AnandRathi Securities has recommended to buy UltraTech Cement, Pfizer, Madras Cements and Mcleod Russel India with a target price of Rs 2100, Rs 215, Rs 1232 and Rs 400 respectively, in its research report dated July 30, 2013.
AnandRathi's research report
UltraTech Cement - In-line & encouraging EBITDA; expansions to drive growth; Buy. UltraTech’s 1Q profit beat our estimate. Its all-India operations, those in the fast-growing businesses and capacity expansions are fundamental positives. We maintain a Buy, with a target of Rs 2,100, based on 10x Jun’14 EV/EBITDA, an EV/ton of USD 175 and a PE of 19.6x. The target multiple is at a 10 percent premium to ACC and Ambuja, given Ultratech’s much larger capacity, short-term capacity expansions and diversification into the less volatile businesses of white cement and wall putty.
Madras Cements - Quiet quarter; steep correction soaks negatives; upgraded to Buy. Though the results belied expectations, given the improving pricing scene in the South, the rest of FY14 is expected to be better and would enable the company to deliver superior profitability as in the past. The recent stock price correction factors in the negatives such as the group company donations and a restrained 1QFY14 performance. We upgrade the stock to a Buy, with a price target of Rs 215 based on 7.5x Sep’14e EV/EBITDA, a 25 percent discount to our target multiple for large-cap cement companies. The target price implies a PE of 13x and an EV/ton of USD 100.
Pfizer India - Margin recovery to sustain; Buy. We expect CAGR of 7 percent in revenue and 16.3 percent in adjusted PAT, over FY13-15. EBITDA margin is expected to improve 170bps to 19.5 percent over this period on account of higher revenue share of domestic formulations. Revenue growth, however, looks lower due to consideration of ~4 percent impact of new drug pricing policy. The net cash position is expected to increase to ~Rs 17bn by FY15, offering opportunity for inorganic move. The stock trades at 15.2x FY14e and 13.5x FY15e earnings. We maintain Buy, with target of Rs 1,232, based on 16x FY15e core earnings and Rs 417 cash per share.
Mcleod Russel (India) - A good quarter; Buy. In 1QFY14 the company benefited from favourable climate and stable operating costs. However, the weather in north India in 2QFY14 has deteriorated a little. Consequently, the output of black tea is expected to be slightly lower than our earlier projection. This has already started reflecting in the Kolkata auctions, where tea-leaf prices have started inching north. We expect tea prices to firm up and end a shade higher yoy. Simultaneously, following increased sourcing of tea leaf from smaller estates, we retain our estimate of greater sales. In its international operations, the company has guided to improvement in Vietnam and Uganda, apart from a marginal decline in its performance in Rwanda. Buy the stock with a target price of Rs 400.
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