HINDUSTAN ZINC
Reco price: Rs 126
Target price: Rs 155
Operating results were marginally better than expected, as costs did not rise as much as expected. Silver sales were in line, whereas the production number was much higher. A higher-than-expected tax rate for the quarter however, led to a two per cent EPS miss. In FY13, zinc output should be flat, but Pb and silver output should rise, though Pb concentrate purchases should continue. Hindustan Zinc Ltd (HZL) also guided to higher costs in H1-FY13 on rising strip ratio at Agucha. Silver guidance was brought down from 450 tonnes to 350 tonnes. Maintain Outperform.
Credit Suisse
BAJAJ AUTO
Reco price: Rs 1,732
Target price: Rs 1,430
Macquarie has revised downwards its volume growth assumption for Bajaj’s domestic as well as export business. The brokerage house believes the company faces a serious growth challenge in the domestic motorcycle industry, given rising competitive intensity and a demand slowdown. Headwinds for exports to Sri Lanka (35 per cent of three-wheeler and 10 per cent of two-wheeler exports) in the form of a sharp increase in import duty, and rising competition in Africa, are also likely to weigh on Bajaj’s export growth. Bajaj Auto is trading at FY13 estimated PE ratio of 15.7 times, which is a 22 per cent premium to its historical valuation. With downside risk to volume amidst rising competition, analysts expect valuations to revert towards the mean. Maintain underperform.
Macquarie Research
DB CORP
Reco price: Rs 205
Target price: Rs 230
FY12 has been characterised by low ad growth due to a slowing economy. However, the long term outlook for India’s GDP and, hence, ad revenue growth looks positive. Analysts expect the company to post an ad revenue growth of 12 per cent in FY13. At the current market price of Rs 205, the stock is trading at 19.1 times FY12 EPS and 14.3 times FY13 EPS. Analysts have valued the stock at 16 times FY13 EPS to arrive at a target price of Rs 230 implying an upside potential of 12 per cent. Maintain buy.
ICICI Securities
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GUJARAT PIPAVAV PORT
Reco price: Rs 59
Target price: Rs 75
The low trade growth in the near term provides Gujarat Pipavav Port Ltd (GPPL) not only the time to fine-tune the gaps in its infrastructure but also the time to plan further capacity. Such growth in capacity, supplemented by world leader APM-Maersk’s (APMM) parentage and superior hinterland connectivity, can become the pivotal factors driving shipping lines’ choice of GPPL as a key port. Present valuations (2.6 times CY13 Price/Book) appear rich only if we focus on the muted near-term growth. Subdued global trade conditions and Maersk’s service realignments will reduce the pace of container volume growth in CY12 and there could be consensus earnings downgrades for this year. Analysts build six per cent volume growth for CY12, but also model phase-I expansion, which is the critical value extractor of GPPL’s asset advantages. Higher operating leverage, leading to higher margins and steady cash generation, are key positives. Initiate coverage with buy.
Ambit Capital