5 Diwali Pick 2012: GEPL Capital
GEPL Capital has come out with its report on Diwali picks.
November 15, 2012 / 18:11 IST
GEPL Capital has come out with its report on Diwali picks.
Eicher Motors: Based on the growth potential emanating from its two JVs; with Polaris Inc and AB Volvo and considering the potential uptick in revenues from Royal Enfield and MDEP plant capacity expansions, we believe that there is considerable revenue visibility for the next 2-3 years. We except revenue to grow at a CAGR of 30% from CY11 to CY13, EBITDA to grow at CAGR of 25% with EBITDA margin of 11%. Profit after tax is also expected to grow at a CAGR of 26% during the same period At the CMP of Rs2,524 EML is trading at 5.3x its CY2013E EBITDA. However, considering the robust growth potential, we value EML at 6.5x EV/EBITDA at its CY14E earnings and arrive at a target price of 2,987, which is a potential upside of 18%.
Godrej Industries: We value GIL at Rs471/share, using the sum-of-the-parts (SOTP) methodology. Our target price includes a sum of Rs256 for GPL (valued at a 40% holding company discount to the price of Rs393) and Rs95 for GCPL (40% holding company discount to the price of Rs146), together accounting for ~74% of our valuation. We value GAVL at Rs33 (7x of FY14E earnings), the standalone chemicals business at Rs87 (9x on FY14E earnings). Hence we initiate a buy rating with a target price of Rs471, an upside by 53%. Rallis India: At the Current Market Price (CMP) of Rs149, Rallis is trading at 16x its FY14E EPS of Rs10.41. With the Capital Expenditure at Dahej behind it and revenue ramp up from Metahelix happening, we expect Rallis to report a robust growth in topline (18% CAGR) over FY12-FY14E. Considering the consistent fundamentals and strong business model, we value the stock at 17x its FY14E EPS to arrive at the target price of Rs177 with a BUY rating indicating an upside potential of 19%. Tree House Education & Accessories: As the company operates in high growth oriented sector, P/E multiples are bound to be higher to compensate its growth. Hence we have valued the company by discounting Enterprise Value to its sales (EV/Sales) as we believe that education is still the sunrise sector in the Indian markets. We expect revenue to grow at a CAGR of 44% from FY12 to FY14, EBIDTA to grow at CAGR of 36% with EBITDA margin of 43%. Profit after tax is also expected to grow at a CAGR of 39% during the same period. At CMP the company is valued at 9.9x as per EV/sales method. Looking at the secular growth which the company is going to witness and aggressive growth drive undertaken by the management, we apply an exit EV/Sales multiple of 6x. With which we arrive at the target Price of Rs280, implying the potential upside of 24% from current levels. TV18 Broadcast: The ongoing stress on its profitability is expected to conclude once subscription revenues of the company become substantial, as being recurring in nature, it tends to lend high stability to the overall profitability of the broadcasters in difficult ad spend environment. We value the company on EV/Sales basis as we believe that media is still the sunrise sector in the Indian markets. Using FY2014 sales estimate post the rights issue completion and the ETV acquisition. Since the company operates in 2 major segments, Media Operations and Film Production & Distribution, we value the company on an SOTP basis to arrive at the target price of Rs 37 per share indicating a potential upside of 30%. Moneycontrol.com and Television Eighteen Network are both part of the Network18 Group.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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