.0 crore representing de-growth of 7.3% YoY as the topline for Q4FY11 was inflated by a one-time revenue from the movie Endhiran. Ad revenues de grew by 9.5% to | 234.0 crore
owing to the slowdown in the economy and fall in the TRPs of the channels. EBITDA for the quarter stood at | 328.2 crore against our estimate of | 330.7 crore. The EBITDA margin stood at 76.9% contracting by 216 bps YoY due to higher other expenses. The PAT stood at | 159.0
crore against our expectation of | 165.1 crore. In light of a continuous decline in TRPs, which will pressurise ad revenues, going forward, we have cut our revenue/PAT estimates for FY13 by 0.4%/8.4%, respectively. We continue to rate the stock as BUY with a target price of | 300.

Declining TRPs
The quarter was marked by a decline in the TRPs of the channels once again owing to competition from Arasu Cable, which has not carried Sun TV channels as yet and a power crisis in South Indian states. The management has indicated that talks with Arasu Cable have reached a final stage and a deal could be struck anytime soon. This is expected to address the decline in TRPs.

Ad revenue de-grows again
Ad revenues continued to de-grow for the second straight quarter due to a decline in TRPs and a challenging macroeconomic environment. Though a decline in TRPs is expected to be arrested soon, the macroeconomic environment is expected to remain challenging. We have
factored in a 13.3% and 14.8% growth of ad revenue for FY13 and FY14, respectively, in our calculations.

We have valued the stock at 16x FY13E EPS and arrived at a target price of | 300, implying an upside of 20% from the CMP. The political pressure may have an overhang on the stock. We continue to rate Sun TV as BUY.


>STRATEGY: India looks oversold

With sellside economists’ GDP estimates being cut regularly (our estimate remains above 7%), with the INR in a free (our target INR/US$56-58), India's star appears to be fading. However, as shown by a series of long term charts in this note, the Indian market is unquestionably ‘cheap’ now. Whilst given the scale of the European crisis and given India's comatose Government, it is easy to be bearish on India, these charts suggest that now is almost as good a time as any to BUY India. The country will rarely look as attractive on valuations when the world economy perks up and when India's growth hits its cyclical peak (v/s the cyclical trough that it is at now).

India appears oversold on long term metrics
India appears significantly oversold on a comprehensive set of relative valuation metrics based on book value, national income and cyclically adjusted earnings (refer to the right hand margin). In fact, India has appeared cheaper than it is at present only once or twice in the last ten years:

  P/B: The Sensex was significantly cheaper compared to current levels only in the year after 9/11 and in the wake of the Lehman crash (exhibit 1).

  P/GDP: BSE500 was significantly cheaper only until 2005. Since then, with the exception of the post-Lehman period, the market has never been this cheap relative to underlying national income. Even in the depths of the Lehman crisis, the market was only 10% cheaper than it is today (exhibit 2).

  CAPE: On CAPE (i.e. cyclically adjusted real P/E), India has only once traded at lower multiples than the current 15x. This rare outcome materialized in the post-Lehman months when it hit 12x (see exhibit 3).

  Even relative to the nominal CAPE for MSCI EM, India has never looked this cheap v/s its peers post CY05 (with the exception of the post Lehman months) with its premium currently crunched to 38% v/s the long term average of 51%.

Investment Implications: Buy Good & Clean stocks
Given that India appears oversold on long term metrics, unless you believe that there is another Lehman on the way, it makes sense to take a bolder approach to buying high-quality, sensibly-valued companies in India. Fifty such companies were highlighted in our "Good & Clean 4.0: the Great 50" note published on May 03, 2012.

Furthermore, leaving our charts aside, it is worth considering the three upcoming catalysts highlighted in our email last week (India Strategy: Blinkered by all the doom & gloom", May 16, 2012) in case your spirit is willing to buy India but the flesh is weak:

1.Change in FM: With the current FM likely headed for a more prestigious but more titular role, the three candidates who appear to be in the frame for the FM’s role appear to be more progressive candidates than the incumbent.

2.More QE from the West: We have seen the QE playbook being rolled out repeatedly by the ECB and the Fed. Given the potential risks to the European banking system and given a pro-growth (hence anti-austerity) leader heading France, it would be very strange if the ECB did not use the monetary fire hose to calm the markets down eventually.

3. Oil: India's oil import bill amounts to 7% of our GDP. Therefore, a 10% fall in the price of oil (from US$110/Brent barrel to US$100) will reduce our current account deficit by 40bps. We are not oil experts but looking at the weakening Chinese economy and listening to the Saudis talk about how they will work proactively to push Brent to US$100, we cannot but feel optimistic.


