CIPLA
Reco price: Rs 333
Target price: Rs 400
The country’s largest domestic pharma player is likely to launch a slew of new brands in 2011-12. These introductions are expected to contribute 2-3 per cent to sales for the fiscal. The research firm believes that existing brands are likely to grow 12-14 per cent, which will help its overall domestic business grow at the rate of 14-16 per cent in this fiscal. Expect an earnings per share (EPS) of Rs 14 in FY10, Rs 16.7 in FY11 and Rs 20 in FY12. The stock is trading below its historical average of 20x 1-year forward price-to-earnings (P/E) multiple. Initiate coverage with buy.
— Ambit Capital
CRISIL
Reco price: Rs 5,564
Target price: 4,800
Crisil’s adjusted net profit for the first quarter of calendar year 2010 (Q1CY10) of Rs 35.3 crore was below expectations and was driven by a sharp rise in rent expenses and forex losses. The revenues declined 3.2 per cent quarter-on-quarter (q-o-q) to Rs 140 crore as advisory and research revenues reported a decline of 32.3 per cent q-o-q and 1 per cent q-o-q respectively. The margins in rating business will also be under pressure driven by investment in new premises and lower ticket size of bank loans. At the current market price, the stock is quoting at 24.7x its CY10E (estimated) core EPS of Rs 210 and 21.6x FY11E core EPS of Rs 235. Valuations are stretched considering the slowdown in rating business and fall in margins. Change rating from hold to reduce.
— Emkay Research
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UNION BANK OF INDIA
Reco price: Rs 305
Target price: NA
The bank improved its savings deposits market share by 10 basis points (bps) in Q3FY2010 to 3.3 per cent. With improving credit demand, it has ended Q4FY2010 with advance growth of 23.3 per cent year-on-year (y-o-y), exceeding deposit growth of 22.7 per cent y-o-y. Expect current/saving accounts market share gains and improving credit-deposit (CD) ratio to drive improvement in net interest margins to 2.7 per cent in Q4FY2010. In FY2011E, expect net interest income growth of 26 per cent (one of the highest amongst peers). The current valuations capture the near-term improvement in profitability due to increasing net interest margins (NIMs) as well as structurally positive deposit franchise. Maintain Neutral.
— Angel Securities
HERO HONDA
Reco price: Rs 1,896
Target price: Rs 2,020
Hero Honda Motors’ (HHML’s) Q4FY10 recurring net income grew a strong 48.9 per cent y-o-y to Rs 599 crore owing to volume growth, 130 bps y-o-y EBITDA (earnings before interest, taxation, depreciation and amortisation) margin expansion to 17.3 per cent and lower tax rate. HHML’s revenues rose 20.4 per cent y-o-y to Rs 4,120 crore, led by a healthy 18.9 per cent volume growth. Motorcycles grew 18.1 per cent y-o-y and scooters saw 34.3 per cent y-o-y growth. The company maintained margins q-o-q on higher volumes and better product mix. Tax rate at 18.8 per cent was lower than expected on account of higher volumes from the Uttaranchal plant. The operational performance is driven by volume growth, despite cost pressures ahead. Estimates for FY11 are raised by 12.3 per cent and the research firm introduces FY12 estimates. The target price for FY12 based on P/E of 15x is Rs 2,020 per share. Maintain hold.
— ICICI Securities