Fw: Investor's Eye: Update - HDFC Bank, Bajaj FinServ, Torrent Pharmaceuticals, Telecom; Viewpoint - Hero MotoCorp

 

 

Investor's Eye [October 19, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE HDFC Bank Cluster: Evergreen Recommendation: Hold Price target: Rs518 Current market price: Rs491 Robust growth in earnings, margins take a dip Result highlights HDFC Bank's earnings for Q2FY2012 grew by 31.5% year on year (YoY) and 10.5% quarter on quarter (QoQ) to Rs1,199 crore. The earnings were slightly ahead of our estimates majorly led by a strong growth in the net interest income (NII; 16.6% YoY and 3.4% QoQ) and non interest income coupled with lower than expected provision expenses. The business growth remained strong with advances growing by 25.6% YoY (after adjusting for one off short term loans in Q1FY2012) leading to a strong growth in core income. However, the net interest margin (NIM) declined by 10 basis points (bps) sequentially to 4.1% due to increased intake of term deposits. The asset quality of the bank also remained stable with the gross and net non performing assets (NPAs) at 1% and 0.2% respectively, in line with that of the previous quarter. The provision coverage ratio (PCR) of the bank however declined to 81.3% from 83% in Q1FY2012. HDFC Bank remains among the safer bets within the banking space due to its consistent growth and impeccable asset quality. However the stock trades at 3.5x FY2013E book value (BV), which is at a significant premium to peer banks, leaving little room for an upside. We maintain our Hold rating with a price target of Rs518 for the stock.  Strong growth in advances fuels NII growth: The NII of the bank grew by 16.6% YoY and 3.4% sequentially to Rs2,944 crore. This was majorly led by a strong growth in advances which grew by 25.6% YoY (after adjusting for one off short term loans in Q2FY2011). The growth in advances was driven by the retail segment which grew 34% YoY and constituted approximately 50% of the advances. The deposits of the bank grew by 18.1% YoY and 9.2% sequentially. Sharp increase in term deposits impacts margins: The NIM of the bank declined by 10bps QoQ to 4.1% as a sharp increase in term deposits raised the funding cost. During Q2FY2012 the term deposits increased by 26% YoY and 13% QoQ compared to an 18% YoY growth in overall deposits (9.2% growth Q-o-Q). Consequently, the current account-savings account (CASA) ratio declined by 173bps QoQ to 47.3% as compared to 49.1% in Q1FY2012.  Non-interest income up 26% QoQ: The non-interest income of the bank grew by 26.1% YoY and 8.2% QoQ to Rs1,212 crore. The foreign exchange (forex) and trading income grew by a robust 43.1% YoY while fee income registered a moderate growth of 15.2% YoY due to sluggishness in distribution income. The loss on sale of investments was also lower at Rs1.3 crore in Q2FY2012 as compared to a loss of Rs52 crore in Q1FY2012. Asset quality remains stable, provisions decline: The asset quality of the bank remained stable with gross and net NPAs at 1% and 0.2% respectively. The proportion of restructured advances stood at 0.4% of the total advances (in line with that of the previous quarter) of which the standard restructured advances stood at 0.1%. The provision expenses declined by 19.5% YoY as the bank adjusted for a surplus provision (Rs135 crore) during the quarter. The bank continues to make floating provisions and has an outstanding balance of around Rs1,000 crore. The provision coverage ratio declined to 81.3% in Q2FY2012 as compared to 83% in Q1FY2012. Cost- Income ratio remains stable: The cost to income ratio of the bank was maintained at 48.9% as compared to 48.8% in Q1FY2012 and 48.2% in Q2FY2011. During the quarter the bank opened 39 branches, taking the total branch network to 2,150. Outlook: HDFC Bank continues to report strong profits; this time the profits were led by a strong growth in advances. The margins witnessed some pressure due to an increase in term deposits while the asset quality remained stable. We expect the bank's earnings to grow at a compounded annual growth rate (CAGR) of 24% over FY2011-13, led by a 25% CAGR growth in advances. HDFC Bank remains among the safer bets within the banking space due to its consistent growth and impeccable asset quality. However the stock trades at 3.5x FY2013E BV, which is at a significant premium to peer banks, leaving little room for an upside. We maintain our Hold rating with a price target of Rs518 for the stock.   