STERLITE INDUSTRIES
Reco price: Rs 843
Target price: Rs 892
Sterlite Industries (Sterlite) posted adjusted profit after tax, or PAT (attributable to company’s shareholders), of Rs 1,380 crore, above expectations. This was primarily on account of higher-than-expected earning before interest, tax, depreciation and amortisation (EBITDA) in the aluminium and zinc businesses and higher other income. The first unit (600 Mw) of a 2,400-Mw plant at Jharsuguda is expected to be commissioned in June 2011, with full commissioning by the end of FY11. The 210-ktpa (kilo tonnes per annum) zinc smelter at Dariba and the one-mtpa (million tonnes per annum) zinc concentrator at Rampura Agucha were commissioned during the quarter, around three months ahead of schedule. The stock trades at a price to earnings (P/E) of 12.3x and 7.9x FY11E and FY12E. Maintain accumulate.
— Prabhudas Lilladher
GMR INFRASTRUCTURE
Reco price: Rs 62
Target price: Rs 75
GMR needs to contribute around $1 billion during 2011-12 as project equity in the power and roads segment. Of this, it has raised $850 million recently through long-term debt, non-convertible debentures, convertible preference shares (CCPS) and a qualified institutional placement. Another $100-150 million through CCPS in GMR Energy (GEL) should make GMR fully-funded till FY12; after that, a likely GEL IPO and internal cash generation will finance the company’s domestic growth, feels the brokerage. DIAL’s (Delhi International Airport’s) project capex is likely to be Rs 12,700 crore, as against a forecast of Rs 10,200 crore. The negative impact on equity value should be more than offset by additional debt, likely higher regulated revenues, and higher land value. GMR’s premium valuations are supported by robust long-term growth outlook. The stock trades at 14.6x/10.0x FY13E/14E earnings per share; FY11 and FY12 earnings are modest.
— Anand Rathi Research
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MARUTI SUZUKI
Reco price: Rs 1334
Target price: Rs 1410
Maruti Suzuki India’s (MSIL) net profit of Rs 656 crore (up 74 per cent year-on-year, but down 4.5 per cent sequentially) was below consensus estimates. The variance was on account of higher-than-expected raw material cost, which led to contraction in the earnings before interest, tax, depreciation and amortisation (Ebitda) margins. Ebitda margins declined 240 basis points sequentially (at 12.5 per cent adjusted for forex translation gains), owing to high commodity inflation and costs related to change in emission norms. The brokerage maintains hold on the stock on account of benign valuations (15.4x FY10E and 14.2x FY11E earnings).
— Edelweiss Research
AUTOMOTIVE AXLES
Reco price: Rs 394
Target price: Rs 528
Automotive Axles (AAL) registered 203 per cent year-on-year growth in net sales to Rs170.3 crore and a robust jump in net profit to Rs12.6 crore for the second quarter of 2009-10 (year ending September), ahead of expectations. The company’s performance on the operating front also exceeded expectation owing to improved operating leverage. Infrastructure development, favourable regulatory policies and economic growth are some key factors that will determine growth of the commercial vehicle (CV) segment. AAL is expected to be one of the biggest beneficiaries on an anticipated higher off-take in the medium and heavy CV segment in the next couple of years. Maintain buy.
— Angel Research