Emkay Global bets on 7 stocks

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Emkay Global bets on 7 stocks

Emkay Global Financial Services has come out with its report on 7 companies- TRF, Lupin, Tulip Telecom, Bharat Bijlee, Jubilant FoodWorks, McNally Bharat Engineering and Dr. Reddy’s Lab.

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RELATED NEWS Buy Bank of Baroda; target of Rs 1196: Sushil Finance Buy SBI; target of Rs 2700: ICICIdirect.com Buy Syndicate Bank; target of Rs 137: ICICIdirect.com ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about TRF See messages about TRF TRF BSE | NSE 29/05/12 Are Mutual Funds betting on TRF? Other Stocks in this news Lupin | Tulip Telecom | Bharat Bijlee | Jubilant Foodworks | Mcnally Bharat Engineering | Dr Reddys Laboratories |

Emkay Global Financial Services has come out with its report on 7 companies- TRF, Lupin, Tulip Telecom, Bharat Bijlee, Jubilant FoodWorks, McNally Bharat Engineering and Dr. Reddy's Lab.

TRF : The stock price correction of 23% over the past 10 days from its recent high of Rs600, the stock is trading at 12.2X FY12E and 10.8X FY13E consolidated earnings of Rs37.6 and Rs42.8 per share respectively. Further, TRF is on crossroads with mixed outlook in terms of (1) strong pick-up in order finalizations, especially in power sector - key trigger for sectorwide re-rating (2) but, concerns exist on profitability of new orders and profitable execution of unexecuted orders (3) improving clarity on auto components business - but no delivery track-record. Hence, we downgrade the stock to HOLD until clarity emerges on the above issues. We revise target price to Rs428 (@10.0X FY13E).

Lupin : We believe Lupin should be a part of the core portfolio because of a) strong execution track record, b) fair visibility on the earnings, c) strong pipeline coupled with both Para IVs (15 FTFs) as well as niche therapies and d) well diversified presence across the key markets . We expect Lupin to report 20% revenue growth in FY12E and 15% growth in FY13E. We expect EBIDTA margins to move from 20.4% in FY11 to 19.6% in FY12 and 20% in FY13. Earnings will grow by 14% CAGR over FY11-13E. We revise our target price on the stock to Rs501 and upgrade the rating the one-notch to Buy. At CMP, the stock is trading at 20x FY12E and 17x FY13E earnings.

Tulip Telecom : Huge debt on the books with D/E of 1.14 for FY12E and net debt 13.6bn remains the key concern for the stock. While stake sale in Data centre and divestment of Qualcomm investment remain key triggers for the stock. Nevertheless, on the back of higher realization on fibre network, Tulip is expected to report healthy revenue and EBITDA going forward. We cut our EPS (fully diluted post dilution on FCCB) est. by 11.5% for FY12E to Rs22.7 due to higher interest and depreciation cost. At CMP of Rs163, Tulip trades at attractive valuations of 5.8x P/E and 3.2x EV/EBIDTA for FY12E. We retain BUY rating with target price Rs218.

Bharat Bijlee : At the current market price of Rs998/share the stock is trading (adjusted for BBL's stake in Siemens at 30% discount) at 7.6x FY13E earnings, 3.8x FY13E EV/EBITDA and 1.1x FY13E book. Value of investments per share stands at Rs317/share (after adjusting for 30% discount).Given the ambiguity in margins of the transformers business we lower our rating from 'Buy' to 'Accumulate' with a price target of Rs1110/share (earlier Rs 1,350/share) assigning an FY13E EV/EBITDA multiple of 4.3x.

Jubilant FoodWorks : Remain positive on growth prospects of QSR segment in India and Domino's robust business model. Further, JFL will continue to witness robust earnings growth momentum for next 5-7 years - considering untapped market potential. We maintain ACCUMULATE rating with price target of Rs725/Share.
 
McNally Bharat Engineering : Post 14% correction in stock price in the past month, MBE is trading at attractively at 7.3X FY12E and 5.7X FY13E consolidated earnings of Rs25.9 and Rs33.3 per share respectively. Hence, we retain our BUY recommendation on MBE with revised stock price of Rs260 per share (@10X FY12E earnings).

Dr. Reddy's Lab : We expect Dr. Reddy to report 30% revenue growth in FY12E and 6% growth in FY13E. We expect EBIDTA margins to move from 21% in FY11 to 25% in FY12 and 22.7% in FY13. Earnings will grow by 23% CAGR over FY11-13E. We maintain our target price on the stock to Rs 1750 with an Accumulate rating. At CMP, the stock is trading at 16.7x FY12E and 17.2x FY13E earnings.

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