Bajaj FinServ Cluster: Apple Green Recommendation: Buy Price target: Rs600 Current market price: Rs543 Growth in lending and insurance businesses propels earnings Result highlights During Q2FY2012, Bajaj Finserv reported a strong 128% year-on-year (Y-o-Y) growth in its consolidated net profits to Rs158 crore. The income from operations showed a 52% Y-o-Y growth to Rs714 crore while expenses remained flat on a Y-o-Y basis which contributed to an around 96% Y-o-Y growth in the operating profits.  Life insurance-top line contracts: The life insurance business reported a policyholder's surplus of Rs238 crore in Q2FY2012, a growth of 24.6% YoY. However, the gross written premium declined by 27.2% year on year (YoY) with renewal premiums declining by 20.2% YoY. The assets under management also declined by 5.8% quarter on quarter (QoQ) to Rs36,946 crore. General insurance-steady growth: The general insurance business registered a growth of 82.9% YoY in its net profit to Rs64 crore as against Rs35 crore in Q2FY2011. This was despite making higher provisions (Rs42 crore vs Rs11 crore) for the motor pool. A strong growth in underwriting profits and a higher investment income were the key drivers for profitability. The gross premiums also increased by 15.5% YoY during the quarter while the combined ratio improved to 99.45% (including motor pool losses). Bajaj Finance-robust growth in core income drives profits: The earnings of Bajaj Finance Ltd (BFL) for Q2FY2012 grew by 64.2% YoY to Rs87 crore as against Rs53 crore during Q2FY2011. The core income grew by 34% YoY while provisions declined by 28% YoY which contributed to a strong growth in profits. The deployments of the company grew by 58% YoY to Rs3,352 crore during the quarter while the assets under management (AUM) grew by 11.6% QoQ to Rs10,071 crore.  Valuation: Bajaj FinServ has reported a strong set of numbers for Q2FY2012 aided by a strong growth in the financing and insurance businesses. However the life insurance business showed moderation in line with the industry as the management works on rationalising the cost structure as per the new regulatory environment. The management expects the life insurance business to start witnessing revenue growth from Q3FY2012 onwards as by then the company wouldn't face a higher base of the previous year.  Due to continued ambiguity relating to the Reserve Bank of India (RBI)'s circular on transfer of shares from Indian residents to non residents, we continue to value Bajaj FinServ on the average of the two target prices ie the one arising out of factoring in the potential upside from the RBI circular and the other arrived at by excluding the impact of the circular on the company's valuation. We maintain our sum of the parts (SOTP) based target price of Rs600. We maintain our Buy recommendation on the stock.   Torrent Pharmaceuticals Cluster: Ugly Duckling Recommendation: Buy Price target: Rs680 Current market price: Rs578 Upgraded to Buy Result highlights Q2FY2012 results exceed expectations: The consolidated net sales of Torrent Pharmaceuticals (Torrent) for Q2FY2012 grew by 19.2% year on year (YoY) and 7.2% quarter on quarter (QoQ) to Rs657.8 crore as against our estimates of Rs619 crore. While the international business (up 32% YoY to Rs386 crore) reported 10% higher sales than our estimate, the Indian business (up 8% YoY to Rs295 crore) fell short of our expectation by 6%, largely due to weaker revenue from contract research and manufacturing services (CRAMS; down 2% YoY) and a stiff competition in the acute therapy segment (contributes approximately 29% of Indian branded formulations). However, due to a 156 basis point (bps) expansion in operating margins to 17.5% and foreign exchange (forex) gains of Rs18.9 crore, the reported profit after tax (PAT) grew by 31.2% to Rs100 crore. The adjusted PAT (adjusted for forex gains and extra-ordinary items) rose by 22.5% to Rs81.1 crore which is slightly lower than our estimates. H2FY2012 revenue from India to grow by approximately 15%: The revenue from India business grew just 6% to Rs295 crore mainly due to (1) a 2% Y-o-Y de-growth in the CRAMs business and (2) just an 8% Y-o-Y rise in branded formulations due to weaker sales in gastro-intestinal segments. In H1FY2012, the revenue from India grew 10% YoY to Rs603.6 crore. The gastro-intestinal segment is facing a stiff competition in the market. However, the management has indicated a 15% Y-o-Y rise in revenue from India during H2FY2012 on better contribution from the newly added field force.  