Fw: Company Reports - Bosch Ltd and Info Edge (India) Ltd

 

Bosch Ltd: Driving technology breakthroughs - BUY CMP Rs8,885, Target Rs10,324, Upside 16.2% A technology leader Bosch Ltd, a subsidiary of Robert Bosch GmBH, has dominated Indian markets for diesel fuel injection systems. The success has been on the back of global dominance of the parent, which has made sustained investments in R&D and evolved the fuel injection system technology. Using this parentage, Bosch Ltd has garnered 81% market share in diesel systems.   Best play on change in emission norms Four-wheeler emission norms for the top 13 cities are set to change from CY15 from BS IV to BS V. This will largely require a shift to electronic fuel injection technology. In 2003, when norms were changed from BS II to BS III, Bosch Ltd saw a material jump in realizations and margins. A similar impact on revenues and profitability can be expected in 2015 as the company is infusing Rs12bn over the next couple of years as capex and also increasing its localization content.   Expect resilient financial performance In spite of weakness in the domestic automotive industry, we expect Bosch Ltd to register a strong profit CAGR of 16.5% during CY12-15E. The strong performance will be on the back of robust margin trajectory and support from replacement and non-automotive revenues. From H2 CY14, we expect gradual recovery in OEM business and CY15 will see benefits from change in emission norms. Return ratios are likely to remain flat as impact of higher profitability is offset by investments in capital expenditure.   Premium valuations justified Over the years, Bosch Ltd on back of a sustained strong performance even in automotive downturns has commanded premium valuations. Its monopoly-like position in the fuel injection system business, robust cash-flows and strong balance sheet has enabled it to trade at an average 1-year forward P/E of 25x over the past two years. These valuations are at a substantial premium to other large auto component players, which trade in the range of 10-18x 1-year forward P/E. We believe, the premium valuations are justified and value the stock at Rs10,324 (25x CY14E EPS of Rs413). Initiate with a BUY rating.

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Info Edge (India) Ltd: Jobs and more! - BUY CMP Rs301, Target Rs345, Upside 14.6% Info Edge, largely known by its recruitment portal Naukri.com, is the first listed internet based player on Indian bourses and until recently the only one. Info Edge owns a diversified portfolio of portals like Naukri.com, 99acres.com, Jeevansathi.com and Shiksha.com which have come a long way in establishing strong market and mind share. Info Edge's strong growth since inception in these key portals is on the back of key structural tailwinds. These include increasing internet penetration, faster and cheaper internet access. The internet penetration in India , despite the strong growth, is still one of the lowest (11%) and is poised to grow threefold by 2015. Over a longer period of time, this under-penetration and India's young demographics is expected to bode well for internet-based businesses in general and Info Edge in particular In last five years though, Info Edge's growth has been impacted due to the effects of global financial crisis (over FY09-10) and more recently in FY13 which was on the back of general slowdown of both global and domestic economy. Due to strong linkage of recruitment (75%+ of the consolidated revenues) to business cycles and increased competitive intensity from non-traditional players (Linkedin), we expect the slower growth to continue in the medium term. On the flipside, high under-penetration, small base, dominant positioning should lead to robust growth for portals like 99acres, JS, Zomato, Meritnation, PolicyBazaar. Overall, we expect the company to register 21%/12% CAGR over FY13-15E and assign a conservative P/E multiple (28x 1 yr forward v/s 37x historically) considering slower growth. Initiate with BUY and 9-month TP of Rs345.

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Warm Regards, Amar Ambani