1) Maruti Suzuki Ltd: Increased diesel capacity, new launches to drive growth
Domestic demand is sluggish and customer footfalls have also weakened. Next year industry growth might be limited to mid single digits. MSIL with increased diesel capacity (on track as of now) and new launches should be able to match industry; not unduly concerned about new competition where MSIL management believes challenges are more daunting.
Export initiatives to target 15 per cent of sales from 10 per cent in the next 3-4 years. New models, geographies will be key drivers for the auto giant. Margins look healthy, thanks to currency as well as to lower discounts. Next quarter (Q4) margins are likely to be strong, also aided by inclusion of financials of engine business.
2) Tata Motors: JLR’s new launch pipeline to drive growth
Tata Motors’ domestic business is likely to remain muted for another year. However, some market share gain is possible post inventory correction. The company’s effort to cut cost and improve internal efficiencies will help margins.
Additionally, capital expenditure of Rs 25-30 billion towards product development for different variants and brand extension would help the company.
JLR’s new launch pipeline and ramp up is on track. The Range Rover phase out is complete and new models are likely to contribute about 3,500-4,000 units per month.
3) ICICI Bank Ltd: Asset quality is still strong
Domestic loan growth for FY14 would be in the range of +17-18 per cent, led by retail and working capital demand and off-take from past projects approvals. The bank remains confident of its asset quality and maintains credit cost as a percentage of loans to be less than 75bps over the next one year, including provisions on restructured assets and standard assets.
Fee income is likely to remain an overhang for now, but the bank remains focused on this variable to raise the growth to double digits (+10-14%).
4) Lupin Ltd: Inorganic growth to boost stock
Regulatory delays has affected US generics ramp up but BofA-ML expects the run-rate to improve on approvals of niche products, of which the majority is in the limited competition/Para IV category.
The brokerage firm expects near-term launch of Suprax drops to boost branded business franchise, with generic competition not likely in the next 12-18 months.
Lupin has identified Russia, Australia, Latin America and parts of Centra/Eastern Europe as key focus areas to expand their emerging market presence.
The inorganic route is likely to be adopted to gain market entry, with its own brand building skills to help grow the business further.
5) DLF: Operational cash flow will be positive in FY14
Gurgaon is the third largest contributor to total taxes paid to the Indian exchequer. The company is in a dominant position in Gurgaon with well-located land parcels. DLF invests heavily in its project sites, building power systems, roads, horticulture, amenities etc.
Key risks remain approval delays from local authorities, environmental approval delays and cost inflation. DLF faced about 20 per cent labor cost inflation in the last 3 years and execution bottlenecks.
However, the strategy of outsourcing all construction activity to top-rated third party vendors is expected to start paying off in FY15 and onwards.
6) Havells India Ltd: Confident of 15-20% growth in India
The company is very excited by the success it has seen in India in FY13, the first full year of its fore into the small electrical appliance business. It believes that the success it has seen in appliances along with the successful launch of ‘Reo’ switches that target rural India has tremendous growth opportunity, which is difficult to quantify at this point of time. The company remains confident of seeing at least 15-20% growth in India.
Sylvania margin improvement is on track driven by change in product mix in Europe in favor of LED lights. Decline in interest cost is going to be key positive for Sylvania.
The interest cost is likely to fall to around Euro7m in FY14 compared to around Euro13mn in FY13. Interest cost may decline even more by FY15 owing to further deleveraging given the improvement in its cash flow.
7) Motherson Sumi: Confident about achieving its 40% ROCE
The company continues to be confident about achieving its 40% ROCE target and exceed $5bn revenue target for FY15. Domestic business has seen strong growth of over 25 per cent despite lack of car sales growth.
Improvement in margin and ROCE of overseas subsidiaries like SMR and SMP is on track. The loss making Brazil unit is a concern and may take six months to improve.
New order win in SMP recently is being seen as major lead indicator for its turnaround as similar changes were achieved in SMR following new order wins.
8) Yes Bank Ltd: Growth is likely to sustain
Yes bank expects its own loan growth to be 19-20 per cent for FY14, which is much ahead of the sector. However, the focus is on CASA mobilization and the bank aims to build 100 bps of CASA deposits every quarter. Moreover, the bank is hopeful of raising CASA levels to 30 per cent of deposits by 2015.
Margins may continue to improve further by +10bps, as the bank is likely to benefit from rising CASA, falling rates and slower growth in credit substitutes (lower yields vs. loans).
Asset quality continues to be healthy and the private bank does not expect any spike in coming quarters. Internal rating of accounts by banks is taken into consideration for proactive provisioning.
9) Glenmark Pharma Ltd: Growth momentum to sustain
Glenmark’s domestic business is unlikely to be affected much by proposed pricing policy changes and BofA-ML expects the revenue impact of Rs100-110mn due to expanded coverage of price control. The brokerage firm expects the domestic business to sustain 4-5 per cent higher growth than the market (12-14%) over medium term. Of the 43 ANDAs pending approval, majority is comprised of limited competition opportunities.
While working capital optimisation has stabilised, improving operating profits resulting from differentiated launches as well as moderation of capex going ahead would help improve free cash flows over the next 4-6 quarters, to be used for debt reduction.
10) HDFC Bank: Momentum likely to continue
The private sector margins estimated are likely to remain healthy in +3.9-4.3% band, as the bank maintains its low funding costs due to its high CASA which is driven by the bank’s expanding retail franchise.
HDFC Bank believes that it can sustain volume growth ahead of the sector. The brokerage firm expects the loan growth to be at-least +3-4 per cent ahead of sector average in FY14.
Asset quality has been healthy all through the cycle and the bank is currently running at delinquency rate of 0.9-1% (of loans). HDFC Bank has highlighted how the bank is effectively leveraging technology to derive economies of scale, reduce transaction costs, and improve sales efficiencies by higher cross sell.
Expanding distribution network should drive operating leverage that may be a key driver for sustaining 28-30 per cent earnings growth in FY14.
A stock like DLF to hold for long term??
Seems too far fetched 🙂