International business jumps 32% YoY; momentum to continue in H2FY2012: During the quarter, the revenue from international business grew by 32% YoY to Rs376 crore. The growth is primarily attributed to (1) 2 new product launches in the US leading to a 57% Y-o-Y rise in revenue to Rs51.5 crore (2) rationalisation of inventory channels (stock clearance by distributors in Q1FY2012) in Brazil helping to record a 31% Y-o-Y rise to Rs120 crore, (3) depreciation of rupee against major international currencies (at constant currency international business grew at 24% YoY). Going forward, we expect the growth momentum to continue in H2FY2012 with 4 new launches in the US, 3-4 launches in Brazil and an approximately 20% growth in the rest of world (RoW) business.  Margin to remain stable in H2FY2012: During Q2FY2012 the operating margin (excluding other operating income) jumped by 156bps to 17.5%. The improvement in margin is mainly attributable to lower employee expenses (down 30bps to 16.6% of net sales), lower other expenses (down 70bps to 26.3%) and lower research and development (R&D) expenses (down 114bps to 31.7%) during the quarter. We expect the margin to remain stable at this level during H2FY2012.  Other operating income, which mainly constitutes exports incentives and forex gains, grew by 30.5% YoY to Rs25.6 crore. The net forex gain for the quarter stood at Rs18.93 crore.  We revise revenue and profit estimates: A better than expected performance in international business and firm operating margins during H1FY2012 prompt us to revise revenue and profit estimates for FY2012 and FY2013. We have increased our revenue estimates for international business by 2% and 4% for FY2012 and FY2013 respectively. However, we have revised our estimate for revenue from Indian business downward by 4% and 3% for FY2012 and FY2013 respectively. Upgrade to Buy, revise price target to Rs680: With the new capacity at Sikkim contributing higher revenues and as the newly added field force starts contributing incremental revenues, the revenue growth momentum is likely to continue in H2FY2012. We expect a compounded annual growth rate (CAGR) of 17% and 23% for revenue and PAT respectively over FY2011-13. At the current market price of Rs574, the scrip trades at 14.5x and 12x FY2012E and FY2013E earning per share (EPS) respectively. We upgrade our rating on the stock to Buy with a price target of Rs680 (14x FY2013 estimated earnings). SECTOR UPDATE Telecommunications  Led by strong performance from Uninor; Net adds up 22.5% MoM For September 2011, the all-India GSM operators (excluding Reliance Communications [RCom] and Tata Telecommunications [Tata Tele]) added 6.54 million SIM cards, taking the overall base to approximately 618.3 million. That is approximately an increase of 1.1% over the August figure. Incumbents' net additions continue to drift southwards: The aggregate subscriber net additions by the incumbents declined by 18.3% month on month (MoM) to 4.62 million subscribers in September from 5.66 million subscribers in August this year. This was the ninth consecutive month of lower net additions for the incumbent players (we consider Bharti Airtel; Idea Cellular, Vodafone Essar, Aircel, Loop and Bharat Sanchar Nigam Ltd [BSNL] as incumbents). Amongst new players Uninor shines bright: The aggregate subscriber base of the new players increased to 40.9 million in September from 39 million in August, primarily driven by the robust net additions of Uninor. For the month Uninor added around 1.92 million SIMs to its kitty taking its overall subscriber base to 29.7 million as against 27.7 million in August this year. The other players like Etisalat as well as STel posted decent net additions during the month. VIEWPOINT Hero MotoCorp An impulsive ride turns compulsive Q2FY2012 was the first quarter when the rejuvenated "Hero" proved its mettle by initiating the most successful corporate rebranding exercise in recent times. The new Hero MotoCorp not only emerged stronger and vibrant, but also appeared more prepared to meet the global challenges. The management tone was confident and firm which was also reflected in the company's Q2FY2012 operating profit margin (OPM) that was the best in last five quarters. Hero MotoCorp is one of the few companies that skipped slowdown last time (2008) and in all probability may do the same this time too.  Based on better guidance on volumes as well as costs we are raising our earnings per share (EPS) estimate for FY2012 by 6.8% to Rs120.7. The stock is trading at over 17x current year's earnings. The current valuation are closer to the higher end of the historical one-year forward price/earnings (P/E) band, and largely capture the long term sustainable growth of the business. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Investor's Eye: Update - Bajaj Corp; Viewpoint - CMC

