ICICI Bank’s substantial branch expansion and strong capital adequacy at 18.5% have positioned it to gain CASA and credit market share. The bank improved its market share of savings deposits by ~5bp in FY2012 compared to FY2011, capturing a substantial 5.7% incremental market share.
The ICICI Bank stock is trading at an attractive valuation of 1.5x FY2014E P/ABV. Hence, Angel maintains its Buy view on the stock with a target price of Rs 1,169, valuing the core bank at 1.9x FY2014E P/ABV and assigning a value of Rs 153 to its subsidiaries.
Wipro has identified four momentum industry verticals to focus uopn: 1) BFSI, 2) energy and utilities, 3) retail and 4) lifesciences and healthcare. These verticals account for 65 per cent of Wipro’s revenue.
Angel expects a 12.2% and 11.1% CAGR in EBITDA and PAT respectively over FY2012-14E. The Wipro stock is currently trading at inexpensive valuations of 13.0x FY2014E EPS. The stock is valued at 15x FY2014E EPS of Rs 28.0, which gives a target price of Rs 420 and it is recommended as one of the top picks with a Buy rating.
Larsen & Toubro
Larsen & Toubro’s strong balance sheet, a sound execution engine, wide array of capabilities, integrated operations tailored to suit India’s infrastructure growth story and multiple, recurring value unlocking triggers over the medium term lead Angel to place faith in this default India’s infrastructure story.
On the valuation front, the L&T stock is trading at a PE of 13.3x FY2014E earnings, adjusted for subsidiary value, which is lower than its historical PE of 15-20x. Hence, a BUY is recommend with a sum of the parts (SOTP) target price of Rs 1,568.
Jaguar – Land Rover is expected to sustain its volume momentum (expect a ~14% volume growth in FY2013) driven by the success of Evoque and new XF 2.2 coupled with the launch of the new Range Rover and Jaguar XE in FY2013. Further, strong growth in China (sales up 98% in FY2012) will also benefit the overall volume growth of Tata Motors.
At Rs 235, the Tata Motors stock is attractively valued at 5.4x and 2.9x FY2014E earnings and EV/EBITDA, respectively. A ‘Buy’ rating on the stock is recommended with a sum of the parts (SOTP) target price of Rs 292.
Axis Bank has increased its current account – savings account market share multi-fold over the past nine years on the back of robust branch and ATM network expansion.
Axis Bank is expected to raise capital in the next 12-18 months as the bank’s capital adequacy at the end of FY2012 stood at 9.5 per cent. Dilution is likely to be book-accretive and will aid in further enhancing the bank’s credit market share going forward.
Axis Bank is trading at 1.3x FY2014E ABV (~60% discount to HDFC Bank). Angel remains positive on Axis Bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income, strong growth outlook and A-list management. A Buy recommendation on Axis Bank is recommended with a target price of Rs 1,373.
Crompton Greaves’ power and industrial segments have been facing several headwinds on the international and domestic business fronts.
However, Crompton Greaves’ margins have bottomed out and its EBITDAM is expected to improve going forward. Crompton Greaves’ EBITDAM is expected to reach 8.5% by FY2014 from 7.1% in FY2012. Angel maintains its positive stance on Crompton Greaves. The pessimism surrounding Crompton Greaves’ profitability has clearly been factored in the stock price, given the PE multiple de-rating. A multiple of 14x is assigned to arrive at a target price of Rs 128.
Multi Commodity Exchange
Since its inception in FY2004, the number of products offered by MCX has grown from 15 to 49 in FY2012. MCX registered a 35.3% and 63.1% CAGR in its revenue and adjusted PAT, respectively, over FY2009-12. MCX is expected to continue to focus on offering futures trading in commodities, which is significant in the Indian and global contexts.
Currently, MCX is trading at 16.1x FY2014E earnings, which is attractive owing to its zero-debt and high-margin business and presence in an highly under-penetrated and oligopoly business. A Buy is recommended with a target price of `1,440, valuing the stock at 20x FY2014E earnings.
United Phosphorus figures among the top five generic agrichemical players in the world, with a presence across major markets such as the US, Europe, Latin America and India.
United Phosphorus enjoys an edge over competition and is placed in a sweet spot to leverage the upcoming opportunities in the global generic space. Over FY2012-14E, United Phosphorus is expected to post a 10% and 18.4% CAGR in its sales and PAT, respectively. Currently, the United Phosphorus stock is trading at an attractive valuation of 7.0x FY2014E EPS. Hence, a Buy view on the stock is recommended with a target price of Rs 170.
DB Corp is one of the leading publishing houses in India, with seven newspapers and 65 editions in four languages across 13 states. DB Corp leads its nearest competitor in its market with a huge margin in terms of circulation.
The recent underperformance of the DB Corp stock can be attributed to OPM pressure on account of higher newsprint costs and the cyclical nature of ad revenue growth (sluggish due to slower GDP growth).
Considering the structural positives of the print business (high brand loyalty and significant entry barriers) and DBCL’s multi-state leadership, in our view, the DB Corp stock deserves a premium to the Sensex. Hence, it is assigned a target multiple of 17x FY2014E EPS, benchmarking it to the print media sector valuations and a BUY view on the DB Corp stock is maintained with a target price of Rs 236.
Mahindra Lifespaces Developers is a mid and premium housing developer catering to strong demand in tier-1 cities and small metros in the country.
Mahindra Lifespaces’ strong balance sheet (D/E ratio – 0.2x), good corporate governance, diversified land bank and solid brand name sets it apart from its peers. A Buy view on the Mahindra Lifespaces stock is recommended, valuing it on sum-of-the-parts (SOTP) basis to arrive at a value of Rs 495. A 20% discount to our SOTP value is applied to arrive at the target price of Rs 396, implying a PB (FY2014E) of 1.2x.
Tata Sponge Iron
Tata Sponge Iron has a long-term supply agreement with Tata Steel for assured supply of iron ore, thus leading to uninterrupted production. Transportation issues which led to iron ore shortage since one year witnessed a revival during 1QFY2013, but continue to be an overhang in the short term due to unstable political scenario. The issue is expected to be resolved completely by FY2014.
Tata Sponge Iron is debt free with cash reserves of Rs 331 crore and RoIC of 32.8 per cent for FY2014E. A Buy rating on the stock is recommended with a target price of Rs 424 based on a target P/B of 0.9x for FY2014E.
Ceat is ramping up its radial capacity at the Halol plant to 150TPD, which is likely to be fully operational by 4QFY2013. With the completion of the proposed expansion, the product mix of truck: non-truck is likely to improve to 55:45 resulting in a better product mix, thereby fetching better margins.
The Ceat stock is currently trading at an attractive valuation of 2.7x its FY2014E EPS. The Buy view on the Ceat stock is retained with a target price of Rs 164, valuing it at 4x FY2014E EPS.