MUNDRA PORT AND SEZ
Reco price: Rs 314
Current market price: Rs 309.35
Target price: Rs 315
Upside: 1.83%
Brokerage: Ambit Capital
Though the outlook for Mundra Port and Special Economic Zone’ (MPSEZ) cargo growth remains healthy, the company is exposed to risks in the medium term, given the slump in the global economic activity and trade. Lower investments could also hurt its SEZ, a growth driver for the port.
Also, the company’s large land bank (18,480 acres) has a long development schedule, estimated up to FY18. A stretched out development schedule exposes the company to significant execution risks as delays in development could impact its earnings and overall financial profile.
The broking expects the company’s volumes to grow by 19 per cent between FY09-FY12 and 11 per cent between FY12-FY16, thus increasing from 12 mtpa to 35 mtpa during this period. This growth would be supported by the soon-to-be-operational 35 mtpa coal terminal, the single-point mooring (SPM) set up by IOCL and the second SPM set up by HPCL at the port.
Over FY09E-FY12E, cargo revenues and profits are likely to grow at a CAGR of 19.5 per cent and 50.4 per cent, respectively. However, the long-term growth is factored in the recommended price. At Rs314, the stock trades at 13.6x FY10E P/E, a premium of over 11.7 per cent to the average valuations of its Asian (ports) peers.
SINTEX INDUSTRIES
Reco price: Rs 74
Current market price: Rs 74.35
Target price: Rs 112
Upside: 50.6%
Brokerage: Emkay Global Financial
Under the current economic situation, the brokerage has revised the earnings estimates and price targets for Sintex Industries. During FY08-FY11, the compounded annual growth rate (CAGR) in revenues in the monolithic construction vertical is expected to be lower at 68 per cent (versus 93 per cent estimated earlier), while in custom moulding it will be down to 8 per cent (against 30 per cent).
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Likewise, the prefabs vertical growth is estimated at 25 per cent (against 36 per cent). Overall, factoring the revised estimates for various businesses, revised CAGR in earnings would be 23 per cent during FY08-FY11E. Although there is a moderation in growth momentum, it still has enough mass and steam.
Despite the downward earnings revision and sharp drop in valuations, Sintex is categorised as a growth play. At Rs 88, the stock is trading at 3.5x FY10E earnings and 0.5x FY10E book value.
Given its strong growth prospects, healthy balance sheet and excellent track record, the brokerage has recommend ‘BUY’ with a revised target price of Rs 112 (against Rs 268 earlier)
BANK OF BARODA
Reco price: Rs 195
Current market price: Rs 193.65
Target price: Rs 315
Upside: 62.7%
Brokerage: Motilal Oswal Securities
Bank of Baroda's (BoB) inherent strengths are its large branch network, technological advancements, strong international business, extensive client base, relatively low risk loan book and clean asset quality.
Also, the management’s focus on core deposits growth, margin stability, fee income growth and NPA management make it one of the preferred bets among public-sector banks. On the flip side, the outlook is cautious for the bank’s international loans, which form 23 per cent of total loan book, which is largely to Indian companies for trade credit, M&A, ECBs, etc.
The bank's management thinks that growth rate would fall from over 30 per cent to 20 per cent going forward. It has become more selective and cautious in the international business. Incremental international loans are largely trade credit (maturity of 3-9 months) as maintaining a liquid balance sheet is the prime focus.
The broking house expects BoB’s earnings to grow at a CAGR of 4 per cent over FY09-11E. The bank is expected to report EPS of Rs 52 in FY09 and FY10. It adjusted book value (ABV) would be Rs 297 in FY09 and Rs 315 in FY10. The stock trades at 0.6x FY10 ABV and 3.7x FY10 EPS. The target price for BoB is based on 1x FY10E ABV. Maintain Buy.
CIPLA
Reco price: Rs 203
Current market price: Rs 203.3
Target price: Rs 246
Upside: 21%
Brokerage: India Infoline
Cipla is the leader in the domestic pharmaceutical market with more than 5 per cent market share. Its domestic business was one of the least affected in Q3 FY09, when the broad market slowed down significantly.
Cipla’s core earnings are expected to register a CAGR of 36 per cent over FY08-11, significantly aided by rupee depreciation and consequent margin expansion, apart from accelerated growth in volumes. Recent capacity expansion through new plants in Indore and Sikkim will contribute to volume growth along with the benefit of lower tax rates.
Also, industry reports indicate the return of growth momentum in the domestic pharmaceutical market, where Cipla has one of the strongest franchises, especially in respiratory medicine. In the long term, it can also benefit from consolidation in the domestic market.
Cipla’s unique business model of registering products in other countries and partnering with companies to market them makes it the best counter-cyclical play in the Indian pharmaceutical space.
The brokerage has raised its FY09-11 earnings estimates by 5-20 per cent and its price target to Rs 246 (15x FY10 estimated earnings) from earlier Rs 215, while highlighting one key risk viz., the potential legal liability of Rs 1,100 crore, if the company loses its lawsuit against the pharmaceutical price regulator.
MARICO
Reco price: Rs 56.65
Current market price: Rs 58.85
Target price: Rs 70
Upside: 18.9%
Brokerage: BNP Paribas Securities
Marico generates 75 per cent of its revenue from domestic business (coconut and other hair oil 48 per cent, edible oil 21 per cent, others 6 per cent), which have been largely unaffected by the current slowdown.
Marico's “Parachute” brand (31 per cent of revenue) has maintained market share (48 per cent) over the past two years, with volume growth of 11-12 per cent per annum driven by consumers shifting from loose unbranded oil. The positioning of “Saffola” edible oil (16 per cent of revenue) has been successfully transformed from a ‘curative’ product to a ‘preventive’ measure, thus driving penetration.
The company has the ability to successfully generate growth through the development of new business lines like skin care clinics and functional foods and, a growing international franchise by using its FMCG as the cash cow.
With this, Marico is expected to report strong growth in volumes along with margin expansion, on the back of falling input costs. This will drive its EPS by 22 per cent during FY09-11.
At Rs 56.65, the stock is attractively priced at 16.1x, a discount to peers at 18.7x despite a higher expected EPS growth of 22 per cent against 17 per cent for its peers. The target price is based on 20x FY10 EPS and a PEG ratio of 0.9x, which is in line with its historical four year average.
Current market price as on March 6, 2009