BANK OF MAHARASHTRA
Reco price/date: Rs 54/June 11;
Current/target price: Rs 52.5/Rs 76
Bank of Maharashtra (BoM), a small western India-based state-owned bank, has made use of its strong growth in pre-provision profits in the past two years to create a significant cushion, which would enable it to report significant net earnings growth for the next two years. With improving fundamentals, fading stress on asset quality and higher-than-industry average growth, it has factored in strong earnings CAGR of 45.3 per cent over FY13-FY15E and RoA and RoE improvement of 28 basis points and 590 basis points at 1.0 per cent and 21.4 per cent, respectively, over FY13-FY15E. With limited institutional interest, the brokerage house believes BoM's current valuation does not reflect the improvement in its fundamentals. The brokerage has assigned a Buy rating to the stock with a target price of Rs 76, valuing it at 1.7 times FY14 estimated adjusted book value and 0.9 times FY14 estimated book value. Buy
GABRIEL INDIA
Reco price/date: Rs 19/June 11;
Current/target price: Rs 18.85/Rs 27
Shrinking demand across most automobile segments weighed on Gabriel's Q4 results. Its FY13 revenue grew 6.8 per cent y-o-y; its Q4 revenue was up 3.9 per cent y-o-y. The Q4FY13 EBITDA margin was 6.4 per cent and, due to depressed demand conditions, did not replicate the normal trend of a sharp q-o-q uptick in Q4, unlike in previous years. Additions to the customer base, exports and steady replacement sales are future growth drivers. We maintain a buy, with a price target of Rs 27 (at a PE of 7x Sep'14e; the present PE is 6x FY14e). Risks include inadequate price hikes by OEMs, increase in commodity prices, prolonged demand slump and delay in ramp-up by HMSI. Maintain Buy.
WOCKHARDT
Reco price/date: Rs 1,201/June 11;
Current/target price: Rs 1,081/Rs 1,680
The health ministry has recommended the sale of Dextropropoxyphene (pain reliever) in India be stopped. These are in India by the names of Proxyvon (Wockhardt), Corbutyl (Sanofi), Parvon (Jagson Pal), Dexovon (USV) and Sudhinol (Ranbaxy), etc. Risk cited is if patients use the medicine for a prolonged time, they could become addicted to the drug. For WPL, this brand in India had annual sales of Rs 1.5bn. Given this drug historically was under price control, the gross margin of the product would be less than 50 per cent. While the current stock can be sold, companies selling this drug class will have to stop further production till the time relief is provided by the regulator. We expect this to impact our FY14E EPS by four per cent. Maintain Outperformer
EXIDE INDUSTRIES
Reco price/date: Rs 131/June 10;
Current/target price: Rs 130.5/Rs 140
The brokerage expects four wheeler replacement demand to remain robust over FY13-15E, reflecting strong FY10-11 OEM volumes driving 16.1 per cent anually in auto segment revenue (60 per cent of revenue). Besides, power back-up segment is to drive 13.9 per cent growth in industrial revenue. It estimates Exide's margin to expand by 140 basis points over FY13-15E to 14.4 per cent in FY15E (but lower than the FY10-12 average margin of 18.7 per cent), driving 21 per cent EBITDA and PAT CAGR over FY13-15E. Significant capacity addition by Amara Raja (40 per cent increase) by FY15 though would restrict Exide's margin expansion, we expect a recovery in its profitability led by OEM demand recovery from second half of FY14 and continued strength of four wheeler replacement demand. Valuation at 12.8 times FY15 estimated EPS (ex Insurance valuation) though captures the positive operating performance outlook. Neutral.
Reco price/date: Rs 54/June 11;
Current/target price: Rs 52.5/Rs 76
Bank of Maharashtra (BoM), a small western India-based state-owned bank, has made use of its strong growth in pre-provision profits in the past two years to create a significant cushion, which would enable it to report significant net earnings growth for the next two years. With improving fundamentals, fading stress on asset quality and higher-than-industry average growth, it has factored in strong earnings CAGR of 45.3 per cent over FY13-FY15E and RoA and RoE improvement of 28 basis points and 590 basis points at 1.0 per cent and 21.4 per cent, respectively, over FY13-FY15E. With limited institutional interest, the brokerage house believes BoM's current valuation does not reflect the improvement in its fundamentals. The brokerage has assigned a Buy rating to the stock with a target price of Rs 76, valuing it at 1.7 times FY14 estimated adjusted book value and 0.9 times FY14 estimated book value. Buy
-Nirmal Bang Equities
GABRIEL INDIA
Reco price/date: Rs 19/June 11;
Current/target price: Rs 18.85/Rs 27
Shrinking demand across most automobile segments weighed on Gabriel's Q4 results. Its FY13 revenue grew 6.8 per cent y-o-y; its Q4 revenue was up 3.9 per cent y-o-y. The Q4FY13 EBITDA margin was 6.4 per cent and, due to depressed demand conditions, did not replicate the normal trend of a sharp q-o-q uptick in Q4, unlike in previous years. Additions to the customer base, exports and steady replacement sales are future growth drivers. We maintain a buy, with a price target of Rs 27 (at a PE of 7x Sep'14e; the present PE is 6x FY14e). Risks include inadequate price hikes by OEMs, increase in commodity prices, prolonged demand slump and delay in ramp-up by HMSI. Maintain Buy.
-Anand Rathi Institutional Research
WOCKHARDT
Reco price/date: Rs 1,201/June 11;
Current/target price: Rs 1,081/Rs 1,680
The health ministry has recommended the sale of Dextropropoxyphene (pain reliever) in India be stopped. These are in India by the names of Proxyvon (Wockhardt), Corbutyl (Sanofi), Parvon (Jagson Pal), Dexovon (USV) and Sudhinol (Ranbaxy), etc. Risk cited is if patients use the medicine for a prolonged time, they could become addicted to the drug. For WPL, this brand in India had annual sales of Rs 1.5bn. Given this drug historically was under price control, the gross margin of the product would be less than 50 per cent. While the current stock can be sold, companies selling this drug class will have to stop further production till the time relief is provided by the regulator. We expect this to impact our FY14E EPS by four per cent. Maintain Outperformer
-Macquarie Equities Research
EXIDE INDUSTRIES
Reco price/date: Rs 131/June 10;
Current/target price: Rs 130.5/Rs 140
The brokerage expects four wheeler replacement demand to remain robust over FY13-15E, reflecting strong FY10-11 OEM volumes driving 16.1 per cent anually in auto segment revenue (60 per cent of revenue). Besides, power back-up segment is to drive 13.9 per cent growth in industrial revenue. It estimates Exide's margin to expand by 140 basis points over FY13-15E to 14.4 per cent in FY15E (but lower than the FY10-12 average margin of 18.7 per cent), driving 21 per cent EBITDA and PAT CAGR over FY13-15E. Significant capacity addition by Amara Raja (40 per cent increase) by FY15 though would restrict Exide's margin expansion, we expect a recovery in its profitability led by OEM demand recovery from second half of FY14 and continued strength of four wheeler replacement demand. Valuation at 12.8 times FY15 estimated EPS (ex Insurance valuation) though captures the positive operating performance outlook. Neutral.
-Motilal Oswal Securities