Post market crash, Sharekhan bets on 6 safe stocks

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Post market crash, Sharekhan bets on 6 safe stocks

Sharekhan has come out with its report on various stocks.

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RELATED NEWS Buy Gujarat State Pet; target of Rs 113: Aditya Birla Money Buy Divis Labs; target of Rs 927: Emkay Hold Hero Motocorp; target of Rs 1911: KRChoksey ALSO READ See previous views by Sharekhan See what other Experts & Brokerages are saying about IDBI Bank See messages about IDBI Bank IDBI Bank BSE | NSE 01/06/12 Are Mutual Funds betting on IDBI Bank? Other Stocks in this news Grasim Industries | Pratibha Industries | United Phosphorous | ITC | Federal Bank |

Sharekhan has come out with its report on various stocks.

IDBI Bank : The bank continues its strategy to pursue slower advances growth and focus on the credit quality, CASA growth, retail deposits etc. While slippages continue to be a cause of concern, the core performance seems to be on an improving trend as reflected by steady margins. We estimate earnings to grow at a CAGR of 20% over FY2011-13 contributed by 14% growth in advances. We maintain Buy with a target price of Rs182 (1x FY2013 book value and Rs20 for investments).

Grasim Industries : We continue to prefer Grasim as our top pick among the large cement players due to its strong balance sheet, comfortable debt-equity ratio (0.36x FY2011), attractive valuation and diversified business. We estimate the consolidated earnings of the company would grow at a compounded annual growth rate (CAGR) of over 19% during FY2011-13. On the valuation front, we continue to value the stock using the sumof- the-parts (SOTP) valuation methodology and revise our price target to Rs2,630. We maintain our Buy recommendation on the stock. At the current market price the stock trades at a price/earnings ratio of 6.8x discounting its FY2013 estimated EPS.

Pratibha Industries : To factor in the higher interest burden, we have lowered our earnings estimates for FY2012 and FY2013 by 6% and 12% respectively while maintaining the same at the operating level. We continue to like the company given its presence in the high-margin water segment, its backward integration into pipe manufacturing and better than industry OPM. The recent large order wins with a better margin reinforce our confidence in the company. However, in the current tight liquidity scenario, we expect its interest burden to continue and we have factored the same in our estimates. The stock currently trades at 6.6x and 5.3x its FY2012E and FY2013E earnings respectively and offers a good upside from the current levels. Hence we maintain our Buy recommendation on the stock with a revised price target of Rs61.

United Phosphorus : To factor in the increase in the higher working capital requirement, the inorganic growth from the recent acquisition and the revised higher revenue guidance from management, we have revised our FY2012 and FY2013 estimates. The revised EPS estimates for FY2012 and FY2013 stand at Rs17.5 and Rs21.3 respectively. At the current market price the stock trades at 9.5x FY2012 and 7.8x FY2013 estimated earnings. We maintain our "Buy" rating on the stock with a revised price target of Rs222 (10.4x FY2013E).

ITC : This is the eighth consecutive quarter of above 20% growth in ITC's bottom line. Along with the cigarette business, the strong performance by all the other businesses on a sustainable basis would help the company to achieve around 21% CAGR bottom line growth over FY2011-13. Hence, in view of the strong earnings growth, we maintain our positive stance on the stock. We maintain our Buy recommendation on the stock with a revised price target of Rs227 (in line with the upward revision in the earnings estimates). At the current market price the stock trades at 26.3x its FY2012E EPS of Rs7.9 and 22.1x its FY2013E EPS of Rs9.5.

Federal Bank : The bank has reported a subdued growth on the earnings front due to a sharp increase in the NPA provision and slower growth in core income. Though the NIM remained steady at 3.87%, it is likely to decline in the coming quarters due to rising rates and change in portfolio mix. The asset quality showed deterioration after stabilising in Q4FY2011 mainly due to slippages from the retail and SME segments. We expect Federal Bank's earnings to grow at a compounded annual growth rate (CAGR) of 25.4% over FY2011-13, contributed by a 21% CAGR growth in the advances. Given the earnings, the return on equity (ROE) and return on assets (ROA) are expected to improve to 14.9% and 1.3% by FY2013. Currently the stock trades at 1.3x FY2012 BV which is among the lowest when compared to its peer banks. We maintain our Buy rating with a price target of Rs500, ie 1.5x its FY2012 BV.

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