Emkay Global Financial Services has come out with its report on Kajaria Ceramics, Hexaware Technologies, Idea Cellular, ICICI Bank, Axis Bank and Maruti Suzuki India.
Kajaria Ceramics is likely to emerge as the largest player in the domestic tiles industry taking over the leader H & R Johnson within the next couple of quarters. We believe that the new growth model adopted by the company of acquiring small players & branding their products under its own umbrella will ultimately strengthen Kajaria’s regional presence and help it to meet its requirements locally. Kajaria’s improving product profile towards high margin value added products combined with lucrative joint venture arrangements would also help the company to improve profitability. We maintain Buy with target price of Rs 225.
Hexaware Technologies, We tweak our US$ revenue estimates higher and build in EBITDA margins at 22.6%/22.3% (V/s 20.9%/18.5% earlier) driven by higher confidence in op margins ahead which drive 9%/16% raise in our CY12/13E earnings to Rs 11.5/12.8 (V/s Rs 10.5/11 earlier). Although valuations at ~11x/10x CY12/13E earnings capture some of the upside, we remain positive on Hexaware given continuous streak of earnings beat and consistent performance. Worth highlighting is that we have raised earnings for the past 5 quarters in a row. Valuations remain reasonable in that context with 5% dividend yield another positive. Retain ACCUMULATE, TP Rs 140(V/s Rs 110 earlier), based on 11x CY13earnings (V/s 10x earlier).
Idea Cellular, has given the strong performance in Q4FY12, we are raising our FY13E revenue and EBITDA estimates by 2.3% and 4.5% respectively. Our revised EPS for FY13E stands at Rs4.3 v/s Rs3.9 earlier. We have introduced FY14E EPS at Rs5.8. At CMP of Rs82, Idea trades at 6.0x and 5.3x EV/EBIDTA and 18.4x and 14.2x estimated EPS of Rs4.4 and Rs5.8 for FY13E and FY14E, respectively. We remain positive on the stock and reiterate ACCUMULATE rating with TP of Rs101.
ICICI Bank, Q4FY12 results reflected material improvement in its operating matrix viz a) stable loan growth, b) NIM expansion (both domestic and international), c) CASA retention d) sequential improvement in asset quality and e) lower credit cost. The bank has capitalized the current phase of growth moderation towards branch expansion and moderation in growth. However, as economic activities revive, we expect ICICI Bank to gain market share. A well diversified loan mix with stable cost will ensure NIM improvement over FY12-14E. We have raised our NII assumption for FY13 by 7% following higher than expected improvement in Q4FY12 NIM. We are now factoring NIM at average 2.6% over FY12-14E. Even after factoring 70bps of credit cost, we expect RoA to move upwards of 1.6-1.7% over FY12-14E and resultant core RoE to improve to 16-18%. We expect bank to report 18% / 17% CAGR in net profit / customer assets over FY12-14E. Upgrade to BUY with price target of Rs1200. Higher than expected increase in restructured loan portfolio / slippages from the same and lower credit growth remain key risks to our estimates.
Axis Bank’s performance for Q4FY12 was robust and also positively surprised on NPLs, we are still factoring in lower 13.4% growth in earnings next year for few reasons (1) NIMs may continue to remain under pressure due to shortfall on PSL requirements which may be substituted with RIDF bonds and (2) the downgrading in the loan rating profiles may spike up restructuring and consequently provisions. We believe that these two can pose further risks to our earnings estimates. But still valuations at 1.7x/1.4x FY13E/FY14E are not unreasonable. Maintain accumulate with TP of Rs1,380.
Maruti Suzuki India, at CMP of Rs 1,397 the stock trades at PER of 16.3x and 13.4x, EV/EBIDTA of 8.7x and 6.7x our FY13 and FY14 estimates respectively. We maintain our REDUCE rating and target price of Rs 1,270. At our TP, the stock trades at 14.8x/12.1x PER and 7.7x/5.9x EV/EBITDA on our FY13/14 estimates. We continue to have concerns with unhedged currency exposure beyond 1HFY13 and demand polarity towards diesel vehicles. Key upside risk arises from favorable currency movement as the stock has shown a ~90% correlation with cross currency movement, says Emkay Global Financial Services research report.
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