Fairwealth Securities` 6 investment ideas for CY2012

Fairwealth Securities has come out with its six investment ideas for the year 2012. Axis Bank, Ashok Leyland (AL), Bajaj Electricals (BEL), KPIT Cummins, Jindal Steel and Power (JSPL) and Shasun Pharma are the few portfolio bets for the current year 2012.

Axis Bank: The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), LIC and GIC and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank has a very wide network of more than 1281 branches (including 169 Service Branches/CPCs as on 31st March, 2011). The Bank has a network of over 6270 ATMs as on 31st March, 2011.

The bank is among our preferred picks in the banking sector due to its strong deposit franchise, healthy growth-return profile, and relative discount to peers. Concerns over asset quality of the bank seem largely discounted in the current market price and stock is currently available at a significant discount to its historical average. Currently the stock is trading at 1.7x FY11 P/BV. Hence, we recommend Buy on Axis Bank with medium to long term horizon with the target price of Rs. 1350.

Ashok Leyland (AL): Has seven manufacturing plants - the mother plant at Ennore near Chennai, three plants at Hosur (called Hosur I and Hosur II, along with a Press shop), the assembly plants at Alwar, Bhandara and state-of-the-art facility at Pantnagar. The total covered space at these seven plants exceeds 650,000 sq m and together employs over 11,500 personnel.

We expect demand to revive from CY12 with the likely easing of interest rates, thereby helping AL to post robust volume growth in FY13E. At CMP, AL is trading at 9.5x its FY2011 earnings. We recommend BUY with a target price of Rs. 32 for a potential upside of 39%.

Bajaj Electricals (BEL): Is a 72 year old company with diversified business interest in consumer durables, lighting and engineering & projects (E&P). The company has grown strongly with revenues increasing at CAGR of 26% and a staggering 40% CAGR in the bottom line in last five years backed by robust growth in consumer segment and steady growth in other divisions.

At the CMP, BEL trades at a P/E and EV/EBIDTA of 9.6x and 5.5x, discounting its FY12E numbers. Based on increasing share of consumer segment, higher cash flows and strong growth prospects, we value the company at 11x FY13E EPS and arrive at a target price of Rs.241. We recommend BUY.

KPIT Cummins (KPIT): Provides technology solutions partner for global Manufacturing corporations with special focus on Automotive, Energy & Utilities, Industrial Equipments, and Semiconductor industries. Highly focused approach has helped company to pioneer innovative solutions and file 37 patents in the Automotive and Semiconductor domains. Following the acquisition of Sparta, KPIT

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