>ORBIT CORPORATION: Q4FY2012 revenue boosted by sale proceeds from Ocean Parque

Regulatory environment easing, execution holds the key

  Q4FY2012 revenue boosted by sale proceeds from Ocean Parque: Orbit Corporation (Orbit)’s consolidated revenues in Q4FY2012 came in at Rs123 crore, up 80% year on year (YoY) and 71% quarter on quarter (QoQ) mainly due to booking of Rs65 crore from the Ocean Parque (Napean Sea Road, Mumbai) deal which took place earlier this fiscal. However, there was an impairment of Rs13 crore in the sales value of the World Trade Centre (WTC) project in Bandra Kurla Complex (BKC), Mumbai which impacted the company’s revenue during the quarter. Thus if we adjust these two items, the revenue for the quarter grew by 3.5% YoY and was down 1.5% QoQ. The same was due to poor execution across projects with construction activity having slowed down for want of clearances and approvals.

 Q4FY2012 PAT below expectation; OPM takes a hit: The adjusted net profit fell by 75% YoY to Rs4.8 crore on the back of a sharp contraction in the operating profit margin (OPM) and higher interest cost. The OPM contracted from 77.9% in Q4FY2011 and 54.1% in Q3FY2012 to 35.7% for the quarter under review. The contraction is on account of impairment booked in case of WTC, adjusting for which, the margins would have stood at 51.5%. Further the budgeted cost has been increased during the quarter for three projects under development. During the quarter the company paid further tax of Rs9.7 crore pertaining to the previous
years, which resulted in a net loss of Rs4 crore at the reporting level. Additionally the auditors have qualified the report that Orbit has not provided for income tax demand including interest amounting to Rs157 crore for previous assessment years. However, the management is contesting the same and is confident of much lower tax liability.

 Presales marginally lower sequentially but expect a rebound in H2FY2013 as approvals gain pace: Presales for the quarter stood at 29,654 sq ft (Rs44.4 crore in value terms), ie slightly lower than Q3FY2012 volume of 32,921 sq ft (Rs71.1 crore in value terms) but much better than Q4FY2011 volume of 11,249 sq ft (Rs50 crore in value terms). The fire sale at Orbit Residency (Andheri) and Orbit Terraces (Lower Parel) supported the volume. However in value terms they are much lower since no sales booking took place in any of the Napean Sea Road projects which command high premium. Going ahead, the management is looking at launching a couple of projects in Napean Sea Road and the first phase of Mandwa by Dussera-Diwali time as approvals and clearances have started kicking in for the stalled projects.

Execution set to improve; though downgrading FY2013 and FY2014 estimates: The regulatory environment has started improving where clearances and approvals have started coming in. Orbit has already received clearances for Orbit Terraces, Orbit Enclave and Orbit Haven where the execution can now resume on full swing. It is expecting more clearances which will help it launch more projects in H2FY2013. However, we are reducing our earnings estimate for FY2013 and FY2014 by 27% and 21% respectively on the back of lower revenue recognition. The execution will pick up post monsoon only, which will result in lower revenue recognition. A stake sale in a few projects and improvement in cash collection hold the key for smooth execution going ahead. Debtors collection has been very poor in FY2012 which has
impacted the working capital.

■  Maintain Buy, outlook improves: Poor sales across projects due to regulatory uncertainty and absence of new launches due to pending approvals and clearances had taken a toll on the company and the overall industry. However the regulatory environment has started improving and the clearances have started coming in for the stalled projects. This will result in a pick up in execution and launch of new projects. A stake sale in few projects along with improved cash
collection hold the key. Thus with improved outlook, we maintain our Buy rating on the stock with price target of Rs70. We have rolled forward our net asset value (NAV) to FY2013 and lowered the discount to NAV from 50% to 40%. At the current market price, the stock trades at 7.3x and 4.4x its FY2013E and FY2014 Eearnings respectively.

■ FY2012 net profit down 73% YoY
The net profit for the full year is down 73% YoY on the back of flat revenue, sharp dip in OPM and higher interest outgo. The revenue has been supported by Rs115 crore of sale proceeds from the Ocean Parque deal. The OPM contracted from 52.5% in FY2011 to 39.2%, impacted by impairment of Rs20 crore on account of the WTC project. If we adjust for the same the margin would stand at 47.2%. Looking at partial exit or strategic partner in few projects

■ Orbit is looking to partially exit two of its projects viz Orbit Grandeur, Santacruz (SRA project) and the Kilachand project at Napean Sea Road in this fiscal itself. If it manages to successfully close the deal, this will help the company in execution of the projects without raising further debt on the books.

■ Presales marginally lower sequentially but expect a rebound in H2FY2013 as approvals gain pace Presales for the quarter stood at 29,654 sq ft (Rs44.4 crore in value terms), ie slightly lower than Q3FY2012 volume of 32,921 sq ft (Rs71.1 crore in value terms) but much better than Q4FY2011 volume of 11,249 sq ft (Rs50 crore in value terms). The fire sale at Orbit Residency (Andheri) and Orbit Terraces (Lower Parel) supported the volume.
However in value terms they are much lower since no sales booking took place in any of the Napean Sea Road projects which command high premium.

Going ahead, the management is looking at launching a couple of projects in Napean Sea Road and the first phase of Mandwa by Dussera-Diwali time as approvals and clearances have started kicking in for the stalled projects.

Valuation and view
Poor sales across projects due to regulatory uncertainty and absence of new launches due to pending approvals and clearances had taken a toll of the company and the overall industry. However the regulatory environment has started improving and the clearances have started coming in for the stalled projects. This will result in a pick up in execution and launch of new projects. A stake sale in a few projects along with improved cash collection hold the key going forward. Thus with an improved outlook, we maintain our Buy rating on the stock with a price target of Rs70. We have rolled forward our NAV to FY2013 and lowered the discount to NAV from 50% to 40%. At the current market price, the stock trades at 7.3x and 4.4x its FY2013E and FY2014E earnings respectively.



Realisation driven growth; volume ramp up awaited  

Realisation drives growth; production volume flat: In Q4FY2012, Selan Exploration Technology (Selan)’s net revenues (adjusted for the petroleum profit) grew by 23.2% year on year (YoY), backed by a 28% year-on-year (Y-o-Y) improvement in the realisation. The blended realisation was boosted by a combination of higher crude oil price and depreciation of the rupee. However, the oil production volume remained flat Y-o-Y at 42,484 barrels during the quarter. The operating profit grew at a relatively lower rate of 20% due to margin contraction on the back of higher overhead expenses as a percentage of sales. The reported profit after tax (PAT) grew by 49% YoY but by 9% QoQ, which includes a foreign exchange (forex) gain of Rs1.9 crore in Q4FY2012 and a forex loss of Rs2.4 crore in Q3FY2012.

Annual performance – driven primarily by higher realisation: Even on an annual basis, the growth in net sales of 34% was largely driven by a higher blended realisation as the production volumes declined by 12% to 1,68,041 bbl as compared to FY2011. However, despite lower production volumes, the operating profit margin (OPM) expanded by 270 basis points on the back of a jump in blended realisation (52% growth in realisation), which is a combination of increase in the price of crude (by 41%) and appreciation of the dollar against the rupee (by 10%). Consequently, the operating profit per barrel of production also jumped by 54% YoY to Rs3,568/bbl in FY2012. Hence, its reported PAT grew by 38% YoY to Rs44 crore, translating into an earnings per share (EPS) of Rs25.9 for FY2012.

Healthy balance sheet position: We like the strong balance sheet and impressive cash generating ability of the company. Currently it has net cash of Rs57/ share, that is 21% of the current market price of the share. Further, the company is generating significant cash flow from operations to support its future growth plans. Hence, we believe that the low leverage position is likely to be sustained.

Fine-tune estimates; awaiting regulatory approvals for next round of production ramp up; reiterate Buy: Post the declining production volume trend since FY2009, Selan was expected to begin the next phase of development of its fields and show a ramp-up in production volumes from FY2012. The same has been postponed due to delay in regulatory approvals. However, the management is quite confident of commencing its next phase of growth and has guided for an annual production volume of 5,00,000-7,00,000 bbl in the next two years. Our volume assumption at 4,47,000 bbl for FY2014 is much lower than the management’s guidance. Hence, we remain positive on the stock and continue to rate it as Buy with a target price of Rs500.


>JK CEMENTS: Q4FY12 Result update

Stellar performance, maintain Buy

JK Cement’s Q4FY12 result was better than our expectations with EBITDA at Rs1,992mn vs. est. Rs1,550mn and adjusted PAT at Rs855mn vs. est. Rs672mn primarily driven by better than expected cement realization of Rs3,822/tonne (est. Rs3,757/tonne) and improved profitability of white cement (EBITDA/tonne increased 16% QoQ to Rs5,145/tonne). EBITDA increased  73.1% YoY (and 67.2% QoQ) to Rs1,992mn and EBITDA margin improved  744bps YoY (and 534bps QoQ) to 24.7%. On the back of higher realization and  increase in sales volume, adjusted PAT of the company increased 59.7% YoY  (and 96.6% QoQ) to Rs855mn. Going forward, the management expects the sales volume from South plants to improve and anticipates 10-12% growth in grey cement sales volume in FY13E. It expects volume growth in white cement to be 8-12% and wall putty ~25%. During FY12, the company recorded 187.5% YoY growth in adjusted profit to Rs1,800mn and operating margin improved 730bps YoY to 19.9%. We expect EPS growth of 13.4%/8.6%/23.2%for FY13E/FY14E/FY15E for the company. RoE of the company is expected to improve to 12.5% in FY14E against 4.6% in FY11. We maintain Buy on the stock with price target of Rs204, an upside of 39.7% from the CMP.

 Improvement in grey cement realization and sales volume lead to higher revenues….: Revenue of the company increased 21% YoY to Rs8.1bn led by 7.1% YoY growth in grey cement realization to Rs3,746/tonne and 12.3% YoY growth in cement sales volume (cement and clinker) to 1.71mt. White cement sales volume increased 10.5% YoY to 0.10mt and realization increased 12.3% YoY to Rs16,519/tonne.

 ….. Leading to significant increase in EBITDA and profits: Driven by improvement in realization and sales volume of both grey and white cement, EBITDA of the company increased 73.1% YoY (67.2 QoQ) to Rs1,992mn. EBITDA margin improved 744bps YoY (534bps QoQ) to 24.7%. Adjusted Profit of the company increased 59.7% YoY (96.6% QoQ) to Rs855mn.

 Significant improvement in earnings in FY12: Adjusted profit of the company increased 187.5% YoY to Rs1,800mn in FY12 primarily due to 14% YoY increase in grey cement realization and 7% YoY increase grey cement sales volume. Adjusted EPS of the company for FY12 stands at Rs25.7 against Rs9 in FY11.

 Earnings estimates revised upwards: We revise EBITDA estimates upwards by 16.2%/20.5% to Rs5.5bn/Rs6bn for FY13E/FY14E to factor in higher realization and volume growth. Our EPS estimates stands revised upwards by 17.9%/13.1% to Rs29.2/Rs31.7 for FY13E/FY14E respectively.

 Maintain Buy on attractive valuations: At the CMP, the stock trades at 4.6x FY14E EPS, 2.7x EV/EBITDA and EV/tonne of US$65. We expect improvement in RoE of the company to 12.5% in FY14E against 4.6% in FY12. We maintain Buy on the stock with a price target of Rs204.


>Venky's (India) Ltd.: Q4FY12 RESULTS

First signs of turnaround visible

■ Q4FY12 –Margins witness stark sequential improvement
• Venky’s India Ltd. (Venky’s) saw its net sales rise by 18.9% Y-o-Y to `2.67 bn led by a 31% rise in the poultry segment and 21% rise in the Animal Health Product (AHP) segment.

• The raw material cost which had rose for the seventh consecutive quarter on a Y-o-Y basis to 69% of sales. However, on a sequential basis, the raw material cost declined by 20 bps. The other expenditure declined by 30bps and 380bps on a Y-o-Y and Q-o-Q basis respectively.

• EBITDA was `218 mn for Q4FY12 against `254 mn for Q4FY11. The EBITDA margin declined to 8.3% in Q4FY12 from 11.3% in Q4FY11 but bounced back strongly from the 3.5% margin seen in Q3FY12.

• The other income component stood at `101 mn, above our estimates, resulting in the profit after tax rising by 16.8% Y-o-Y and over 500% Q-o-Q to `181 mn.

Result Highlights
■ Segmental revenues in-line with our estimates
The poultry and poultry related segment grew by 31.4% Y-o-Y to `1.99 bn and contributed 69% to total revenues as compared to 62.7% in Q4FY11. Similarly the AHP division witnessed a 21.1% Y-o-Y growth in revenues to `244 mn and contributed 8.5% to the revenues in Q4FY12 as compared to 8.3% in Q4FY11. The oil seed division on the other hand de-grew by 8% Y-o-Y to `644 mn and contributed 22.4% to the total revenues.

■ Segmental margins decline annually but bounce back strongly on Q-o-Q basis
The higher raw material cost pressures have been visible across segments over the last four quarters. The EBIT margin of the poultry and poultry related segment was 10.4% in Q4FY12 much lower than 13.6% in Q4FY11 but significantly higher from the 4.8% margin reported in Q3FY12. Similarly, the oilseed segment also clocked EBIT margins 10.2% in Q4FY12 from 6.1% in Q3FY12. The strong bounce back in the EBIT margin re-iterrates the turnaround for the company.

■ Valuation & viewpoint
Given the turnaround in realisations after the last few slack quarters and the strong macro conditions; we expect the company to report a 21.6% CAGR in revenues over FY12-FY14E. We expect the lower raw material cost to help margins to expand and reflect in the PAT with a CAGR of 57.3% over FY12-FY14E in PAT.

Venky’s is currently trading at 5.4x FY13E EPS and 3.6x FY14E EPS, a significant discount to its historical one-year forward P/E band. We have valued the company based on the average historical P/E band (5.6x) over the last four years to capture the cyclicality of the industry and its profits. With an assumption of the worst behind the company as far as the raw material prices are concerned, we value the company based on its next two years average EPS of `90 per share. Consequently, we reiterate our BUY rating on the stock with a target price of `515 per share.