 

 

Investor's Eye [October 13, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Bajaj Corp Cluster: Ugly Duckling Recommendation: Buy Price target: Rs142 Current market price: Rs102 Operating performance in-line with expectation Key points Operating performance in line with expectation: Bajaj Corp Ltd (BCL)'s operating performance was in line with our expectation with the gross profit margin (GPM) standing at 25.6% and the operating profit at Rs27.4 crore (in keeping with our expectation of Rs27.3 crore) in Q2FY2012. The sales volume growth stood at 22% year on year (YoY), which was the highest in eight quarters.  Volume-led top line growth: The total revenues (including the operating income) grew by 31.8% YoY to Rs107.1 crore during the quarter. This was on the back of a strong 22% year-on-year (Y-o-Y) volume-led growth and an improvement in the sales realisation. The company did not implement any fresh hike during the quarter and hence the year-to-date price hike stands at 8.5%. The 20%+ Y-o-Y volume growth was achieved on the back of around 23% Y-o-Y volume growth in Almond Drops hair oil (ADHO; which contributes around 96% to the top line). Kailash Parbat hair oil (KPHO), which is currently available in 3.6 lakh outlets, contributed around 1% to the total volume growth.  GPM improved on Q-o-Q basis: The prices of the key raw materials such as LLP, glass bottles and refined oil were up by 31.1%, 27% and 31.5% YoY respectively during the quarter. Hence the GPM was down by 331 basis points YoY to 53.8%. Having said that, the prices of the key raw materials (except for refined oils) remained stable on a quarter-on-quarter (Q-o-Q) basis, which resulted in a 133-basis-point improvement in the GPM on a Q-o-Q basis. Operating profit grew by 19% YoY: The operating profit margin (OPM) was down by 277 basis points YoY to 25.6%. Hence the operating profit grew by 19% YoY to Rs27.4 crore (which was lower than the top line growth of about 32% YoY). However the OPM improved sequentially by 90 basis points during the quarter.  Higher other income boosted bottom line growth: The higher other income helped the company to achieve a 45% Y-o-Y growth in the bottom line to Rs28.7 crore (ahead of our estimate of Rs25.1crore) during the quarter. The other income stood at Rs9.9 crore in Q2FY2012 as against Rs2.6 crore in Q2FY2011. The other income was higher on the back of the huge cash of around Rs400 crore during the quarter. However, with the company investing around Rs90 crore in non-yielding assets (at the end of Q2FY2012), we expect the other income to be lower in H2FY2012 in comparison with that in H1FY2012.  