>JET AIRWAYS (CLSA)

Jet reported better than expected results for 1QFY13 with pre-ex PBT of Rs.456m after five successive quarters of losses. Yield improvements, particularly in the international business, helped drive 30% revenue growth. Costs remained under control and helped drive a 113% YoY increase in Ebitdar. Looking ahead, a strong yield environment, focus on route utilisation and tight cost control should help sustain performance. We now expect profitability to sustain over FY13-14 and significantly upgrade estimates. Upgrade Jet to BUY with a TP of Rs500.

Back in black after five quarters of losses
Jet’s 1QFY13 results reflected rising yields and high cost discipline amidst pressures from fuel, currency and higher airport charges. Ebitdar rose 113% YoY/100% QoQ with a margin recovery in both segments. Pre-exc PBT returned to positive territory after five quarters of losses, coming in at Rs456m against a loss of Rs2.7bn in 1Q12 and Rs3.3bn in 4Q12. At the reported level, FX losses were largely offset by gains on sale and leaseback of two aircrafts and net profit stood at Rs247m – the highest since 3QFY11.

Domestic – yields strong, focus turns to costs and efficiency
Domestic seat factors were at 76.2% (74.6% in 1Q12) while yields were up 10% YoY/9% QoQ amidst strong industry pricing. Fuel costs rose 8% QoQ/27% YoY as rupee depreciation filtered through while other costs grew slower than sales. Ebitdar margins stood at 15.0% (+700bps YoY/1040bps QoQ). Looking ahead, while 2Q will see seasonal weakness, the overall yield and load environment remains strong. Margin performance is being  complemented by tight cost control with Jet controlling staff, selling, maintenance and other costs to target a 5-8% reduction in cost/ASKM.

International – yields and loads strong, route optimisation in focus
The international business saw yields increase 21% YoY/10% QoQ while loads increased 5.8% YoY to 86.3% - an all time high. The improvement is being driven by route rationalisation and an uptick in gulf markets. Fuel costs rose 25% YoY while selling and staff costs declined. Ebitdar margins improved 580bps YoY/440bps QoQ to 17.0%. Looking ahead, the focus on profitable routes and recovery in gulf markets should help sustain margins.

Asset sales easing balance sheet pressure; upgrade to BUY
Jet is focusing on debt reduction with a target of US$400m for the year. The sale and leaseback of two aircrafts and engines in 1Q helped raise Rs720m and an additional 8-9 aircrafts are planned for 2Q. Given the improved performance in international and cost discipline in domestic, we now expect improved profitability over FY13-14, driving significant upgrades. Continuing strength in operating performance and debt reduction leaves room for upside. Upgrade to BUY from SELL earlier (TP Rs500, 6.9x FY14 Adj EV/Ebitdar).

To read report in detail: JET AIRWAYS

RISH TRADER

>EICHER MOTORS

Revenue up 22% YoY, led by 62% YoY volume growth in motorcycles Eicher Motors reported top-line revenue at `15.9bn, up 22% YoY led by ~8% YoY volume growth in M&HCV. The company sold 11,979 medium and heavy commercial vehicles (M&HCV). It sold 27,244 motorcycles in 2QCY12, up 62% YoY.

Operating margins decline 180bps QoQ to 8.8%
The company’s operating margins declined 180bps QoQ to 8.8%. This was mainly led due to higher staff costs and other expenses. Staff costs was in line with expansion plans. The higher incentives to push sales led to higher other expenses. EBIDTA for the quarter was ` 1.4bn, up 11% YoY.

PAT reported at ` 760mn, flattish YoY
The company reported its PAT at ` 760mn. This was because of lower other income. The EPS for the quarter stood at ` 28.2.

View and valuation
Macro headwinds may affect the demand in the commercial vehicle segment. Accordingly, we estimate volume growth of 12% in CY13 in the CV segment. Its demand in the motorcycle segment continues to be strong with a waiting of almost 2-3 months. With supply issues being sorted, we expect this segment to grow 30% YoY. We also believe margins may remain stable at these levels. The stock is currently trading at a P/E of 13.9x CY14E. We recommend Accumulate.

To read report in detail: EICHER MOTORS
RISH TRADER

>UNITECH: New launches geographical breakdown

Unitech’s struggles in improving its execution continue, as liquidity for the company remains tight. In this scenario, its revenue recognition is faltering, and 1QFY13 results disappointed yet again on the top line, which missed our and consensus estimates by 30% and 38%, respectively. EBITDA margins at 20% were in line with our estimate of 21%, while a lower interest cost recognized on the P&L helped the company report a PAT of INR459 mn, slightly below our estimate. Our target price and rating are under review.

