BAJAJ AUTO
Reco price/date: Rs 1,932/Dec 24;
Current/target price: Rs 1,981/Rs 2,500
Bajaj Auto domestic franchise has weakened over the past few quarters as Honda has aggressively targeted the executive segment. Analysts believe Bajaj Auto has to take a re-look at its positioning in the executive segment, where it has lost considerable market share. Analysts believe pricing could play a key role in regaining market share, as its executive-segment brand is not as strong as the premium segment. Export market share in the motorcycle segment is rising sharply, likely to aid profitability. Attractive valuations, strong free cash yield and strong recovery in the export business are key positives. Maintain buy.
TATA COMMUNICATIONS
Reco price/date: Rs 294/Dec 23;
Current/target price: Rs 296/Rs 340
Tata Communications expects wholesale voice growth of mid to high single digits. In wholesale voice, the focus is more on free cash flows than Ebitda margins. On the data side, historically the business has grown at 15 per cent which can be the trend line along with 20 per cent margin. Notably, if one adjusts for new initiatives (like ATMs), data margins have much higher potential. Neotel has turned around at the Ebit level since Q4 FY13 and Tata Comm remains in discussion with Vodacom to sell its entire stake in the South African arm; if successful, the deal would remove a key overhang on consolidated profitability. Upgrade to Buy.
BATA INDIA
Reco price/date: Rs 1,026/Dec 20;
Current/target price: Rs 1,055/Rs 1,170
Demand environment remains robust and analysts expect nine per cent same-store sales growth in Q4CY13. A comprehensive loyalty programme and a new advertisement campaign through a recent tie-up with DDB Mudra in the offing. Bata plans to partially invest gains from better scale, mix improvement in new consumer initiatives. It plans to add 100 new stores every year; could revise target upwards if the economy improves. Analysts believe Bata is taking the right steps towards strengthening its share in the Indian footwear market. Analysts value Bata at 25 times CY15 estimated EPS of Rs 46.8. Maintain Buy.
PERSISTENT SYSTEMS
Reco price/date: Rs 1,008/Dec 23;
Current/target price: Rs 997/Rs 955
Persistent System's management continues to focus on leveraging on its SMAC capabilities. But, it highlighted that low penetration in the services business among enterprise customers was a challenge and a potential growth driver. The management intends to build a balanced product portfolio by acquiring products at various stages of the life-cycle. Overall, Persistent appears well-positioned to expand above the industry average, given its strength in emerging technologies. However, current valuations already discount the high growth potential. Its stock price has more than doubled over the last six months and is now trading at over 30 per cent premium to its five-year historical average P/E multiple and at a 20 per cent premium to its Tier-II peers. Maintain Sell.
Reco price/date: Rs 1,932/Dec 24;
Current/target price: Rs 1,981/Rs 2,500
Bajaj Auto domestic franchise has weakened over the past few quarters as Honda has aggressively targeted the executive segment. Analysts believe Bajaj Auto has to take a re-look at its positioning in the executive segment, where it has lost considerable market share. Analysts believe pricing could play a key role in regaining market share, as its executive-segment brand is not as strong as the premium segment. Export market share in the motorcycle segment is rising sharply, likely to aid profitability. Attractive valuations, strong free cash yield and strong recovery in the export business are key positives. Maintain buy.
-Kotak Institutional Equities
TATA COMMUNICATIONS
Reco price/date: Rs 294/Dec 23;
Current/target price: Rs 296/Rs 340
Tata Communications expects wholesale voice growth of mid to high single digits. In wholesale voice, the focus is more on free cash flows than Ebitda margins. On the data side, historically the business has grown at 15 per cent which can be the trend line along with 20 per cent margin. Notably, if one adjusts for new initiatives (like ATMs), data margins have much higher potential. Neotel has turned around at the Ebit level since Q4 FY13 and Tata Comm remains in discussion with Vodacom to sell its entire stake in the South African arm; if successful, the deal would remove a key overhang on consolidated profitability. Upgrade to Buy.
-IIFL
BATA INDIA
Reco price/date: Rs 1,026/Dec 20;
Current/target price: Rs 1,055/Rs 1,170
Demand environment remains robust and analysts expect nine per cent same-store sales growth in Q4CY13. A comprehensive loyalty programme and a new advertisement campaign through a recent tie-up with DDB Mudra in the offing. Bata plans to partially invest gains from better scale, mix improvement in new consumer initiatives. It plans to add 100 new stores every year; could revise target upwards if the economy improves. Analysts believe Bata is taking the right steps towards strengthening its share in the Indian footwear market. Analysts value Bata at 25 times CY15 estimated EPS of Rs 46.8. Maintain Buy.
-MOSL
PERSISTENT SYSTEMS
Reco price/date: Rs 1,008/Dec 23;
Current/target price: Rs 997/Rs 955
Persistent System's management continues to focus on leveraging on its SMAC capabilities. But, it highlighted that low penetration in the services business among enterprise customers was a challenge and a potential growth driver. The management intends to build a balanced product portfolio by acquiring products at various stages of the life-cycle. Overall, Persistent appears well-positioned to expand above the industry average, given its strength in emerging technologies. However, current valuations already discount the high growth potential. Its stock price has more than doubled over the last six months and is now trading at over 30 per cent premium to its five-year historical average P/E multiple and at a 20 per cent premium to its Tier-II peers. Maintain Sell.
-ambit capital