Kajaria Ceramics: Target price Rs 272
Kajaria Ceramics’ Q3FY13 results were a bit muted and the weakness could continue in the March quarter as well. However it remains a structurally strong story. Despite the short term pressures like slowing consumption and increased gas prices, Kajaria Ceramics’ long term structural story remains intact. Further, the JV outsourcing theme continues with the acquisition of Cosa Ceramics in the previous quarter.
Kajaria Ceramics’ top line and bottom line is expected to grow at a CAGR of 17.5% & 27.8% respectively over FY13-15 while the ROE is expected to remain strong at 31 per cent. The debt equity is expected to go down from 0.7x in FY13E to 0.4x in FY14E and further to 0.2x in FY15E.
Supreme Industries Ltd: Target price Rs 409
Supreme Industries offers the widest and most comprehensive range of plastic products including piping systems, packaging solutions like cross laminated films, protective packaging products and flexible films, plastic parts & accessories for consumer durables & automobiles.
Supreme Industries’ strong volume growth is expected to remain strong over the next two years (led by strong growth in Pipes & SILPAULIN), exhibiting a CAGR of 15 per cent for FY13-FY15E.
Supreme Industries will be incurring a capex of Rs 10 billion from FY13-FY17E buoyed by strong demand across its product portfolio. The capex would be funded through internal accruals and monetization of its commercial property “Supreme Chambers”.
Supreme Industries is expected to report revenue & PAT CAGR of 17.2% & 21% over the period from FY13-15. Supreme Industries currently trades at 12.5x & 10.3x its FY14E & FY15E consolidated earnings (excluding construction business).
Astral Poly Technik: Target price Rs 472
Astral Poly Technik’s product range is witnessing strong growth due to product characteristics, which makes the product superior to competitors’ products. Astral Poly Technik has license for 4 products from Lubrizol which puts it at an advantage.
Astral Poly Technik is also aggressively expanding its dealer network to increase its presence across the country. The brand enhancement program would improve the product perception by new users.
The continuous capacity addition at low incremental cost would enable Astral Poly Technik to cater the strong growth rate as well as improve the return ratios. Astral Poly Technik has strong growth trajectory and ability to protect return ratios (ROE @ 27%).
Lupin Ltd: Target price Rs 656
Lupin continues on the top of preferred plays in Indian pharma. The limited competition in generic launches in US (gTricor.gYasmin & OC’s) will aid Lupin’s growth trajectory. Lupin’s US segment is expected to contribute USD 681mn to consolidated revenues during the current fiscal.
Lupin’s FY14 estimates factor in contribution from OC launches (31 filings so far) and Tricor generic (limited competition) at USD 85mn & USD 65mn respectively to US sales. Overall, Lupin is expected to show 18 per cent earnings growth over FY13-15E and return ratios of over 25 per cent.
Petronet LNG: Target price Rs 180
Key beneficiary of latent demand for RLNG reflected in the share of LNG increasing significantly in the basket from 1 per cent in FY04 to 20 per cent in FY12.
LNG has been a better solution for India as compared to transnational pipelines due to geographical concerns and having a shorter gestation period. Capacity expansion will be a key driver of revenue growth. Liquefaction capacity expected to be doubled in next 4 years.
Given the business model, Petronet LNG does not carry the risk of rupee depreciation or gas price as both the re-gasification margin and the off-take of re-gasified gas is fixed for confirmed off-take volumes.