Cadila Healthcare:

Cadila’s weak performance during the past few quarters due to a series of acquisitions and a warning letter by USFDA to its Moraiya plant had spawned the negative sentiment, widening the valuation discount. However, the valuation discount is set to shrink on the recent clearance of the Moraiya plant by the USFDA and a strong growth in the domestic market.

Cadila is expected to report revenue CAGR of 18.6 per cent and profit CAGR of 25.6 per cent over FY2012-14. Cadila is currently trading at 15.1x FY2014E EPS, which is a 14 per cent discount to Lupin. The valuation discount should narrow further. Cadila is valued at 16x FY2014E EPS to arrive at a price target of Rs 950.

Dishman Pharmaceuticals:

After four years of lull, Dishman Pharmaceutical is all set to capitalise on its capabilities in the CRAMS space and the marketable molecules (MM) business, thanks to its enhanced capacities and the up cycle in the CRAMS business.

The Dishman Pharma stock is currently trading at 5.9x FY2014E, which is a 60per cent discount to its five-year average P/E multiple and close to a 68per cent discount to Divi’s Laboratories. The valuation gap is expected to narrow on a strong operating performance and an improved financial health. Dishman Pharma is a Buy with a price target of Rs 135 (8x FY2014E EPS).

GSK Consumer:

Blue Chip GlaxoSmithKline Consumer Healthcare (GSK) is a leader in the malted food drink (MFD) market with a market share of 70 per cent. The improvement in penetration, increase in rural reach and judicious new launches would help the Glaxo achieve a sales volume growth in the range of 8-10 per cent in the MFD segment over the long run.

With a double-digit value growth in the MFD segment and a strong growth in the launched products, we expect GSK’s top line to grow at a CAGR of 16.6 per cent over CY2011-13. The strong pricing power would help it to maintain the OPM at 16-17 per cent over the same period.

Hence, GSK’s bottom line is expected to grow at a CAGR of 19.2 per cent over CY2011-13. At the current market price the stock is trading at 24.2x its CY2013E EPS of Rs120.1.

ICICI Bank:

ICICI Bank is back on growth path as its advances are growing at a healthy rate (up 17.3 per cent YoY and 3.1 per cent QoQ in Q4FY2012). ICICI Bank’s advances are expected to grow by 20 per cent CAGR over FY2012-14. This should lead to a 15 per cent CAGR growth in the net interest income in the same period.

The ICICI Bank stock trades at 1.5x FY2014E book value. The ICICI Bank is expected stock to re-rate, given the improvement in the profitability led by lower NPA provisions, a healthy growth in the core income and improved operating metrics. ICICI Bank should be bought Buy with a price target of Rs 1,110.

IRB Infrastructure:

IRB is the largest toll road BOT player in India and the second largest BOT operator in the country. It has a portfolio of 16 projects which are all toll based, together worth Rs 16,468 crore and cover 1,180km of length. Its portfolio is mostly located along the corridors with high traffic density and high growth around Mumbai and Pune.

At the current market price, the IRB Infrastructure stock is trading at 8.6x and 9.4x its FY2013 and FY2014 estimated earnings respectively and the valuations are very attractive. IRB Infrastructure can be bought with a price target of Rs 175.

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