IL&FS Transportation Networks Ltd: “Strong Buy” By Microsec, CMP: Rs. 214, TP: Rs. 286, Upside: 34%
IL&FS Transportation Networks (ITNL), a “STRONG BUY”. ITNL, a leading road infrastructure company, with an illustrious parentage (IL&FS), a sharply focused business model and comfortable funding position, is all set to ride benefits emanating from the robust momentum in NHAI road project awards. ITNL has followed a disciplined bidding strategy to maintain its IRR, based on which it has judiciously built a balanced road portfolio comprising a mix of annuity & toll, spread across the breadth of the country. Earlier we have recommended the stock on our ICR report dated 29th June 2012 at a price of INR 182 and since then we have maintain our positive bias on the stock. We see upside momentum of ITNL’s earning for FY15E. Therefore we recommend a “STRONG BUY” with a target price of INR 287.
Crompton Greaves: By Motilal Oswal, CMP: Rs. 203, TP: Rs. 271, Upside 34%
Consumer business demerger to unlock value; several triggers exist
CRG has proposed the demerger of the consumer business into a separate listed company. The Committee of Directors was to examine all relevant aspects and make suitable recommendations to the Board; and we expect the process to be completed shortly. We believe that the transaction will unlock significant value, and also opens up strategic possibilities to accelerate growth.
CRG’s journey to emerge as a ‘global corporation’ from India continues to face multiple ‘growth pangs’. Phase 1 of the restructuring program, encompassing the European operations had been largely completed; and the business reported EBIDTA breakeven in FY14. There had been initial successes in strategic areas like geography expansion, moving up the value chain, widening the production footprint, etc. Thus, FY15/FY16 should witness the gains of the fructification of these efforts over the last two years. Demerger of the consumer business will unlock shareholder value. Maintain Buy, with a revised Price target of INR271/sh (standalone business at 22x FY16E, overseas at 0.5x EV/Sales).
Bata India: By Motilal Oswal, CMP: Rs. 1,277, TP: Rs. 1,375, Upside 7.67%
Moving to the next orbit – Right investments underway; strengthening its invincible moat
BATA is making the right investments in advertising, brand building and store expansion as it plans to add 100 stores on net basis going forward, much higher than the 30 stores added in CY13. Similarly, BATA is aggressively penetrating into newer markets and channels through an entry in Tier 2, 3 and 4 cities and developing an aggressive strategy for e-commerce. It has developed a special team for e-commerce and will have a two-pronged strategy: 1) sales being done through third party e-commerce platforms like Jabong, Flipkart, Snapdeal, etc and 2) sales being done through its own website and mobile app (to be launched shortly). It is also evaluating opening of exclusive Hush Puppies stores and Foot In stores in Tier 2 and 3 markets. It also plans to roll out its ERP program starting 4QCY14 which will not only improve working capital but drive sales. It plans to increase the price points of some products priced at INR499 upwards and reduce price points of some products priced ~INR1049 downwards to INR999 owing to changes of excise duty on footwear in recent budget.
Sales spillover due to delay in monsoon, H2CY14 to see strong growth