mkay Global Financial Services has come out with its research report on Marico
, Tamil Nadu Newsprint and Papers
, GSK Consumer
, Manappuram General Finance
(MAGFIL), KSK Energy
and Jubilant Life Sciences
Marico demonstrates strong volume growth on sustained basis, despite significant price increase. Thus, Marico’s earnings can gain from delta effect from any softening in input prices. This is completely in sync with one of three themes in consumer sector; Referring to ‘Rural Steroids Ebbing. Underweight Rural Exhilarants’. We reiterate Marico as our top pick in consumer sector, focus on absolute Ebidta and strong brand efficacy. Forecast for strong earnings performance in ensuing quarters (next 3 quarter) ahead of industry growth is an important catalyst. We retain our ACCUMULATE rating with target price of Rs172/Share.
Tamil Nadu Newsprint and Papers
Sluggish demand coupled with significant inventory builtup is likely to exert pressure on realisations and margins in the near future. Due to weak Q3FY12 results we have reduced our FY12 EPS est to Rs 1.3 (from Rs 9.1). Estimates for FY13 remain unchanged. On back of compelling valuations (40% discount to BV) we maintain Accumulate rating with target price of Rs 108.
GSK Consumer is preferred play within 3 themes to play in Consumer sector, considering least rural exposure and highest sensitivity to agri commodities considering its raw material basket. Also, GSK Consumer is well placed to benefit from the low-penetrated category of malted foods drinks promising healthy growth in its core MFD portfolio. Also, efforts to increase the MDF growth through product development (smaller packs for rural markets, premium product – Horlicks Gold priced at 30% higher, etc) could augur well in long-term. We maintain our ACCUMULATE rating on the stock with target price of Rs 2,743/share.
Manappuram General Finance (MAGFIL)
Though MAGFIL continue to grow at a healthy pace surpassing our estimates, we believe the impact of rising competition in gold loan space is also getting more visible now, as reflected in lower gold stock addition/ branch. Moreover possibility of NPA recognition on 90dpd as mentioned in the draft discussion paper could hurt growth and margins. Higher than expected balance sheet growth driven by sharp rise in gold prices or volumes pose upside risk to our estimates. At CMP the stock trades at 2.1x/ 1.6x FY12E/FY13E ABV. Maintain HOLD with TP of Rs65
We had expected a run up in the stock post 2Q12 results based on the attractive valuations and better performance in 3Q12. However we believe that the current market price fairly prices in 1) upsides from ~50-60% linkage coal supply for Wardha, 2)Phase-I of Mahanadi and 3)Open access for Wardha. Hence we continue to maintain our Hold rating on the stock with TP of Rs75. Upside triggers could be 1) Linkage coal supply beyond 60% requirement and 2) allocation of an alternate coal block in lieu of Morga-II.
Jubilant Life Sciences
We expect Jubilant to report 19% revenue growth in FY12 and 15% growth in FY13. We expect EBIDTA margins to improve from 16% in FY11 to 20% in FY12 and FY13. Earnings will grow by 21% CAGR over FY11-13E. We value the company at 10x FY13 EV/EBITDA with a target price of Rs348 and BUY rating. At CMP, the stock trades at 9xFY12E EPS of Rs20 and 7XFY13E EPS of Rs 25.
Shares held by Mutual Funds/UTI
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