Emkay has released its hold, buy and accumulate strategies for 10 stocks. Amara Raja Batteries, Greaves Cotton, Lupin, Sobha Developers, Mahindra Satyam, Allahabad Bank, Punjab National Bank, ICICI Bank, Union Bank of India and Grasim Industries are the stocks in the list.
Amara Raja Batteries
Recommendation: BUY
CMP: Rs 313
Target Price: Rs 380
Consistent performance, Maintain BUY
• Q3FY13 results surprised positively with EBITDA margins at 16% and beat our profit est by ~14%; lag effect of lead prices protected margins despite 13% higher avg. lead prices
•Mgmt expects replacement demand to grow at 16-18%; price hike of ~4% in replacement and pass-through in other segments should help retain margins above the 15% mark
•Capacity constraints being addressed with a higher than expected capex plan of Rs 7.5bn – we cut FY14/15 EPS marginally by 6%/1% on higher capex assumptions
• Remain fundamentally positive – case for valuation re-rating has been supported by markets quicker than anticipated
• Maintain BUY and revise our TP to Rs 380 based on 15x FY15 EPS (vs 12.5x earlier). Stock currently trading at 15.4x/12.4x FY14/FY15 est
Greaves Cotton
Recommendation: BUY
CMP: Rs 82
Target Price: Rs 100
All revved up, Reiterate Buy
• Stellar performance Revenue up 11% yoy to Rs, EBITDA margins expand 150 bps yoy to 13.9% and APAT up 42% yoy to Rs486 mn above estimates
• Key highlight Revenue growth driven by volume pick-up in both 3-W and 4-W segment addressing key concern. Further, GCL has favourable base in 3W for next 3-4 quarters
• Upgrade earnings by 5% for FY13E & by 4% for FY14E. Robust return ratios at +30% levels and 8% FCF yield.
Reiterate Buy with price target of Rs100
Lupin
Recommendation: BUY
CMP: Rs 604
Target Price: Rs 708
Rocking results Maintain buy
• Lupin Q3FY13 Results, above expectations a) Revenue up by 38% YoY to Rs25bn, b) EBIDTA up by 62% YoY to Rs6bn and c) RPAT up by 43% YoY to Rs3.4bn
• US business grew 54% YoY to US$193mn on back of Tricor which contributed $30-35mn. India grew 14% YoY and Japan grew 48%
• Going forward, Lupin will launch 3 products in Q4’13 and 20 products in FY14 which includes, Solodyn, Yasmin, Symbalta, Asacol and Cipro OS among others in US
• On back of strong outlook we have upgraded Lupin’s earnings by 9%/12% for FY13/14. Maintain Buy with a revised target price of Rs708 (20x FY14E EPS of Rs35.4)
Sobha Developers
Recommendation: ACCUMULATE
CMP: Rs 429
Target Price: Rs 484
Reiterate bullish outlook
• SDL sells 0.9msf for Rs 5.3bn in Q3FY13. Mgmt. is quite confident of attaining highest quarterly sales booking in Q4 and crossing the target of Rs 20bn for FY13
• Generates cash surplus of ~Rs 0.5bn in the Q3FY13 which is utilized towards payments for new JD projects. Capex of Rs 230mn leads to increase in gross debt by Rs 244mn QoQ
• SDL to inch up its housing space scalability in FY14 – to enter new markets viz. Kochi & Kozikhode, penetrate Chennai and look for opportunities in Noida & Hyderabad
• Maintain Accumulate rating with TP of Rs 484. Mgmt. reiterates our recent report on Bangalore housing markets, wherein demand and pricing both look strong
Mahindra Satyam
Recommendation: ACCUMULATE
CMP: Rs 120
Target Price: Rs 125
Inline operating performance
• Inline operating performance with revenues at US$ 356 mn (+0.5% QoQ) and a better margin performance (21.6%, flat QoQ) aided by provision reversals(1.7% of revenues)
• Europe drives growth with a 9.6% sequential increase. Top client metrics remain tardy with non 10 clients driving rev performance after strong client mining through recent qtrs
• Management hopeful of pickup in revenue growth in FY14 aided by new logo wins and deal wins in Manufacturing, Retail and Healthcare
• See pause to outperformance ahead with Dec’12 qtr breaking the trend of strong beat on operational performance through FY12-H1FY13. Retain ACCUMULATE, TP Rs 125
Allahabad Bank
Recommendation: HOLD
CMP: Rs 164
Target Price: Rs 170