Upward revision in estimates: We have slightly revised upwards (by 3.6%) our estimate for FY2012 to factor in the higher than estimated sales volume growth and other income. Also, we have fine tuned our estimates for FY2013. Outlook and valuation: With the category growth likely to sustain above 15% YoY, we expect BCL's volume growth to sustain in the range of 18-20% in the coming quarters. Overall, we expect the company to achieve around 31% top line growth in FY2012. With the volume growth in ADHO likely to sustain above 15% YoY, we expect the FY2013 top line growth to be at around 20% YoY. With the OPM sustaining in the range of 27-28%, we expect the bottom line to grow at a compounded annual growth rate (CAGR) of 17% over FY2011-13. VIEWPOINT CMC Extraordinaries pull down otherwise strong operating performance   Result highlights  On reported basis, for Q2FY2012, revenues grew by 17.1% quarter on quarter (QoQ) and 32% year on year (YoY) to Rs357.7 crore with the rupee depreciation benefiting by Rs4 crore. The EBITDA margin dropped to 14.9%, down 170 basis points QoQ affected by a wage hike (of 9% taken w.e.f. July 1, 2011), mark-to-market (MTM) foreign exchange (forex) losses of Rs3.63 crore and a one-time charge of Rs2.2 crore on re-calculation of gratuity and leave encashment benefits. The effective tax rate increased to 38.1% from 29.6% in the sequential quarter on the back of an additional tax charge of Rs4.16 crore on the dividend received from CMC Americas Inc (its 100% subsidiary). The reported net profit was down 6.5% QoQ and 25.2% YoY to Rs32.6 crore.  Adjusting for the forex loss of Rs3.63 crore and one-time gratuity and leave encashment charge of Rs2.2 crore, the EBITDA margin stood at 16.5%, down 10 basis points on a sequential basis and 290 basis points on a year-on-year (Y-o-Y) basis. Adjusting for the tax on the dividend of Rs4.16 crore, the effective tax rate stood at 27.2%, down from 29.6% in the sequential quarter. The adjusted net profit grew 22.2% QoQ and declined 2.3% YoY to Rs42.6 crore.  The depreciation charge for the quarter increased by 45.1% QoQ and 122.8% YoY to Rs5.4 crore on the back of capitalisation of part of Phase II of the Hyderabad special economic zone (SEZ) facility. The total amount capitalised in H1FY2012 is Rs118 crore.  The services revenues grew 17% QoQ to Rs316.5 crore contributing 88.6% of the total revenues. Equipment sale grew 17.7% QoQ to Rs40.7 crore. The international business revenues grew 19.3% QoQ to Rs211.1 crore, contributing 59.1% of the total revenues, whereas the domestic revenues grew by 14% QoQ to Rs146.1 crore.  In terms of business segments, the customer services (CS) revenues grew 12% QoQ to Rs84.5 crore with the EBIT margin up 80 basis points QoQ to 7.9%. The system integration (SI) revenues grew by 19.9% QoQ to Rs204.5 crore with the EBIT margin down 480 basis points QoQ to 21.4%. Within the SI revenues, the embedded systems revenues grew by 10% QoQ. The IT enabled services (ITES) revenues grew by 13% QoQ to Rs48.4 crore with the EBIT margin down 470 basis points QoQ to 28.6%. The education & training revenues grew 20.9% QoQ to Rs15.4 crore with the EBIT margin up 820 basis points QoQ to 18.4%. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Invest in Gold - through "Gold ETF"

