Dolat Capital has come out with its report on individual stocks.
PI Industries: We expect 33% earnings growth over FY12- 14E assuming a nondilutive Capex. At CMP, the stock trades at 11.9x FY13E and 8.9x FY14E earnings. Recommend ‘Buy’ with a target price of ` 646 (11x FY14E earnings).
Hero Motocorp: We continue our preference for Hero Motorcorp in the two wheeler space even as the stock has had under performance over the last three months (+2% vs 12%). We believe the valuations at 14.0xFY14E are attractive at an absolute and relative level (Bajaj Auto trades at 17.8xFY14E). We recommend BUY.
Apollo Tyre: The company has had a consistent performance amidst volatile market conditions. Its net sales grew at 26.9% CAGR over last five years. It reported its EBITDA growth at 18.2% CAGR over last 5 years. We expect its revenue to grow at a CAGR of 11%over FY12-14 and EBIDTA to grow at 16% CAGR. The stock currently trades at 6.5x FY14E. We recommend BUY.
Berger Paints: We continue to prefer paints sector over other consumer segments on back of sustained volume growth and huge opportunity of consumer up-trading. And our preference for Berger continues driven by management to focus on ‘premiumising’ its product categories, and improving margins. We estimate revenue and net earnings CAGR of 15% and 20% respectively during FY12-15E. The stock trades at 19.7x FY14E EPS of ` 7.5 and 16.6x FY15E EPS of ` 8.9. We have a price target of ` 175 (20x FY15E).
Pidilite Industries: Pidilite, a proxy on housing, construction and other industrial activity has over the years successfully converted niche commodity category into strong brands. We estimate a Revenue and PAT CAGR of 17.5% and 24% respectively during FY12-15E. The stock trades at 22x FY14E EPS of ` 9.8 and 18x FY15E EPS of ` 11.7.
Petronet LNG: Petronet LNG (PLL) shall be the key beneficiary of the structural play on India gas consumption over the medium term. The supply crunch in domestic gas market due to decline in KG D6 gas volumes as well as lack of new supply from domestic sources shall drive demand for spot RLNG volumes. At CMP, the stock trades at 10.8x FY13E and 9.9x FY14E earnings. We have a positive view on the stock with a DCF based price target of ` 180.
Indraprastha Gas (IGL): Our preferred play on the India city gas distribution, IGL continues to deliver sustained volume growth of 15% - 16% and gross spreads around Rs 8 per SCM. The stock has had an uneven performance for good part of 2012 due to the legal issues with the PNGRB. We believe valuations are now discounting a fair degree of negativity on the earnings, and hence we are now including the stock in our preferred picks. At CMP, the stock trades at 9.7x FY13E and 8.4x FY14E earnings, which are much below historical averages. We have a positive view on the stock with a DCF based target price of ` 351.
ICICI Bank: ICICI Bank continues to be on our preferred list on the back of sustained earnings growth, well capitalized balance sheet to capture uptick in credit growth and credit costs in control. Valuations at 2.1x P/ABV FY13E and 1.9x P/ ABVFY14E have scope for an upgrade over next few quarters. Our SOTP price for core banking business implies a 2xFY14E P/ABV, and ` 293 for other businesses. Based on this, our SOTP value comes to ` 1,309 per share.
Axis Bank: We believe Axis Bank would be one of the key beneficiaries of expected turnaround in credit cycle. Axis Bank’s credit book composition is tilted more towards large corporate and SME, some of these have been under stress last few quarters. Any improvement in business environment would lead to credit demand from these sectors. At current price, the stock quotes at 2.1x P/ABV FY13E and 1.8x P/ ABV FY14E. Based on our target price of ` 1,540, the stock would trade at 2.1x ABV FY14E.
Karur Vysya Bank: We have preference for Karur Vysya Bank’s given its prudent credit book expansion on the back of robust understanding of local & regional business environment helps the bank maintain its asset quality. Valuations at 1.6x P/ABV FY13E and 1.4x P/ABV FY14E have scope to re rate, in our opinion over the medium term.
Syndicate Bank: Syndicate Bank’s strategy of moderate business expansion with improvement in low-cost deposits share and improvement in margin led to improvement in overall profitability. The asset quality, though has taken a hit last few quarters, with the GNPAs now at 2.5% and restructured book at 7% of gross book. However the high provision buffer at 82% gives us the comfort.
