07-04-2012, 04:41 PM
Portfolio Management
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Unichem Laboratories Ltd:
Unichem Labs posted standalone revenues of Rs 189cr for Q1FY12 which were up by 6.0% q-o-q & 0.6% y-o-y basis. The overall sluggish growth in sales was due to domestic formulation business which reported sales of Rs 139cr, declined by 5.4% yo-y, led by rationalization of inventory at distribution level, intense competition and pricing pressure. The company is expected to show overall improvement from H2FY12 driven by domestic restructuring at field force & inventory rationalization at distribution level, commencement of supply to US subsidiary (ANDA approved 20), contract manufacturing revenue of Rs 60cr & Rs 120cr in FY12E & FY13E respectively. At CMP of Rs 148, the stock is trading at 12.1x & 9.2x of its FY12E & FY13E earnings respectively. Investors are recommended to buy the stock for a price target of Rs176, implying an upside of 19% from CMP of Rs148.
2) GlaxoSmithKline Consumer Healthcare Ltd.
With zero debt on its books and operating cash flows of about Rs2-3 billion per annum, GSK Consumer is a cash-rich company (cash on books Rs9bn as on December 2010). The company expects to incur normal capex of ~Rs600 million per year (~Rs2.5 billion for a new plant in CY13). It also plans to expand the distribution network from current 650,000 outlets to 700,000 outlets by CY12 end, which will be a key revenue growth driver. Ramp up in noodles and new categories like glucose will further fuel growth. We expect the company to register ~22% CAGR in net profit over FY10-12. At the current market price of Rs2,411, the stock is trading at 22.8 times CY12E EPS of Rs105.8. we maintain BUY, with a 9-month price target of Rs2,752 (earlier Rs2,569).
3) ITC Ltd
At the CMP of Rs. 207 per share, the stock is currently trading at a PE of 26.7x FY12E & 22.4x FY13E, which looks fairly priced. ITC is expected to report strong revenues at CAGR of 15.4% and earnings of CAGR 19.2% over FY11 to FY13E. Considering the higher demand growth and improving business scenario in Hotel and Paper industry, investors are recommended to hold the stock for a price target of Rs234.
3) Power Grid Corporation of India Ltd
PGCIL has reported lower than expected results for Q1FY12. The top-line has witnessed 10.2% y-o-y growth to Rs22 bn against Rs19.9 bn reported in Q1FY11. EBITDA for the quarter stands at Rs18.4 bn, registering a growth of 9.8% y-o-y from Rs16.8 bn reported in the same quarter last year. The net profit for the quarter remained flat at Rs7 bn. PGCIL has reported higher PBT in Q1FY11 on account of certain on time income of Rs1.4 bn. With the rising capex lined up for Power generation and transmission, we are optimistic about the future growth prospects of PGCIL with earnings expected to grow at a CAGR of 15% over FY11-FY13. We value PGCIL at Rs123 per share (16 times FY13E EPS of Rs7.7) and maintain a Buy on the stock
4) ICICI Bank Ltd
ICICI Bank delivered strong core operating performance and performed well on most of operating parameters in challenging macro environment during the quarter. Sharp revival in earnings of life insurance coupled with steady banking business’s profitability supported consolidated earnings. Steady NII growth, healthy fee income growth and stable operating costs were key drivers for earning growth during the quarter. Focus on profitable growth, improving liability franchise, better branch productivity, improving asset quality emerged key value drivers for the stock. At Rs941, the stock is trading at 14 times FY13 earnings and 1.6 times FY13 core book, attractive risk reward in our view. We maintain their Buy on the stock with target price of Rs 1,341.00.
5) Bajaj Auto Ltd
At the current market price of Rs.1407.25, the stock is trading at 10.07 x FY12E and 8.50 x FY13E respectively. EPS of the company for the earnings for FY12E and FY13E is seen at Rs.139.77 and Rs.165.53 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 41% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 8.44 x for FY12E and 7.97 x for FY13E. Price to Book Value of the stock is expected to be at 4.55 x and 2.96 x respectively for FY12E and FY13E. The company will keep its growth story in the coming quarters also and recommends traders to buy in this particular scrip with a target price of Rs.1590.00 for Medium to Long term investment.
6) Union Bank of India
Sharper than expected margin compression, additional one time NPA provisions and higher slippages were key disappointments from the result. We expect 14.7% CAGR in earnings over FY11-13 driven by 20% loan CAGR and lower credit cost. Currently, the stock is trading at 1.0 time P/B on FY13e book and 5.4 times P/E on FY13e earnings. The stock has corrected by ~10% in the last three months and 5% in the last one month.
7) Maruti Suzuki India Ltd.
At current market price of Rs1240, Maruti Suzuki India is trading at 12.04 P/E multiple of its FY2012 Estimated earnings of Rs102.94. We recommend investors to buy “Maruti Suzuki India Ltd.” with medium to long-term investment horizon.
8) Hindustan Unilever Ltd
HUL’s strong performance in the highly competitive scenario is result of its strong product mix & effective management strategies focusing on improving efficiencies. Though input cost pressure will continue in Q2, We expect HUL’s growth to be more strong in H2FY12 & margins to expand. Also company’s increased focus in the mid & premium segments and high growth categories like Personal care & Foods would improve the overall profitability going forward.
9) ONGC
For FY12e and FY13e, we have assumed upstream share of under recoveries at 38.7% while ONGC’s share in upstream subsidy is assumed at 82.16%. Any increase in either of these would entail downside risk to our earnings and price target. We maintain our EPS estimate for FY12e and FY13e at Rs33.3 and Rs33.5 respectively. We maintain our BUY rating on the stock with a price target of Rs350. At the CMP, the stock is trading at 8.1x and 3.3x FY12e EPS and EBITDA respectively.
10) Tata Consultancy Services Ltd.
Considering, strong volume growth and broad-based deal pipeline we assume revenue growth of around 28% (on YoY basis in USD term) and marginal decline in operating margin (i.e. around 20 bps YoY to 29.8%) in FY12E. However, taking into account that the company is trading at a fair valuation and pressure on cash conversion cycle, we maintain our ‘HOLD’ recommendation on the stock with a price target of Rs.1295 by assigning multiple of 20 times to its FY13E EPS of Rs.65.1.