 

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Fw: Investor's Eye: Update - Ashok Leyland, Fertiliser; Special - Q2FY2012 Oil & Gas earnings preview

 

 

Investor's Eye [October 05, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Ashok Leyland Cluster: Ugly Duckling Recommendation: Buy Price target: Under review Current market price: Rs25 Are these signs of chocking? Underperformance in truck segment, a matter of concern: Ashok Leyland's medium & heavy commercial vehicle (MHCV) or truck volumes have significantly underperformed the competition in the April - August 2011 period. Industry data reveals that truck volumes grew by 9.9% year on year (YoY) between April - August 2011 whereas Ashok Leyland reported a dismal 11% decline in volumes during the same period. Consequently, the market share of the company in the truck segment dropped from 21% in June 2011 to 19.6% in August 2011. Valuation: Ashok Leyland's asset heavy strategy and southern market exposure has added high beta to its earnings. Our FY2012 estimates are based on the assumption that the company would achieve volumes of 1 lakh units for the financial year. This is 7% lower than the management's guidance. We will be reviewing our FY2012 earnings assumptions post Q2FY2012 results. However for the time being we are retaining our FY2012 estimates as well as the Buy recommendation on the stock. However, we are putting our target price under review.  SECTOR UPDATE Fertilisers Low volume offtake in the kharif season The aggregate sales volume for the 13 leading (mostly listed) fertiliser companies saw a decline during the recent kharif (July-September) season. The total sales volume declined by 16.8% as compared to last year, largely due to significantly lower imports this time around. The imports declined sharply due to extremely high prices globally and the deadlock between the Indian government and leading global complex fertiliser companies (specifically potash based fertiliser companies). In terms of locally produced fertilisers, the volume offtake of complex fertilisers dropped by 21.6% (tracking the aggregate of 13 leading companies) whereas the decline in urea's sales volume was limited to just 5% in the kharif season. The consumption of non urea fertilisers has declined mainly due to the non availability of raw materials and increase in price of non urea fertilisers. The supply of di-ammounium phosphate (DAP) and muriate of potash (MOP) was also tight internationally which has resulted in a steep increase in price, thereby affecting domestic consumption. Urea's sales volume for the kharif season (July to September) has decreased by 5% year on year (YoY). There was a decline in the sales volume of urea because its production was lower due to shortage of gas. We believe that going forward volume of urea will increase which will ultimately help pure urea manufacturers like Chambal Fertilisers and Nagarjuna Fertilisers. Any increase in the output of domestic gas will be allocated to fertiliser manufacturers as the government has listed the fertiliser sector as a priority sector and that too above power. Overall, the decline in imported non urea fertilisers during the current kharif season was of 40% YoY. The steep decline was mainly due to lower import of MOP and DAP. The import of NPK fertilisers has increased significantly as complex fertilisers are relatively easily available compared to MOP and DAP. Farmers have also started using complex fertilisers other than MOP and DAP due to growing awareness about the benefits of NPK fertilisers. We believe that there will be a healthy growth in the consumption of NPK fertilisers, which will have a positive effect on indigenous NPK manufacturers. This shift towards a higher use of NPK fertilisers will benefit manufacturers like Coromandel International. The consumption of DAP during the current kharif season has declined by 23% YoY as its imports declined. The availability of DAP was constrained in the international market, hence the decline in imports. Higher than expected demand and supply side constraints have kept the price of DAP strong. Currently the price of DAP is ruling firm at $665 per tonne. There was a sharp decline of 89% in the consumption of MOP during the current kharif season mainly due to its lower imports. Imports were lower due to a dead lock between Indian importers and global suppliers of potash over pricing. India imports 100% of its requirement of MOP (of 60 lakh tonne per annum) as it does not have the raw materials required to manufacture MOP. SHAREKHAN SPECIAL Q2FY2012 Oil & Gas earnings preview Brent crude oil price declined marginally; largely remained above $110 in Q2FY2012: During Q2FY2012, the average price of Brent crude oil hovered in the range of $105-120 per barrel. The average Brent crude price in Q2FY2012 stood at $112, which is approximately 5% lower over the last quarter. Nevertheless, it is 45% higher than in the corresponding period of last year. Hence, realisation of end products of exploration and production should replicate the trend. Sequentially a marginal decline in the realisation is expected. However, the dollar has appreciated in Q2FY2012 from Rs44.5 to Rs49, though the appreciation largely occurred in the last month of Q2FY2012 only.  Expect GRM to remain high: The Singapore gross refining margin (GRM) remained around $9 per barrel in Q2FY2012 as against $8.4 per barrel in Q1FY2012. Hence, we expect Reliance Industries Ltd (RIL) to report its GRM at around $10.7 per barrel in Q2FY2012. Macro environment signaling slow down; global oil demand may dip: Recently, the International Energy Agency (IEA) has reduced its forecast for global oil demand growth to 1.2% in CY2011 to 89.3mnbpd and 1.6% to 90.7mnbpd in CY2012. As stated in our previous report, we believe petrochem would get affected due to the apparent slow down. Even petrochemical prices declined sequentially in Q2FY2012 and are likely to remain subdued in the near future.  Outlook: Brent crude has declined mainly in the later part of the quarter; hence, the decline in the average crude price in Q2FY2011 has only been off 5% (sequentially). We observed a strong dollar appreciation and declining crude oil prices (due to weaker macro environment on account of the Europe crisis) in the tail end of the quarter. The scenario is likely to continue in Q3FY2012 as well. The full impact of the situation is likely to reflect fully in Q3FY2012. View and valuation: We retain our estimates for RIL and GAIL. We value RIL following the sum of the parts (SoTP) method at Rs1,040 and retain our Buy rating on it. We value GAIL at Rs567 based on the SOTP valuation method and retain our Buy rating on the stock. Click here to read report: Investor's Eye

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Fw: ValueGuide: Darkest before dawn

 

 

