Berger Paints: The last 2 quarters has seen muted performance in domestic operations led by disappointing volume growth, while international operations positively surprised by reporting margin expansion. However, our core arguments remain intact (1) gains from scale and size (2) shift in product portfolio (3) retaining market shares and (4) backward integration. Berger Paints (22.8x FY14E earnings) trades at significant discount to Asian Paints (30.8x FY14E earnings). Retain Buy.
CRISIL: Full impact of the large client addition, to be visible in next 6-9mths. Drop in CP rates and improvement in credit in H2FY13, owing to seasonality to drive ratings revenue in H2FY13. Expect earnings to grow at a CAGR of 22% over CY11-13 with RoE/ RoIC of 55%/117%. The stock trades at 25.9x/21.3x CY13/14 EPS.
Exide Inds: We expect the company to report earnings CAGR of 31% in FY12-FY15 and act as a counter cyclical stock when OEMs are facing demand slowdown pressures. We recommend a BUY on Exide with a TP of Rs 190 based on 15xFY15E earnings for the core business and Rs 10/share for its stake in ING Vysya Life Insurance business. Improving margin trajectory should be the key trigger for the stock.
Federal Bank: With the largest branch network among old pvt sector banks and a healthy deposit profile, moderation in GNPA number could trigger a re-rating in the stock. Expect GNPA to come down to 2.4% by FY14 from 3.6% in Q1FY13.
LIC Housing Finance: With resilience of retail loan portfolio and low NPA risks, the downside in the stock is limited at current valuations of 1.9x FY13/14E ABV. The upside trigger to the stock would be faster than expected growth in the developers’ loans and better overall spreads driven by the same.
Tech Mahindra: We continue to back upsides in Tech M /Mah Satyam given upside risks to our earnings estimates. We retain ACCUMULATE on Tech M with a TP of Rs 1,050 (based on 11xFY14E pro forma earnings). Merger swap ratio of 8.5:1 implies a TP of Rs 125 for Mahindra Satyam. Valuations at ~9.5x/9x proforma FY13/14 P/E remain attractive.
Wockhardt: Wockhardt has one of the largest and the most profitable US businesses with steady India business. It has one of the best in class operating and balance sheet ratios. Going forward 31% CAGR in earnings & reduction in net debt to zero will re-rate the stock from current 14x FY13E to 18x FY14E EPS of Rs120. Initiate coverage with a BUY and TP of Rs 2,160. At CMP, the stock trades at 16x FY13E and 14x FY14E EPS.