CUMMINS INDIA
Reco price/date: Rs 454/July 5
Current/target price: Rs 452/Rs 495
Tighter emission norms are set to be introduced mid-CY13 for low kVA gensets. The company management believes it is highly unlikely that the introduction of the new emission norms will be postponed. Management expects costs and thus, prices to go up 25-30 per cent on tightening emission norms. Margins will be under pressure in the near term as the sales mix moves towards lower kVA gensets. However, in the long-term, management expects EBIT margins to improve to the targeted 18 per cent as low kVA genset exports achieve scale and add Rs 1,000 crore to the top line by FY16. Maintain Buy.
BNP Paribas
DISH TV
Reco price/date: Rs 70/July 5
Current/target price: Rs 69/Rs 80
Effective July 1, 2012, Dish TV has raised the prices of its ‘Rest of India’ subscription pack by Rs 20 each. As a result, the price of its popular base pack will increase from Rs 180 toRs 200 (an increase of 11 per cent). Analysts are surprised by the quantum of the price rise, especially since the company’s average revenue per user (ARPU) growth guidance for FY13 was only two to three per cent. Analysts expect the hike to lead to an increase in ARPU by Rs 5-Rs 6 in a couple of quarters. Maintain Buy.
Edelweiss Securities
KEC INTERNATIONAL
Reco price/date: Rs 58/July 5
Current/target price: Rs 61/Rs 73
KEC International has announced that it has secured multiple orders for a total consideration of Rs 795 crore in the transmission and power systems business. The orders are diversified across India, Sri Lanka and Kenya. Management expects operating margin to improve by one per cent post-complete commencement of the Gujarat facility, as the company broadens its product portfolio. Management also notes that the non-transmission business’s (cable, railways and water) contribution to revenue is expected to increase (management expectation of 35 per cent of total revenue for FY13) going forward, given the low base effect.. Maintain Buy.
Angel Broking
More From This Section
ITC
Reco price/date: Rs 246/July 5
Current/Fair value : Rs 250.05/Rs 200
ITC’s stock has corrected about six per cent from its peak in the last three trading sessions, as Uttar Pradesh raised taxes on tobacco. Given state-level fiscal vulnerability, we think the risk of tax increases on tobacco has heightened and more states might see tobacco taxation as an easy option. ITC is heavily exposed to several of the states with the greatest fiscal vulnerability (on our index). ITC has increased its prices by a weighted average of Rs 12 per cent post the FY13 budget, which should be sufficient to offset the excise duty increase of Rs 20 per cent in FY13. UP tax increases would warrant a further two per cent price increase, according to our estimates. We advise investors to look for defensiveness elsewhere where earnings growth estimates may be higher and risk around regulatory and pricing issues lower. Reiterate Sell.
Espírito Santo Investment Bank Research