The sales run rate has started dipping, as Unitech now focuses more on execution than new launches. Also, with execution significantly delayed on many projects, the scope to launch new projects remains limited. The company sold 1.5mn sqft of projects in 1QFY13 worth INR7 bn, down from 1.8mn sqft in 4QFY12 and 1.9mn sqft in 1QFY12, a fall in line with the dip in the overall property market. The company managed to deliver only ~0.8mn sqft in 1QFY13. Deliveries of older projects launched before 2009 at 0.3mn sqft in 1Q were still extremely slow, despite 80% of the older projects being in finishing or handover stage. The company has provided the balance sheet for FY12, where consolidated net debt is down INR3.25 bn YoY at INR54 bn, which is a minor positive.

Key results highlights
 1QFY13 revenues at INR4.1bn (-32% YoY and -43% QoQ) came in lower than our and Street expectations of INR5.9bn and INR6.6bn, respectively.

 EBITDA margins at 20% were in line with our estimate of 21%. However, from the segment results, EBIT margins in the real estate segment are extremely low at 13.5%, which is a concern.

 Below the EBITDA level, lower interest cost at INR1.2 bn vs. our estimate of INR3.4 bn saved the day for Unitech and helped it report PAT only slightly below our estimate of INR497 mn.

 The average residential realisation was up QoQ to INR4,215/sqft (vs INR 3,863/sq ft in 4QFY12). The Noida region was a larger contributor to sales in the last two quarters, with Gurgaon slowing down significantly with the dependence on National Capital Region (NCR) as a whole still continuing.

 Execution remains a key disappointment, as the company managed to deliver only an additional 0.8mn sqft even with ~80% of the older projects being in finishing or handover stage. Of this, 0.3mn sqft was
from older projects launched before 2009 and 0.4mn sqft from projects launched after 2009.

 On the balance sheet side, inventory moved up by a large INR10 bn YoY as of Mar’12, with a similar reduction in fixed assets, which could be a case of realignment of some land parcels.

 Short-term loans and advances are down ~INR5 bn. The auditors have remarked that, of the total INR43.2 bn of short-term loans and advances, INR16.1 bn has been outstanding for long period and they are unable to ascertain the recoverability of the same.

To read report in detail: UNITECH



RISH TRADER

>NAVNEET PUBLICATION: Q1FY13 Result Update

Navneet Publications (NPL) reported strong Q1 results in line with our estimates. Revenue was up 18.4% YoY to Rs3.6bn in Q1 driven by strong growth in the publication business. Syllabus change continues to help company maintain its growth momentum. Considering inventory levels at the end of Q1FY13, we expect good growth in Q2FY13 also in its publication segment. Going forward, we believe that both the publication business and stationery segment will
continue to deliver strong growth. We retain Buy rating on attractive valuations, high growth visibility and dividend yield.

Results better than expectation during Q1: NPL reported 18.4% growth in revenue to Rs3.6bn, in line with our expectation. Operating margin remained flat compared to Q4FY12 at 31.8%.

Stationery business revenue growth picks up in Q1: After a weak FY12 performance, the stationery segment picked up in Q4FY12. Revenue grew 20% YoY to Rs1.3bn backed by better order flows from India and abroad. The PBIT margin remained lower by 100bp at 16.9%
YoY. We expect the performance of the stationery segment to improve in FY13E as the company expects strong order flow from international markets. The margin is also likely to improve from Q3FY13 as the company is now concentrating on specific states and increasing penetration there rather than opting for a pan India sales push. This will result in better output and save cost.


Publication segment registers 17.4% growth: The publication business registered 17.4% YoY growth to Rs2.25bn on the back of ongoing syllabus change in Maharashtra and Gujarat states. PBIT margin improved by 110bp to 41.1% YoY on higher sales growth.

Historically, Q1 is a strong quarter for the publication business from a margin perspective as the company gets higher sales in this quarter.  Earnings estimate changed: We have marginally upgraded our estimates for FY13/FY14 considering better visibility of revenue from
both publication and stationery segment.

Attractive valuations; Reiterate Buy: Visibility on revenue growth remains high for the next year due to higher sales growth in the publication segment due to the change of syllabus. Moreover,
government orders and Andhra Pradesh market will also contribute to the revenue. We continue to like the stock due to attractive valuation; better sales mix in favor of the publication segment and improvement in return ratios. We also upgrade our numbers considering better business visibility. We re-iterate our Buy rating on the stock as it gives an upside of  38% with a dividend yield of 2.9% (on Rs1.6 dividend per share).


RISH TRADER