ICICI Securities Limited Bajaj Hindusthan (BAJHIN)

ICICI Securities Limited
Event Update
Rating matrix
Rating : Sell
Target : | 39
Target Period : 12 months
Potential Upside : -25 %
ICICIdirect.com | Equity Research
WHAT’S CHANGED…
September 15, 2011
Bajaj Hindusthan (BAJHIN)
Key Financials
| Crore
Net Sales
SY10
3,201
SY11
4,717
SY12E
3,237
SY13E
3,646
PRICE TARGET............................................................................. Changed from |60 to |39
EPS (FY12E)........................................................................................................Unchanged
EBITDA
Net Profit
EPS
529.0
41.2
2.2
1,035.6
146.0
6.0
877.2
192.0
3.3
925.3
221.7
3.9
EPS (FY13E)........................................................................................................Unchanged
RATING...............................................................................................................Hold to Sell
Valuation summary
Rights issue to pare debt…
SY09 SY10 SY11E SY12E
P/E 24.2 8.6 15.5 13.5
Target P/E 10.6 3.8 6.8 5.9
EV / EBITDA 12.9 7.3 8.2 7.2
Price to Book Value 0.3 0.6 0.6 0.6
RoNW(%) 1.2 2.8 3.5 3.8
RoCE (%) 2.6 7.1 6.3 6.1
Stock data
Market Capitalisation | 995 crore
Total Debt (SY10) | 6350 crore
Cash and Investments (SY10) | 1220 crore
EV | 6125 crore
52 week H/L 144 / 50
Equity capital | 19.1 crore
Face value | 1
MF Holding (%) 6.8
FII Holding (%) 13.7
Price movement
7,000
6,000
5,000
4,000
3,000
2,000
Sep-10
Analyst’s name
Dec-10 Mar-11 Jun-11
Price (R.H.S) Nifty (L.H.S)
Sanjay Manyal
sanjay.manyal@icicisecurities.com
Parineeta Poddar
parineeta.poddar@icicisecurities.com
140
120
100
80
60
40
Sep-11
| 52
Bajaj Hindusthan (BHL) has announced a rights issue for its shareholders.
It is offering two new shares for an existing share (ratio of 2:1) at a price
of | 36/share (face value of | 1 and a premium of | 35). The record date
for the same is September 22, 2011. Hence, through the issue BHL plans
to raise | 1644.2 crore and utilise the amount for repayment of its debt.
� Scenario 1: If rights issue is fully subscribed
If the rights issues is fully subscribed, then there will be a dilution of 200%
of the share capital and the adjusted price would be | 41/share. Hence,
the diluted equity share capital for the company would become | 57.3
crore.
� Scenario 2: If rights issue is subscribed up to 50%
If the rights issue is subscribed partially (~50%) then the adjusted price
would be ~| 44/share and diluted equity share capital will be | 43.5 crore.
According to the management, the entire funds from the issue would be
utilised for repayment of the debt (| 6350 crore) on the books of BHL.
Hence, the current long-term debt of | 5100 crore would come down to |
3500 crore (100% subscription), thereby helping the company to save on
interest cost to the extent of ~| 140 crore per annum.
Valuation
At the CMP of | 52, the stock is trading at 5.9x its SY12E EPS of | 8.8 and
5.0x its FY13E EPS of | 10.5. However, post dilution (considering 100%
subscription) the stock would trade at 15.5x and 13.5x its estimated SY12
and SY13 EPS of | 3.3 and | 3.9, respectively. Considering the company’s
lack of execution capability in the power segment and issues like coal
supplies remaining a snag for power companies, we will await the
company’s performance in power. Moreover, an expected higher
sugarcane cost in SY12 (due to election in the state) could further keep
earnings from the sugar business subdued. Therefore, we advise our
investors to avoid the rights issue and remain negative on the stock with a
target price of | 39/share.
Exhibit 1: Financial Highlights
| Crore SY10 SY11E SY12E SY13E
Net Sales 3201.4 4717.4 3237.2 3645.6
EBITDA margin (%) 16.5 22.0 10.2 7.6
Depreciation 344.0 356.1 292.8 340.7
Interest 368.1 478.5 324.9 285.0
Other Income 20.2 0.0 0.0 0.0
Reported PAT 41.2 146.0 192.0 221.7
EPS (|)
Source: Company, ICICIdirect.com Research
2.2 6.0 3.3 3.9
Though we have adjusted our estimates, assuming a 100% subscription, we shall re-visit them once the
procedure is over on September 23, 2011 and there is further clarity on the subscription.

ICICI Securities Limited
Exhibit 2: ICICIdirect.com Coverage Universe (Sugar)
Shree Renuka Sugars
Sales (| cr) EPS (|) PE (x) EV/E (x) RoNW (%) RoCE (%)
Idirect Code RENSUG CMP 60.0 SY11E 8278.6 7.4 8.1 9.2 16.6 5.6
Target 80.0 SY12E 7451.7 9.9 6.1 6.3 18.2 8.4
Mcap
Balrampur Chini
3992 Upside 33.3% SY13E 7263.2 9.3 6.4 6.9 14.6 12.2
Idirect Code BALCHI CMP 58.0 FY11 2972.4 6.4 9.0 6.5 10.5 12.4
Target 80.6 FY12E 2630.6 6.9 8.3 4.9 10.8 10.4
Mcap
Bajaj Hindustan
1283 Upside 38.9% FY13E 2672.0 9.4 6.2 4.8 14.1 13.0
Idirect Code BAJHIN CMP 52.0 SY11E 4717.4 6.0 8.6 7.3 2.8 7.1
Target 39.3 SY12E 3237.2 3.3 15.5 8.2 3.5 6.1
Mcap
Dhampur Sugar
2986 Upside -24.4% SY13E 3645.6 3.9 13.5 7.2 3.8 6.3
Idirect Code DHASUG CMP 50.0 FY11 2376.0 0.8 NA 4.8 1.8 10.6
Target 75.2 FY12E 1325.4 6.5 7.7 4.3 5.4 10.3
Mcap 282.6 Upside 50.3% FY13E 1639.4 10.1 4.9 3.9 20.5 21.8
Source: Company, ICICIdirect.com Research
ICICIdirect.com | Equity Research
Exhibit 3: Recommendation History
160
140
120
100
80
60
40
20
0
Sep-10
Oct-10
Nov-10
Source: Company, ICICIdirect.com Research
Jan-11
Feb-11
Apr-11
Price Target Price
May-11
Jul-11
Page 2
Aug-11
Exhibit 4: Recent Releases
Date Event CMP Target Price Rating
3-Nov-10 Sugar Sector Update 127 105 SELL
3-Dec-10 Q4SY10 Result Update 115 105 HOLD
10-Jan-11 Q3FY11 Preview 111 105 HOLD
8-Feb-11 Q1SY11 Result Update 82 75 HOLD
4-May-11 Q2SY11 Result Update 72 75 HOLD
5-Jul-11 Q1FY12 Preview 74 75 HOLD
17-Aug-11 Q3SY11 Result Update 54 60 HOLD
Source: Company, ICICIdirect.com Research

ICICI Securities Limited
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps / midcaps, respectively;
Buy: Between 10% and 15%/20% for large caps / midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
ANALYST CERTIFICATION
ICICIdirect.com | Equity Research
Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1 st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
We /I, Sanjay Manyal M.B.A.(FINANCE) Parineeta Poddar M.B.A.(FINANCE) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
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