Buy Divi's Labs; Hold Madras Cem, Tata Global: Sharekhan

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Buy Divi's Labs; Hold Madras Cem, Tata Global: Sharekhan

Sharekhan has come out with its report on various stocks.

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RELATED NEWS Buy Deepak Fert; target of Rs 228: PINC Research Buy Power Grid Corp; target of Rs 122: PINC Research Buy M&M; target of Rs 838: PINC Research ALSO READ See previous views by Sharekhan See what other Experts & Brokerages are saying about Apollo Tyres See messages about Apollo Tyres Apollo Tyres BSE | NSE 01/06/12 Are Mutual Funds betting on Apollo Tyres? Other Stocks in this news Madras Cements | Divis Laboratories | Tata Global Beverage |

Sharekhan has come out with its report on various stocks.

Apollo Tyres :  We expect FY2013 to witness a full impact of the revival in the truck and bus replacement tyre segment and OEM demand. Moreover, the cooling off of natural rubber prices and the peaking of the interest rate cycle is expected to have a positive impact on Apollo Tyres' FY2013 earnings.

Madras Cements : In spite of an unfavourable demand-supply scenario in the southern region the prices have increased sharply on account of the supply discipline followed by the cement manufacturers. Further, the cement offtake in the region is expected to improve gradually only due to slower than expected execution of infrastructure projects in the region and political issues in the state of Andhra Pradesh. In addition, the cost pressure will continue to play its role and keep the margin under pressure. Hence, we maintain our Hold recommendation on the stock with a price target of Rs95. However, in the longer run we believe Madras Cement has the potential to deliver a good return to its investors due to its operational efficiency. At the current market price the stock trades at a PE of 7.3x and an EV/ EBDITA of 5.2x its FY2013 earnings estimate.

Divi's Laboratories : With a pickup in order inflow and commissioning of its new plant, Divi's has a strong revenue growth visibility and the operating leverage in the business will boost its margins. Consequently, we estimate the company's revenue and earnings to grow at a CAGR of 23% and 21% respectively over FY2011-13. At the current market price, the company trades at 20x FY2012E and 16.1x FY2013E earnings. We recommend Buy on the stock with a price target of Rs1,047, which implies a potential upside of 35% over the next 12 months.

Tata Global Beverages : With the prices of the key raw materials (raw tea and coffee) expected to remain firm (on the back of the global demand-supply mismatch), we believe the profitability of the consolidated entity will remain under pressure in the near term. Though the domestic business has seen an improvement in the volume growth, the other key geographies (such as the USA, the UK) have yet to witness an improvement in the sales volume.

Going ahead, new product launches under various strategic alliances (the joint ventures with PepsiCo and Kerala Ayurveda) and an improvement in the operating performance of both Eight O'clock Coffee and Tetley would act as the key triggers for the stock. In line with the slight downward revision in our earnings estimates, we have revised our price target for the stock to Rs109 (based on 16.0x its FY2013 EPS estimate of Rs6.8). We maintain our Hold rating on the stock. At the current market price the stock trades at 20.7x its FY2012E EPS of Rs5.0 and 15.1x its FY2013E EPS of Rs6.8.

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