PINC Research handpicks 16 stocks from market
PINC Research has come out with its report on top stock picks for September 2011.
September 16, 2011 / 19:44 IST
PINC Research has come out with its report on top stock picks for September 2011.
ASHOKA BUILDCON: We value BOT (on a DCF basis) at FY12E and FY13E equity multiples of 1.6x and 1.1x, respectively. Our SOTP-based target price is Rs 363, where BOT is valued at Rs 208 and EPC at Rs 155 (9x FY12E earnings). We have a 'BUY' recommendation on the stock.BAJAJ AUTO: Our FY12 and FY13 earnings estimates are Rs 107.5 and Rs 123.3, respectively. We have a 'BUY' recommendation on the stock with a target price of Rs 1,850 discounting FY13E earnings at 15x. Our FY12 earnings estimate is 8.3% higher than consensus estimate of Rs 99.2. 1) Significant increase in prices of commodities such as steel and rubber are likely to increasingly pressurise margins. 2) The company draws significant benefits from the DEPB export benefit scheme; and withdrawal of the same would impact profitability. In case this incentive is withdrawn entirely, our earnings estimate would reduce ~10%.GODAWARI POWER: Impediments in ramping up output from the pellet plant (own as well as Ardent Steel's) and the 20MW power plant. Negative impact of entry into the 50MW solar power project. GPIL already invested Rs 1.2bn in equity (valued at a 10% discount to invested capital) and achieved financial closure for debt of Rs 5.8bn for the project. Continued delay in acquiring forest land in the Boria Tibu mine; and Simultaneous decline in steel prices and power tariff.HCL TECH: Our revenue estimates for FY12 and FY13 varies from consensus by ~(3)%. Our EBITDA margin and EPS forecasts for FY12 and FY13 are lower than consensus. 1) Slower recovery in the US economy; 2) Appreciation of INR vs. USD and strengthening of USD against EUR; and 3) Higher attrition and wage increments. Buy for a target price of Rs 464 (17% upside).INFOSYS: Our revenue estimate for FY12 varies from consensus by ~(0.4)% and 0.4% higher than consensus for FY13. Our EBITDA margin forecast for FY12 is marginally higher than consensus and marginally lower than consensus for FY13. Our EPS estimates are ~1.8% lower than consensus for FY12 and FY13. 1) Slower recovery in the US economy; 2) Appreciation of INR vs. USD and strengthening of USD against EUR; and 3) Higher attrition and wage increments. Buy for a target price of Rs 2,730 (16% upside).IRB INFRASTRUCTURE: Our FY12 and FY13 earnings estimates are Rs 14.2 and Rs 11.3, 3.9% and 32.1% lower than consensus estimates respectively. We expect top-line growth of 27.6% and 18% to Rs 31.1bn and Rs 36.7bn in FY12 and FY13 vs. consensus forecasts of 33.6% and 31.9% to Rs 32.6bn and Rs 42.9bn, respectively. We believe the recent correction in share price provides a good entry point for long-term investors. The stock offers an upside potential of 35% at our SOTP-based target price of Rs 227 vs. consensus target of Rs 218.JAGRAN PRAKASHAN (JPL): 1) Momentum in ad revenue, underpinned by anticipated growth across sectors such as education and financial services (13% CAGR over FY11-FY13E); 2) Broad-based growth across other new media businesses; 3) attractive valuations-At CMP, the stock is trading at an attractive 13xFY13E EPS. Our FY13 revenue estimate is in line with consensus. However, our FY13 EPS estimate of Rs 8.2 is 4% below consensus. We have a 'BUY' recommendation on the stock with a target price of Rs 148 (18xFY13E EPS).JYOTHY LABORATORIES: Our estimates for FY13 are among the highest on the street, led by expectation of profitability improvement in Henkel India. We assign 16x to FY13 earnings and add Rs 12/share NPV on tax saving of Rs 1.2bn @12% discount rate to derive the TP of Rs 246 (44% upside).MAHINDRA & MAHINDRA: Our FY12 and FY13 earnings forecast of are Rs 41.6 and Rs 47.9 respectively. Our FY12 earning estimate is 8.2% lower than consensus estimate of Rs 45.4. We value M&M at Rs 831 using SOTP methodology, discounting the standalone business at 13x FY13E earnings. Buy for a target price of Rs 831 (5% upside).NESTLE INDIA: Our estimates and target price are among the lowest on the street, led by pressure on EBITDA margin and argument of narrowing down the Nestle's P/E premium. We assign P/E of 30x on next 12-months earnings to derive TP of Rs 3,400.NIIT TECH: Our top-line estimates vary from consensus by ~(3.3)% for FY12 and ~(2.7)% for FY13. Our EBITDA margin estimate is 150bps lower for FY12 but marginally 30bps higher for FY13. Our EPS estimate for FY12 is 13% lower than consensus due to built-in one time charges on new deals but EPS estimate for FY13 is 1.6% higher than consensus. Buy for a target price of Rs 285 (38% upside).PHOENIX MILLS: Our EPS estimates for FY12 and FY13 are Rs 10.8 and Rs 16.0, respectively. Our FY12 earnings estimate is 30% higher than consensus estimate of Rs 8.3. We have a 'BUY' recommendation on the stock with a target price of Rs 265, which discounts FY12E gross NAV by 15%.POWER GRID: Our PAT estimates for FY12 and FY13 are lower than consensus by 2% and 3%, respectively. We value PGCIL on FCFE basis to arrive at a target price of Rs 122 (terminal growth rate of 3% and Ke of 14%).SINTEX INDUSTRIES: Our earnings estimates (EPS) for FY12 and FY13 are Rs 20.2 and Rs 23.6, respectively. Our FY12 earnings estimate is 1% higher than consensus estimate of Rs 19.9. We have a 'BUY' recommendation on the stock with a target price of Rs 240, which discounts FY12E earnings by 12x.TATA STEEL: BUY, TP-Rs 629 (34% upside)
1) Brownfield expansion of 2.9mtpa at Jamshedpur would increase share of the profitable Indian operations (FY11 EBITDA/t of USD353 vs. USD138 at the consolidated level); 2) Capital structure has improved and financial leverage is manageable; 3) there is progress in raw material integration at TSE; 4) Coal mining commences from Riversdale's Benga project, in which Tata Steel holds 35% stake with 40% offtake rights; and 5) Expected improvement in steel profitability as high raw material prices ease. Our consolidated estimates are lower than consensus. We value Tata Steel at Rs 629 using SOTP methodology.TECPRO SYSTEMS: We expect EPS of Rs 31.4 and Rs 37.6 in FY12 and FY13, respectively, almost in line with consensus forecasts. We expect 9% growth in order inflow in FY12, whereas some analysts forecast de-growth of ~30-35%. However, the management has guided for ~30% growth in order inflow in FY12. We have a BUY recommendation with a target price of Rs 375 (10x FY13E).See which stocks FIIs have bought in last quarter?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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