Additions to stressed assets continues to decline
• ALBK’s Q3FY13 NII/PAT at Rs13.3bn/3.1bn in line with estimates. Enthused by consecutive decline in addition to stress assets Rs18bn vs. Rs37bn in Q2 and Rs54bn in Q1
• Loan growth jumps back to 19% yoy with 8.5% qoq growth. ALBK confident of 18% growth for FY13 implying 9% qoq growth in Q4FY13 even as we remain unsure of the same
• Slippages at Rs10bn (3.3% annualized), ALBK confident of Rs7-8bn slippage in Q4FY13. CDR pipeline at Rs4.3bn only. As with other PSU banks, recoveries remain strong
• Cutting our FY13/14E estimates by 6%/20% for wage revision and higher NPA provisions. Retain HOLD rating with TP of Rs170
Punjab National Bank
Recommendation: HOLD
CMP: Rs 912
Target Price: Rs 820
High recoveries help; slippages remain elevated
• PNB’s Q3FY13 NII/PPOP at Rs37.3bn/26.8bn below estimates. With lower provisions required, PAT at Rs13.1bn beat consensus / our forecast (Rs11bn) by wide margin
• Q3FY13 slippages remain high at Rs30bn, albeit lower than Rs45bn of Q2FY13. PNB has done recoveries/upgrades of Rs26bn from H1FY13 recoveries
• Additions to stressed assets (slippages plus restructuring) remains elevated at Rs64bn vs. Rs82.3bn (adjusted for recoveries) in H1FY13. Suzlon exposure of Rs5.4bn included
• Retain our FY13E/FY14E forecast while plugging Rs12.5bn capital infusion and higher recoveries for Q3FY13. Upgrade to HOLD with TP of Rs820 valuing stock at 1x FY14E ABV
ICICI Bank
Recommendation: HOLD
CMP: Rs 1191
Target Price: Rs 1300
Another stable quarter; raise TP to Rs1,300
• ICICI Bank Q3FY13 results beat estimates- NII at Rs35bn (+29% yoy) / PAT at Rs22.5bn (+30% yoy). Treasury gains offset muted fee income
• Muted fee income remains only negative point. Slippages remain under control at Rs8.5bn or 1.2% annualized.
Restructuring pipeline at Rs9-10bn in Q4FY13
• Domestic loan growth remained strong at 21% yoy (4% qoq) with NIM at 3.47%. FY13 domestic loan growth targeted at 20% with 3%+ NIM. We are factoring FY13 NIM at 2.7% (calc)
• Raised our earnings estimates by 4/4% for FY13E/FY14E driven by robust NIMs and NII growth. Valued at 2x FY15E standalone ABV. Retain HOLD with TP of Rs1300
Union Bank of India
Recommendation: HOLD
CMP: Rs 255
Target Price: Rs 240
Asset quality showing improving trend
• UNBK Q3 NII at Rs18.9bn (+6.2% yoy) was inline with our estimates. As UNBK moved towards improving PCR, higher NPA provisions pulled down PAT at Rs3.0bn, down 45% qoq
• Net slippage at Rs2.4bn lowest in last three years. Moreover with NPA provisions at 2.5x net slippages PCR rose to 66%. NPL/ Net worth also improved to 19.8% from 23% in Q2FY13
• Improving asset quality along with capital raising to improve networth impairment ratio to less than 17% and increase Tier I ratio to ~8.5%.
• With receding risk on asset quality side and improving PCR, credit cost to come down to 70bps with RoA improving to 0.83%. Upgrade to HOLD with TP of Rs240
Grasim Industries
Recommendation: BUY
CMP: Rs 3006
Target Price: Rs 3900
Close to bottoming out
• Stnd EBITDA at Rs2.15bn (-25% yoy) below est (Rs2.5 bn) as VSF prices dip 5% yoy (4% qoq) on weak cotton prices. PAT at Rs2 bn (-28% yoy) also disappoints
• VSF EBIDTA/kg at Rs24 (est-Rs26/kg) least in last 15 quarter. See profitability bottoming out driven by recent increase in VSF prices (Domestic & Global), China prices already up 6%
• Though standalone earnings declined by 28% yoy, consol net profit (post minority) at Rs5.5 bn came in almost flat helped by 17% yoy profit growth delivered by Ultratech
• performance lead to Standalone EPS downgrade of 8%/10% for FY13E/14E. Despite earnings cut, Standalone biz still contributing 40% to FY13 consol EPS even when the VSF profitability is at 3 year low
• See Grasim as a classic bottom out play- adjusted for value of Ultratech & Investments, Stock already close to June-12 lows. Holdco Disc at ~45% to support downside. BUY
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