DABUR INDIA
Reco price/date: Rs 169/December 12;
Current/target price: Rs 165/Rs 195
Analysts like Dabur for volume growth that's amongst the best in the sector (10 per cent for the past seven-eight quarters), (b) robust 250 basis points margin expansion expected over FY13-FY16 led by stronger gross margins as well as operating leverage, and supporting a 20 per cent earnings CAGR, (c) ongoing recovery in international business growth/margins, and (d) reasonable valuations (post 10 per cent correction from its peak) at 26.2 times FY15 estimated earnings. Dabur is Religare's preferred mid-cap consumer staples pick. Key risks remain further slowdown in consumption, and input cost inflation resulting in lower-than-expected margin expansion. Maintain Buy.
ZEE ENTERTAINMENT
Reco price/date: Rs 290/December 17;
Current/target price: Rs 284/Rs 268
Zee Entertainment's board of directors approved a scheme of arrangement between the company and Diligent Media Corporation (DMCL) for demerger of Media Business Undertaking from DMCL to vest it into Zee Entertainment with effect from March 31, 2014. This transaction has been executed at a share exchange ratio of one preference share for every four equity shares held by DMCL shareholders, resulting in an issue of 2.23 crore redeemable non-convertible preference shares of Rs 1 a share. Preference shares would be issued for three years with a coupon rate of six per cent. The transaction would benefit Zee in tax benefits and channel licences. Maintain Hold.
JUBILANT FOODWORKS
Reco price/date: Rs 1,322/December 14;
Current/target price: Rs 1,306/Rs 1,350
Analysts believe the operating environment continues to deteriorate, with same store sales growth (SSSg) still trending lower. Analysts estimates factor in seven per cent SSSg for FY14 (versus 6.5 per cent in 1HFY14) and 16.1 per cent Ebitda margins (versus 15.8 per cent in 1HFY14). Jubilant Foodworks' current valuation (45 times 1-year forward) offers limited upside. Over the last six months, Jubilant has successfully grown faster than its peers and management has increased guidance for new stores. While execution remains robust and the opportunity still large, the six month outperformance versus Sensex and current valuations offer limited upside. Downgrade to Hold from Buy.
DHUNSERI PETROCHEM AND TEA
Reco price/date: Rs 110/December 18;
Current/target price: Rs 108/Rs 187
CRISIL Research has assigned a CRISIL IER fundamental grade of 3/5 to Dhunseri Petrochem and Tea (Dhunseri). Being a dominant PET player with a large capacity, Dhunseri is well able to cater to the increase in demand for PET. Its coming 4,20,000 TPA plant in Egypt would offer locational advantage, due to proximity to end markets and raw material sources; Dhunseri derives locational benefits from its plant in Haldia (West Bengal). However, the current over-supply of PET, forex risk, and social unrest and political instability in Egypt are key risks. Revenues are expected to grow at a two-year CAGR of 66 per cent to Rs 6,750 crore in FY15. Ebitda margin is estimated to expand by 100 bps to 7.3 per cent in FY15, driven by an improvement in PET spreads.
Reco price/date: Rs 169/December 12;
Current/target price: Rs 165/Rs 195
Analysts like Dabur for volume growth that's amongst the best in the sector (10 per cent for the past seven-eight quarters), (b) robust 250 basis points margin expansion expected over FY13-FY16 led by stronger gross margins as well as operating leverage, and supporting a 20 per cent earnings CAGR, (c) ongoing recovery in international business growth/margins, and (d) reasonable valuations (post 10 per cent correction from its peak) at 26.2 times FY15 estimated earnings. Dabur is Religare's preferred mid-cap consumer staples pick. Key risks remain further slowdown in consumption, and input cost inflation resulting in lower-than-expected margin expansion. Maintain Buy.
-Religare Capital Markets
ZEE ENTERTAINMENT
Reco price/date: Rs 290/December 17;
Current/target price: Rs 284/Rs 268
Zee Entertainment's board of directors approved a scheme of arrangement between the company and Diligent Media Corporation (DMCL) for demerger of Media Business Undertaking from DMCL to vest it into Zee Entertainment with effect from March 31, 2014. This transaction has been executed at a share exchange ratio of one preference share for every four equity shares held by DMCL shareholders, resulting in an issue of 2.23 crore redeemable non-convertible preference shares of Rs 1 a share. Preference shares would be issued for three years with a coupon rate of six per cent. The transaction would benefit Zee in tax benefits and channel licences. Maintain Hold.
- ICICI Securities
JUBILANT FOODWORKS
Reco price/date: Rs 1,322/December 14;
Current/target price: Rs 1,306/Rs 1,350
Analysts believe the operating environment continues to deteriorate, with same store sales growth (SSSg) still trending lower. Analysts estimates factor in seven per cent SSSg for FY14 (versus 6.5 per cent in 1HFY14) and 16.1 per cent Ebitda margins (versus 15.8 per cent in 1HFY14). Jubilant Foodworks' current valuation (45 times 1-year forward) offers limited upside. Over the last six months, Jubilant has successfully grown faster than its peers and management has increased guidance for new stores. While execution remains robust and the opportunity still large, the six month outperformance versus Sensex and current valuations offer limited upside. Downgrade to Hold from Buy.
- Deutsche Bank
DHUNSERI PETROCHEM AND TEA
Reco price/date: Rs 110/December 18;
Current/target price: Rs 108/Rs 187
CRISIL Research has assigned a CRISIL IER fundamental grade of 3/5 to Dhunseri Petrochem and Tea (Dhunseri). Being a dominant PET player with a large capacity, Dhunseri is well able to cater to the increase in demand for PET. Its coming 4,20,000 TPA plant in Egypt would offer locational advantage, due to proximity to end markets and raw material sources; Dhunseri derives locational benefits from its plant in Haldia (West Bengal). However, the current over-supply of PET, forex risk, and social unrest and political instability in Egypt are key risks. Revenues are expected to grow at a two-year CAGR of 66 per cent to Rs 6,750 crore in FY15. Ebitda margin is estimated to expand by 100 bps to 7.3 per cent in FY15, driven by an improvement in PET spreads.
-CRISIL Research