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Thursday, April 13, 2006

Sharekhan - Investor's Eye

ORG Informatics
Cluster: Emerging Star
Recommendation: Buy 
Price target: Rs194
Current market price: Rs143

ORG Info bags Rs170-crore order

ORG Informatics has announced that it has bagged a Rs170-crore order from Bharat Electronics Ltd (BEL) as the second part of the order for the convergent billing system to be implemented by BEL for Mahanagar Telephone Nigam Ltd (MTNL). ORG Informatics had secured the first part of the order worth Rs255 crore on March 15, 2006. In our Stock Update dated March 16, 2006, we had indicated that we expected the announcement of the second part of the order (to be worth over Rs125 crore) in the following few weeks. 


Associated Cement Companies
Cluster: Apple Green
Recommendation: Buy 
Price target: Rs1,050
Current market price: Rs912

Results above expectations

Result highlights

  • ACC's Q1CY2006 pre-exceptional net profit at Rs247 crore is above our expectations primarily because of the higher than expected improvement in the cement realisations and the lower than expected rise in the freight cost. 
  • We had mentioned in our earlier cement estimates that the cement price rise and volume growth are above consensus estimates and hence shall lead to an upgradation of the consensus earnings. This is clearly reflected in ACC's consensus net profit estimates of Rs165 crore, which are way below what the company has actually delivered. 
  • The net sales for the quarter grew by 19% driven by a 27.4% growth in the cement revenues. The cement volumes registered a growth of 12.9% whereas the cement realisations improved by 12.8% year on year (yoy).
  • The growth in the net sales was lower than that in the cement revenues, as the Q1CY2006 revenues do not include the revenues from the refractory business, which had been divested by the company in September 2005. 
  • The company's operating profit margin (OPM) for the quarter improved by a staggering 890 basis points primarily driven by a sharp 12.8 % improvement in the cement realisations, which brought the operating leverage into play.
  • With a 19% growth in the revenues and an 890-basis-point improvement in the OPMs, the operating profit for the quarter jumped by a whopping 91% and stood at Rs315 crore. 
  • With a 5% decline in the interest cost, the profit before tax (PBT) for the quarter jumped by 124% and the same stood at Rs281 crore. We have shown a year-on-year (y-o-y) comparison on the PBT basis as last year there was a tax write back of Rs25.7 crore on account of the reduction in the corporate tax rate. 
  • ACC's pre-exceptional net profit grew by 63% to Rs247 crore. The reported net profit, which includes the gain from the divestment of ACC's stake in Eternit Everest and the tax provision made for the earlier quarters (which we have treated as extraordinary items) stood at Rs235 crore, up 42%.