TCS: TCS remains one of our preferred picks, even as it has had sustained outperformance over the year led by better revenue CQGR of 5.4% over Q1FY11-Q2FY13 (Infy – 4%; Wipro – 3.5%). We expect this momentum to carry it through for next few quarters at leastWe maintain TCS as our Top Pick among Tier I IT space and expect it maintain its outperformance over peers in the near term with a Target price of INR 1500 valued at 19xFY14E.
OFSS: We also maintain our positive outlook in expectancy of sustained demand in the near to medium term. OFSS continues to build upon its strong product wins in the first half of the year. We maintain our sector Outperformer rating on the stock with a target price of ‘ 3250 valued at 19xFY14E.
Tech Mahindra: Tech M has been our favorite since the last 5 quarters now, and we believe there is still potential for it to perform next few quarters. Notably, post merger the combined entity would become sixth largest Indian IT company (5th if we exclude Cognizant) with a revenue of over USD 3.5bn, sales growth of 12%+ and EBIT margin of 15%+, quite comparable to HCL and Wipro in terms of profitability and with Wipro and Infosys on sales growth perspective.
KPIT Cummins: We remain positive on the stock post the earnings call in view of its focused approach on its niche strength (Automotive, Enterprise services) and sustained strong business traction through new deal wins and through successful integration of acquired entities (Stock returned over 65% YTD vs the IT index return of 6%). We maintain our BUY rating with a TP of ` 160 (valued at 11x FY14E EPS).
Innoventive Industries: We expect IIL revenue CAGR of 23% and earnings CAGR of 30% over FY12-14E led by expansion in CEW tubes and strong traction in OCTG products and reduction in interest cost. We maintain our Buy on IIL with a price target of ` 159 (7x FY14EPS).
Lupin: Lupin continues on the top of our preferred plays on India pharma. We anticipate limited competition generic launches in US (gYaz, gYasmin and gTricor) to lead the growth trajectory. We expect the US segment to contribute USD 740mn to consolidated revenues. At CMP of 591, the stock trades at 23x FY13E and 19x FY14E earnings. Recommend Accumulate, with target price of 620 (20x FY14E EPS).
Divis Laboratories: We expect the Custom Synthesis (CS) & API division to grow by 20% CAGR over FY12-14E, aided by ramp up in Vizag SEZ operations. The FDA approval for the location is expected in Q1FY14. At CMP of 1175, the stock trades at 24.5x FY13E and 19.4x FY14E earnings. Recommend Accumulate, with target price of 1271 (21x FY14E EPS).
Supreme Industries: We expect SIL to report revenue & PAT CAGR (core operations) of 18.5% & 21.4% in FY13 & FY14 respectively. SIL currently trades at 13.8x & 11.4x its FY13E & FY14E consolidated earnings (excluding construction business). We value SIL’s core business at ` 324 per share based on 14x its FY14E earnings of ` 23.1. Further, SIL’s 29.88% stake in SPL is valued at ` 12. Thus, the SoTP valuation for SIL comes to ` 336, representing an upside potential of 17% from current levels.
Astral Poly Technik: At CMP, the stock trades at 13.8x FY13E and 10.4x FY14E earnings. Valuations are on the higher side and cap any significant outperformance in the short term. However, considering the growth trajectory and ability to protect return ratios (ROE @ 27%); we feel that story is structurally good from a long term perspective. We have a target price of ` 401 to trade at 12x FY14E earnings.
Maruti Suzuki: The stock has rallied almost 28% in the last three months vs the Nifty movement of 12%. Based on our estimates, the stock currently trades 19.2xFY14E. We reiterate Sell with a target price of Rs1170 (15xFY14E) with a potential downside of 21%.
SAIL: We believe that there are headwinds for SAIL given the negative impact of the impending wage hike, inefficient operations, and inordinate delay in expansion plans and weak steel pricing environment .The impending dilution of stake by Govt of India will also keep the stock under pressure. SAIL is currently trading at EV/EBITDA of 9.6xFY13 and 7.9xFY14 EV/ EBTDA multiple and is expensive amongst its global peers. We continue to maintain Reduce on SAIL with a price target of ` 76 (5.5xFY14 EV/EBITDA, adj for CWIP).
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