(12 Stocks) Express Idea + Call Success & Update + Q3FY15 Results Update

Express Idea – Relaxo Footwears – BUY
CMP Rs658, Target Rs760, Upside 15.5%

• Revenue zooms on celebrity power, strong product portfolio
• Product Premiumisation, falling crude to aid margins
• Strong financial and attractive valuations

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Axis Bank – Call Success & Update
Reco Price Rs515, Previous Target Price Rs600, New Target Price Rs675

We had retained BUY on Axis Bank in our Q3 FY15 Result Update dated January 19, 2015 with an upgarded 12-month price target of Rs600. The stock breached the target in Friday’s trading session registering a 16.5% return from recommended price of Rs515. We continue to remain positive on Axis Bank and see more upside coming from incremental valuation re-rating and a robust earnings growth. Sustained operational improvements and moderation in credit cost should enable the bank to deliver handsome RoA of 1.8% over FY16-17. We increase our 12-month target price to Rs675.

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Dabur India Ltd – Call Success & Update
Reco Price Rs231, Previous Target Price Rs263, New Target Price Rs295

We had revised our target price to Rs254 in a call update released on September 01, 2014. We extended our target to Rs263 in Q2 FY15 Result Update released on November 10, 2014. The stock has touched the target in today’s trading session registering ~14% returns. We remain positive on the growth prospects of the company and advise investors to hold on to the stock for a revised target of Rs295.

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UPL Limited – Call Success
Reco price Rs362, Call Closure Price Rs395.7

We had recommended a buy on UPL Limited in an Express Idea report dated January 16, 2015 with a target price of Rs402. The stock has hit a high of Rs395.70. The total return delivered since recommendation price of Rs362 stands at ~9.3%. We recommend traders to book profit.

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HCL Tech (Q2 F6/15) – BUY
CMP Rs1,794, Target Rs2,200, Upside 22.6%

• Robust dollar revenue growth surprises positively; strong growth in IMS and engineering/R&D services
• Growth was broad based within verticals and geographies; non-Top 20 clients drive growth again
• Contrary to expectations of material decline, OPM was largely stable qoq
• Raise earnings estimates by 5-7% and 24-month price target to Rs2,200; risk-reward favorable, HCL Tech remains our Top Pick in the sector

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ICICI Bank (Q3 FY15) – BUY
CMP Rs361, Target Rs425, Upside 18.0%

• Domestic loan growth to healthy 15.6% yoy; retail credit continued to grow by robust 26% yoy
• Average CASA ratio stable; NIM touches historic high of 3.46%
• Weak fee growth; cost/income ratio declines on higher non-fee income
• Influx of stressed assets was much higher than expectation driving an increase in credit cost
• Retain BUY and 24-month target of Rs425

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JSW Steel (Q3 FY15) – BUY
CMP Rs977, Target Rs1,332, Upside 36.4%

• JSW’s standalone results was marginally below our estimate due to higher than expected decline in blended realisations
• Consolidated numbers were impacted by weaker performance at US, Chile and JSW Coated
• Weak domestic demand growth coupled with pressure from imports led to a 3.3% qoq decline in realisations
• Operating profit was marginally lower due to costs involved in hedging of iron ore imports and payments for outside job-work
• Imports accounted for 40% of total iron ore consumption in Q3 FY15, company expects 30% of total demand to be met by imports in FY15
• Debt increased due to increase in working capital requirement
• Maintain Buy with a price target of Rs1,332.

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Ashok Leyland (Q3 FY15) – BUY
CMP Rs65.7, Target Rs76, Upside 15.7%

• Revenues at Rs33.6bn was better than our expectations and represented a growth of 72.1% yoy and 4.5% qoq
• Volumes were higher by 37.6% yoy and blended realizations jumped by 25% yoy; Sequentially volumes were flat while realizations rose 4.3%
• While M&HCV volumes were higher by 70.6% yoy, LCV volumes lower by 7.9% yoy
• OPM at 7.1% was tad lower than our estimates of 7.3% and represented a jump of 12ppts yoy but a decline of 20bps qoq, gross margins were higher by 523bps yoy but declined by 88bps qoq, staff costs and overheads were lower on the back of benefits of operating leverage
• While PBT was higher than our estimate, PAT was at Rs321mn compared to our estimate of Rs412mn owing to higher tax rate
• Retain BUY rating with a raised 9-12 month price target of Rs76 as we see upside risks to our volume growth assumption of 18% CAGR during FY15-17E

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Indoco Remedies (Q3 FY15) – Accumulate
CMP Rs322, Target Rs350, Upside 8.9%

• Weak seasonality in 45% of domestic portfolio and tepid export sales lead to lower revenues qoq; YoY growth remains robust with ~380bps margin expansion and ~53% surge in PAT
• Started supplies for 2 approved products to Watson in late December whose impact to be seen in current quarter
• Forecast 42% EPS cagr driven by robust domestic formulations growth, incipient momentum in export partnership deals and modest 150bps margin expansion; Accumulate with 9-12mth target of Rs350

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Tech Mahindra Ltd (Q3 FY15) – Accumulate
CMP Rs2,870, Target Rs3,116, Upside 8.6%

• Revenue growth came in ahead of expectations; industry-leading growth to continue
• Growth driven by non Top-5 clients and Manufacturing/Retail verticals; measured employee addition to drive utilization up
• OPM recovery was muted; margin to improve in the longer term with multiple levers at disposal
• Retain Accumulate rating; raise 12-month TP to Rs3,116

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Sesa Sterlite Ltd (Q3 FY15) – Accumulate
CMP Rs200, Target Rs218, Upside 9.0%

• Consolidated topline was lower than expected due to lower contribution from copper and iron ore business
• Revival in aluminium business continued on the back of higher product premiums and increase in availability of coal
• Copper business continued to report strong numbers led by higher Tc/Rc margins and increase in acid realisations
• SEL’s power production increased on a qoq basis on account of increase in availability of coal
• One unit of 660MW was commissioned in Talwandi Saboo (TSPL) during the quarter, contributing 250mn units in Q3 FY15
• Domestic zinc business operating performance was marginally lower due to inventory accumulation
• International zinc business performance improved due to higher product premiums
• Contribution of Oil & Gas business reduced on account of the sharp reduction in crude oil prices
• Upgrade the stock to Accumulate on attractive valuations with a revised price target of Rs218

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Dabur India (Q3 FY15) – BUY
CMP Rs256, Target Rs295, Upside 15.2%

• Dabur matched our expectations by recording modest 9.2% yoy revenue growth at ~Rs21bn during Q3 FY15
• Domestic FMCG business revenues increased by ~13% yoy driven by 7.4% yoy underlying volume growth while international business registered slower ~4% yoy growth
• Operating margins expanded by 130bps to 17% led by 120bps/50bps decline in raw material/overhead cost. Adjusted net profit recorded 16.2% yoy growth at Rs2.8bn, in line with our expectations
• We expect Dabur to witness a revenue/PAT CAGR of 14%/21% respectively over FY15-17. Maintain Buy with revised 9-mth price target of Rs295

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