10 stocks you should keep an eye on post Q3 results: Emkay

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10 stocks you should keep an eye on post Q3 results: Emkay

Emkay Global Financial Services has come out with result updates on Bajaj Auto, Hero MotoCorp, Axis Bank, Wipro, Rallis India, Hindustan Zinc, JSW Steel, M&M Financial Services, Reliance Industries, Ultratech Cement.

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RELATED NEWS Accumulate Hero Motocorp; target of Rs 2101: PINC Research Buy Dewan Housing; target of Rs 365: Motilal Oswal Buy Balkrishna Industries; target of Rs 218: Way2Wealth ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Bajaj Auto See messages about Bajaj Auto Bajaj Auto BSE | NSE 30/05/12 Are Mutual Funds betting on Bajaj Auto? Other Stocks in this news Hero Motocorp | Axis Bank | Wipro | Rallis India | Hindustan Zinc | JSW Steel | Mahindra & Mahindra Financial Services | UltraTech Cement |

Emkay Global Financial Services has come out with result updates on  Bajaj Auto , Hero MotoCorp , Axis Bank , Wipro , Rallis India , Hindustan Zinc , JSW Steel , M&M Financial Services , Reliance Industries , Ultratech Cement .

Bajaj Auto : At Rs1,558 the stock trades at PER of 14.1x/12.6x and EV/EBIDTA of 9.8x/7.9x our FY12/13 estimates respectively. Given the high cash flow generation and strong ROCE of above >60%, we find stock attractive. However, given the fact that exports will be the key driver of performance in the near term, we are lowering our target multiple by 10% to 15.5x/10.2x PER / EV - EBIDTA. We retain our BUY rating on the stock but lower our TP to Rs 1,920.

Hero MotoCorp : At CMP of Rs 1,951, the stock trades at PER of 16.2x/13.9x and EV/EBIDTA of 14.6x/12.6x our FY12/FY13 estimates. We lower our target price to Rs 2,170 implying PER of 18.1x/15.5x PER and EV/EBITDA of 14.5x/11.8x our FY12/FY13 estimates. We downgrade our rating to HOLD due to limited upside from current levels.

Axis Bank : We are encouraged by Axis Bank's increasing penetration into the high yielding retail segment in recent past. The move will enable bank tide over concerns on loan growth slowdown on SME / agri front and also lend stability to its PSL portfolio. Further, higher branch addition, primarily in semi urban and rural areas (41% of total network) should reap benefit in times of economic revival. An increasing retail exposure calls for higher provisioning. We have accordingly built in a credit cost of 80bps for FY12-13E. Axis Bank mgmt remains confident of 1.4x the system loan growth and we have factored a loan CAGR of 21% over FY11-13E. The stock has underperformed its peer HDFC Bank in recent past over concerns on asset quality and growth slowdown. However, Q3FY12 results clearly shrugged off all this negatives. The stock now trades at 49% discount to HDFC Bank (against average of 32% for past 5-years). We believe the stock should reiterate to its historic average valuations at 2.3x 1-year forward. Maintain HOLD with TP of Rs1,380.

Wipro : Our FY12/13E earnings estimates remain unchanged for Wipro at Rs 23.2/26.7. While Wipro's senior management has done well on inherent plagues in the recent qtrs, we see it as 'Work in Progress' and believe that a 10-15% stock outperformance to peers in the past 3 months captures that, With valuations in line with peer Infosys despite inferior cash generation and return ratios, we find better risk-reward there. Wipro remains the least preferred stock in out Tier I coverage universe. Retain REDUCE, TP Rs 400.

Rallis India : As per management despite increase in acreages for wheat and paddy during the current rabi season, productivity was impacted due to the erratic nature of the North east monsoons. Delay in the onset of North east monsoons and spatial distribution of monsoons caused disruptions in cropping patterns and affected farming activity thereby negatively impacting agrochemicals sales during the quarter. We maintain Hold on Rallis India with target price of Rs 120.

Hindustan Zinc : At the CMP of Rs 127, the stock is trading at 8.0x its FY13E EPS and 4.2x FY13E EV/EBITDA. We continue to value the stock at 6.0x EV/EBITDA. Maintain BUY with a target price of Rs 159.

JSW Steel : At CMP of Rs 647, the stock trades at 10.2xFY13 EPS and 5.7xFY13 EV/ EBITDA Considering the uncertainty with respect to its FY13 volume, we value the stock at 5.5xFY13 EV/ EBITDA which translates to a target price of Rs 590/ share. Reduce.

M&M Financial Services : MMFSL has been able to deliver strong growth despite rising interest rate scenario, without much impact on the asset quality and margins. We believe with interest rates coming down, and as the company continues to increase its branch network, MMFSL is on a strong footing. We expect earnings to grow at a CAGR of 30% over FY11/13 with average RoE and RoA of 23% and 3.4% respectively. The current valuations at 2.4x/2.0X FY12E/FY13E ABV still remain attractive. Maintain BUY with TP of Rs800.

Reliance Industries (RIL) : While the concerns on declining gas production in KG basin have remained, RIL stock has under performed in the last two months on the back of sharp correction in GRMs and weak petchem chain margins on the back of a weakening demand. The stock currently trades at
FY12E and FY13E PE multiple of 12.3x and 11x. The stock gained recently on the back of buyback announcement at a price not exceeding Rs870 per share, which will act a support to the stock price in near term. Going ahead we remain cautious on refining and petchem margins on the back of new
capacities and/or weakening demand. We now factor in lower GRMs and built in flat margins from petchem for FY13E. Downgrade our reco to Accumulate and cut our target price to Rs913.

Ultratech Cement : Sharp price hikes has ensured recovery in UTCEM's profitability with normalized level of EBIDTA/t of ~Rs950. However cement demand remains sluggish (12M rolling average growth at 5.4%) raising question on medium to long term sustainability of price hikes. Under such a scenario UTCEM's current valuation (PER of 15X & EV/t USD131) fully captures any possible positives & ignores UTCEM's limited FCF generation due to a massive Rs110 bn capex, & subdued return ratios. Downgrade to REDUCE.

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