Hindustan Unilever
Reco price: Rs 230
Target price: Rs 246
Continued pressure of growth in the core categories of soaps and detergents, aggressive price cuts and advertising spends now in line with other consumer companies are evidence of the daunting task that HUL is facing to regain the lost market share. While HUL’s willingness to forgo margins for market share gains is understandable, improving volume growth and recent launches and this consistency of the approach would be critical to HUL in the long run. Also, as HUL remains aggressive for want of market share gains and gross margin expansion fades off in due course of the year, profitability will remain subdued in 2010-11. While valuations are 19x FY12E earnings, HUL may offer near-term gains. Maintain neutral.
— IDFC Securities
Bharat Forge
Reco price: Rs 261
Target price: Rs 290
Bharat Forge (BFL) reported a 10.7 per cent quarter-on-quarter (q-o-q) growth in its top line to Rs 560 crore, on account of a 10 per cent sequential improvement in export revenues and 11.2 per cent q-o-q improvement in domestic revenues. Tonnage production for the quarter stood at 41,093 million tonnes (mt) compared to 36,159 mt in Q3FY10 (third quarter of 2009-10). Due to recovery in domestic volumes, better product mix and operating leverage, earnings before interest, taxes, depreciation and amortisation (Ebitda) margins improved by 160 bps q-o-q to 25 per cent. Due to lower interest cost and lower tax rate, the company reported a 51 per cent q-o-q growth in the adjusted profit after tax (PAT) at Rs 61.9 crore. Given the strong traction in the domestic commercial vehicle (CV) market and signs of a recovery in the global market, consolidated earnings would grow manifold during FY10-FY12E (estimated). The stock is trading at 24.9x its FY11E earnings respectively. Maintain accumulate.
— Prabhudas Lilladher
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Jaiprakash Associates
Reco price: Rs 118
Target price: Rs 195
Jaiprakash Associates (JPA) maintained momentum in sales of real estate projects in both standalone entity and Jaypee Infratech (JIL) by launching projects at various price points, supported by low land cost. Of the total launches, JIL sold 87.5 per cent, or 21.3 million sq ft, till end of 2009-10 (FY10. JPA commissioned around nine million tonnes per annum (mtpa) in FY10 and ended the year with an installed capacity of 22.8 mtpa. While management has maintained its guidance of 31.45 mtpa installed capacity by FY11, the cement division is valued at $100/tonne for 25.7 mtpa of installed capacity. Power business is also set to see traction with the 1,000-Mw Karcham (hydro) and 500-Mw Bina (thermal) projects set for completion in 2011. Further, the 1,320-Mw Siddhi thermal power project is on track to come on stream in 2013. Maintain buy.
— Edelweiss Securities