Sharekhan ValueGuide [October 04, 2011]  Sharekhan www.sharekhan.com

EQUITY FUNDAMENTALS FROM SHAREKHAN'S DESK Darkest before dawn The headwinds from the West grew stronger last month as the crisis in Greece escalated threatening to engulf the entire euro region. The economic data coming from the USA also pointed to more weakness and the dim outlook for growth globally led to risk aversion-driven sell-off in equities and commodities whereas the flight-to-safety-driven rally pushed up the US Dollar and bonds.   SHAREKHAN TOP PICKS Sharekhan top picks  STOCK UPDATE Bajaj Corp: Price target revised to Rs142 Bharat Electronics: Annual report review Bharat Heavy Electricals: Competition pressure intensifies, PT revised to Rs2,077 CESC: Annual report review Eros International Media: Annual report review Grasim Industries: Annual report review Hindustan Unilever: Annual report review IDBI Bank: Asset quality woes continue IRB Infrastructure Developers: Annual report review; price target revised to Rs228 ITC: Price hike in cigarettes Mahindra & Mahindra: Price target revised to Rs865 Marico: Price target revised to Rs153 Maruti Suzuki India: Annual report review Orient Paper and Industries: Annual report review Reliance Industries: Price target revised to Rs1,040 Selan Exploration Technology: Gearing up for a strong production ramp-up Tata Chemicals: Annual report review Thermax: Price target revised to Rs550 THE STOCK IDEAS REPORT CARD SECTOR REPORT Information technology: Sky is not falling...hope persists SECTOR UPDATE Banking: Asset quality concerns intensify Fertilisers: Urea makers have the advantage VIEWPOINT Liberty Phosphate: Key beneficiary of NBS scheme EARNINGS GUIDE MUTUAL GAINS Sharekhan's top mutual fund picks (equity)  EQUITY TECHNICALS  Sensex: Breakdown  EQUITY DERIVATIVES  Derivative view: Bears resurge  COMMODITY FUNDAMENTALS  Macro-economy Crude oil: Further decline possible Precious metals: Dip buying noted Base metals: Buy copper on dips Major economic events in October 2011   COMMODITY TECHNICALS  Gold (London): Monthly outside bar Silver: Bears cut loose Light sweet crude oil: Monthly 20-SMA important in the medium term Zinc: At MOB Lead: Last leg pending Pepper NCDEX: Rs31,096 critical for bulls  CURRENCY FUNDAMENTALS  USD-INR EUR-INR GBP-INR JPY-INR  CURRENCY TECHNICALS  USD-INR: Time for a breather GBP-INR: Moving higher EUR-INR: Channelised rise  JPY-INR: Correction unfolding  PMS DESK Sharekhan PMS funds: Fund manager's view and product performance ProPrime-Top Equity ProPrime-Diversified Equity ProTech-Nifty Thrifty ProTech-Diversified ProTech-Trailing Stops  ADVISORY DESK  Monthly performance of Advisory products Smart Trades Derivative Trades MID Trades Click here to read report: Sharekhan ValueGuide

Regards, The Sharekhan Research Team myaccount@sharekhan.com  www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Investor's Eye: Update - Bajaj Corp , Viewpoint - Rupa & Co

 

 

Investor's Eye [September 30, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Bajaj Corp Cluster: Ugly Duckling Recommendation: Buy Price target: Rs142 Current market price: Rs104 Price target revised to Rs142 Bajaj Corp Ltd (BCL) has acquired Uptown Properties and Leasing Pvt Ltd (Uptown) for Rs75 crore (including liabilities of Rs49.5 crore). Uptown owns a building in Worli (Mumbai) with a built-up area of 33,600 square feet. The sole reason behind the acquisition is to develop a corporate office on the acquired plot to bring in all the scattered divisions at various locations under one roof to improve the operational efficiencies.  Outlook and valuation: To factor in the deal, we have downgraded our earnings by 1.6% and 2.4% for FY2012 and FY2013 respectively. The BCL stock has already reacted negatively to the announcement of the property deal and factors in the negative implication of the same at the current market price. Going forward, any initiative on the company's part to expand its portfolio or strengthen its core business would be the key upside trigger for the stock.  At the current market price the stock trades at 13.4x its FY2012E EPS of Rs7.8 and 11.1x its FY2013E EPS of Rs9.5. We maintain our Buy recommendation on the stock with the price target of Rs142 (15x FY2013E earnings as against 16x earlier due to the not so judicious use of free cash on the books). VIEWPOINT Rupa & Co Good brands + strong distribution reach < Valuation   Rupa is the largest men's innerwear player by volume (in FY2011, it sold 168 million pieces). It has presence across the value chain with products in categories ranging from basic to mid premium, premium and super premium (entered into the last category recently). Its flagship brands Rupa, Frontline, Jon and Air are in the basic and mid premium categories while brands like Euro, Macro Man and Macro Man M Series target the premium and super premium categories. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions