>HAWKINS COOKER LIMITED (GEOJIT)

Hawkins Cookers has reported fantastic performance for Q4 FY 2009. Net Sales rose by 25.2% to Rs. 75.42 crore (Rs. 60.24 crore). OPM% jumped up to 14.5% (10.4%) mainly because of sharp reduction in other expenses to 28.9% (32.4%) of sales. Further aided by substantially higher other income (incl. operating) of Rs. 67 lakh (Rs. 25 lakh), PBT zoomed to Rs. 10.66 crore (Rs. 5.62 crore). Slightly lower tax rate of 34.5% (36.2%) led to doubling of PAT to Rs. 6.98 crore (Rs. 3.59 crore).

For FY 2009, Net Sales increased by 18.3% to Rs. 241.48 crore. OPM% improved commendably to 12.1% (9.7%). 69.2% higher other income of Rs. 1.89 crore and extra ordinary income of Rs. 2.26 crore (nil) being surplus on disposal of immovable property and lower tax rate of 33.7% (36.8%) lifted PAT up by 78.6% to Rs. 20.12 crore (Rs. 11.26 crore)

Company’s main products are pressure cookers and kitchenware products. It operates in branded segment and is among the largest manufacturers of kitchenware in India. Its 'Futura' brand of non-stick kitchenware has higher margins and is growing at 20-25% per annum. Even in its bread-and butter pressure cooker segment, sales volume is growing at 10-13 % on y-o-y basis.

Continuing vitality of HCL’s brands - Hawkins, Futura and Miss Mary - and economic growth and growth of aspirations in India offer company best opportunity. Also, fast developing modern retail segment in India offers new opportunities for increasing turnover. Thus, future outlook for business is excellent and company is wellpositioned to take advantage of growth in demand & to increase its sales & profits handsomely.

While growing demand would be driving topline growth, softening of raw material (main being aluminium – accounting for 2/3rd of production cost) would improve profitability going ahead. Thus company is set for excellent growth.

At CMP of Rs. 210/-, the share (Rs. 10/- paid up) is trading at 6 times FY 2009 EPS of Rs. 35.21 and 4.77 times FY 2010 expected EPS of Rs. 44/-. Company has declared dividend of Rs. 20/- per share. At CMP dividend yield works out to be 9.5%. In view of decent future prospects, we recommend to “BUY” the share at CMP.

>PVR LIMITED (ICICI DIRECT)

Near term pain, long-term looks good...
PVR reported its Q4FY09 standalone results, which were below our expectations. The topline at Rs 58.0 crore was up 6.8% YoY while it declined by 21.5% QoQ. The EBITDA margin at 10.5% declined 248 bps and 526 bps YoY and QoQ, respectively, on the back of higher rental cost and
film distributors share. The company reported a net loss of Rs 1.11 crore vs. Rs 2.8 crore of PAT during Q4FY08.

Highlight of the quarter
PVR opened a 24-lane bowling alley centre at Ambience Mall, Gurgaon under its newly formed JV PVR Blu-O. During its 18 days of operation, the subsidiary grossed an income of Rs 0.7 crore and PAT of Rs - 0.4 crore.

Valuations
The whole of Q110E has been written off. This would result in negative growth in topline for FY10E. However, we expect the bottomline to grow on account of operational improvement in the subsidiaries and absence of one time launch cost incurred in them in FY09. At the CMP of Rs 129.3, PVR is trading at 27.0x its FY10E EPS of Rs 4.8 and 10.6x its FY11E EPS of Rs 12.2. On an EV/EBITDA basis, it is trading at 7.1x and 4.7x its FY10E and FY11E EBITDA, respectively. We value the company at 7x FY10E EBITDA to arrive at a target price of Rs 127.3, implying a 1.5% downside. We are upgrading the stock from UNDERPERFORMER to HOLD.

Result Analysis

Lack of good quality content
The entire multiplex industry witnessed lower occupancy levels due to lack of good quality content and the examination season. Generally, Q4 remains subdued due to the examination season. However, during Q4FY09 the exhibition business took a further hit due to the inferior quality content that was released. Big-ticket movies like Delhi 6, Chandni Chowk to China and Billu underperformed at the box office. Top five films in Q409 had a net collection of Rs 94.0 crore at the box office as compared to Rs 145.6 crore in Q408.

Consolidated result analysis
On a consolidated basis, the company reported topline of Rs 355.39 crore and EBITDA of Rs 50 crore. The EBITDA margin stood at 14.2% as against 16.8% on a standalone basis. During the year, PVR formed three new subsidiaries PVR Pictures, Sunrise Infotainment Ltd and CR Retail. The company entered into a 51:49 JV with Thailand-based Major Cineplex group Plc for PVR Blu-O. These collectively contributed ~Rs 117.66 crore to the topline. However, on the EBITDA front, the consolidated contribution from these subsidiaries was negative.

To see full report: PVR LIMITED

>YES BANK (IDFC SSKI)

'Interest'ing times

Yes Bank will be a key beneficiary of declining interest rates, and thereby a collapse in wholesale borrowing costs, given the bias of its funding mix. Lower deposit costs are expected to drive a structural improvement in CASA – one of the key focus areas. The bank has surprised positively on the strength of its asset book, reflected in the 200bp+ of capital release on migration to Basel-II. We expect 26% earnings CAGR for the bank over FY09-11 driven by margin expansion, stable asset quality and robust fee income growth. Owing to a potential expansion in NIMs and comfort around asset quality, we are upgrading our earnings estimates by 3.9% for FY10 and 5% for FY11. At 1.8x FY10E and 1.5x FY11E adjusted book, valuations are attractive when viewed in conjunction with the stock’s historical trading multiples. Maintain Outperformer with a revised 12- month price target of Rs200.

■ Key beneficiary of collapse in bulk deposit rates: Wholesale borrowing costs, which had soared in Oct 2008 due to tight liquidity, have been rapidly falling over the past few months – CP rates now near to all time lows touched in 2003. Being largely bulk funded (only ~9% of deposits in CASA), Yes Bank will be a key beneficiary of the same. Around 60% of the bank’s liabilities are likely to get re-priced over the next 12 months, translating into lower deposit costs and an expected ~15bp expansion in NIM in FY10.

■ Well-capitalized for growth: Tier I ratio of 9.5% (as of March 2009) provides Yes Bank headroom to grow at ~30% for the next 18-24 months. Migration to BASEL-II has led to capital release of 210bp and enhanced the capital cushion. Further, as more corporate accounts get rated, another 50-100bp of capital release is likely over the next six months. That also underlines superior quality of the bank’s loan book.

■ Attractive valuations; reiterate Outperformer: Yes Bank is expected to report a strong 26% CAGR in earnings over the next two years. We expect RoE expansion (21% in FY10E against 14% in FY07) to lead to re-rating of the stock in the near term. At 1.8x FY10E and 1.5x FY11E adjusted book, current valuations offer an attractive entry point as the stock trades on the lower end of its historical price to book band. Reiterate Outperformer with a revised 12-month price target of Rs200 (3x FY10E and 2.4x FY11E adjusted book).

To see full report: YES BANK

>INDIA EQUITY STRATEGY (CITI)

New Government: Expectation = Action?

■ Broad blueprint spelt out — The new government has laid out its broad 5-year governance agenda – in the form of the president’s opening address to the parliament. This agenda covers socio, economic and political issues, and is wider and a little more detailed than the Congress Party’s pre-election manifesto. We do not believe there are any big surprises, or any key specifics, on economic policies; though the primary forum for that is the Budget, slated for the 1st week of July.

■ More socio-economic, than pure economic — The agenda of governance, expectedly, is most heavily biased toward socio-economic policies and objectives. These account for 7/10 top priorities of the government, and 90%+ of its 100-day plan – in sync with its pre-poll manifesto, and reflective of the mandate it has got. While expectations of a meaningful economic and policy change (and execution) are fair and will run alongside its socio-economic focus – we believe the ‘givens’ are in the area of rural infrastructure, health, education, agriculture and small business support, rather than headline economic reforms.

■ There is enough economics — The president has spelt out key economics issues and policies for the government – these cover: a) medium-term strategy for prudent fiscal management; b) counter-cyclical investment in the Infrastructure sector – PPP model, and policy changes; c) encouragement of foreign flows; d) recapitalization of government banks, and creating a pension regulator; e) rural infrastructure; f) land acquisition and rehabilitation laws; g) introduction of a
general service tax; h) 13,000MW of power capacity creation annually; and i) energy security, including oil exploration, coal policy and nuclear developments. If executed, and well, could well provide the economic action the market is expecting.

■ Right noises – wait for the budget — The new government has got off to a fairly positive start – ministerial allocations, right noises on economic policy and reform, and fairly positive GDP and market data to boost. While we do expect policy making to be an ongoing exercise – the budget, slated for early July, will be an early test of how much expectation actually translates into action.