Diwali Picks 2014-15 from Kotak Securities
FUNDAMENTAL STOCK PICKS
Infosys | CMP: Rs.3935 | Target Price: Rs. 4191 | Upside: 6.5%We have been positive on the long-term demand prospects for quite some time. With the developed economies (especially US) stabilizing, we do expect the demand scenario to improve over the next few quarters. The margins for Infosys seem to be improving ahead of our expectations. The new strategy should allow Infosys to improve growth rates over the long term with sustained margins.
Larsen and Toubro (L&T) | CMP: Rs.1446 | Target Price: Rs.1721 | Upside: 19.0%Diversified play on the Indian infrastructure and Industrial sector. Order backlog of Rs. 1.65trn remains strong providing visibility of 34 months of trailing four quarter revenue. The company has given guidance of 20% growth in order intake in FY14. We expect stock to respond favourably to any reforms moves to address the issues that have plagued the power sector.
Maruti Suzuki India | CMP: Rs.2979 | Target Price: Rs. 3404 | Upside: 14.3%In FY15, we expect the company to report volume growth led by new products and expected improved demand scenario. We expect MSIL to launch 2-3 new models in FY15. Management expects double digit volume growth for the company in FY15 in the domestic market. In exports, management guided for flat volume growth in FY15. We expect MSIL's EBITDA margin to improve in FY15 and FY16. MSIL has lowered its import content from peak of around 25-26% (2-3 years back) to 16% by end FY14. Company plans to further reduce it to 12-13% over the course of next few years.
Grasim Industries | CMP: Rs.3408 | Target Price: Rs. 4163 | Upside: 22.2%VSF division performance remained weak till Q1FY15 but demand environment is improving slightly. Prices have remained stable during past two months. Capacity expansion in VSF and chemical division to translate into increased volumes during FY15 and FY16. Cement division volumes are also likely to increase on demand improvement, capacity expansion, higher dispatch from JCCL plants.
Kansai Nerolac Paints | CMP: Rs.1858 | Target Price: Rs. 2250 | Upside: 21.1%KNPL is the market leader in the Industrial Paint Segment with 42% market share, with automotive segment contributing 75% of the industrial segment revenues. We expect revival in auto sales and capex cycle from here We estimate margins of the company to improve over FY14 to FY16E by 70 bps. The company has no major near term capex.
Engineers India | CMP: Rs.238 | Target Price: Rs. 315 | Upside: 32.4%Engineers India enjoys a healthy market share in the Hydrocarbon consultancy segment. It enjoys prolific relationship with few of the major oil & gas companies like HPCL, BPCL, ONGC and IOC. Company is well poised to benefit from recovery in the infrastructure spending in the hydrocarbon sector. We believe that in future, company shall inevitably benefit from MoPNG huge target of nearly Rs 1.2 trillion envisaged for various projects in XII five year plan. Company has been observing pick up in order inflows/revenue booking in consultancy business space which enjoys healthy margins.
Allcargo Logistics | CMP: Rs.243 | Target Price: Rs. 295 | Upside: 21.4%Allcargo has a strong presence in the MTO business through wide network of ECU Line. It also has a strong hold on domestic MTO business and continues to perform strongly in the MTO segment despite sluggish container shipping market We estimate the MTO segment to grow at ~24% in FY15 and ~7% in FYY16 Strong relationships will help the company to report stable volumes in the CFS segment in FY15E and FY16E.at around 200,000 TEUs per annum
Geometric | CMP: Rs.138 | Target Price: Rs. 167 | Upside: 21%The scale-down in the large account is complete and should not impact FY15 revenues. Also, the management has undertaken several restructuring initiatives to improve growth, bring in predictability as well as sustain margins. These initiatives are expected to lead to improved revenue growth over the next few quarters. The order booking over past three quarters and the strong pipe-line make us optimistic on future growth prospects.
Zee Entertainment Enterprises | CMP: Rs.319 | Target Price: Rs. 332 | Upside: 4.1%Amongst most exposed broadcasting plays to ride DAS: Zee Entertainment has over 30 channels that bring strong bargaining power to the company. As such, the company is well-set to benefit from the roll-out of DAS over the next few years. New channels to improve company’s positioning, augur well for long-term valuations Strong balance sheet enables the company to react strongly to competitive strain: The entertainment space could see significant competitive strain, and we believe that broadcasters with strong balance sheets are better positioned. Ratings strong, Zee well – positioned to benefit from uptick in advertising.
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