CADILA HEALTHCARE
Reco price/date: Rs 785/ December 30;
Current/target price: Rs 799.45/ Rs 908
With a higher revenue share in domestic business, limited competition product launches in the US and pick-up in JV businesses, expect a sharp improvement in margins with 200 bps expansion (against 100 bps earlier) for FY15E. This, coupled with the decline in capex intensity going forward (to be directionally lower, as per the management), expect return on equity/ return on capital employed to improve by 260bps/220bps, respectively, over FY13- FY15E. Upgraded rating on the stock to Buy (from Hold earlier) with a revised target price of Rs 908 (from Rs 728 earlier). Buy.
TATA GLOBAL BEVERAGES
Reco price/date: Rs 160/ January 1;
Current/target price: Rs 160.25/ Rs 168
Tata Global Beverages' (TGB) international operations, housed in Tetley, comprises 45 per cent of its turnover and 28 per cent of EBIDTA. A disproportionately large portion of the tea sold by Tetley consists of black tea largely sourced from Kenya. Prices of Kenyan black tea have been trading in a band of US$ 2.1-2.2/kg this quarter. Even Ceylon (Sri Lanka) teas, comprising 10% of Tetley's raw material, have been range-bound at US$3.6-3.7/kg during the period. This is positive for Tetley as stable raw material prices are a harbinger of decent profitability, especially in the face of intensifying competition and declining volumes in the international, branded black tea market. TGB's domestic and international coffee businesses have been going from strength to strength, on account of a reinvigorated product portfolio and volume growth due to better distribution. Downgrade to HOLD.
GATEWAY DISTRIPARKS
Reco price/date: Rs 138/ December 31;
Current/target price: Rs 140/ Rs 178
Gateway Distriparks (GDL) has appreciated by close to 40 per cent in the last three months. In addition to the improving macro data-points, the move to unlock the value in its subsidiaries (especially the cold chain business, Snowman, through a possible public offering) has gone down well with investors. GDL, a leading and well managed logistics company, would benefit from any possible uptick in its core business (driven by export import trades) and is the preferred pick in the logistics sector. Thus, maintain Buy recommendation on the stock with a price target of Rs 178 (due to the rollover of valuations). Maintain BUY.
SOBHA DEVELOPERS
Reco price/date: Rs 313/ December 31;
Current/target price: Rs 319.95/ Rs 475
Management recognizes the super-luxury high-ticket product is a slow-moving affair (with exhaustion of the sub- Rs 1 crore product) and hence plans to launch lower variable products to maintain current volumes (protecting realisations) in Bangalore. Realising the increasing competition and hence evaluating to reintroduce the 'Dream' series like apartments to push for further volume growth and consistent (one at a time) growth in new markets to work towards consolidated volume growth. Expect debt to increase in the next two years as Sobha will fund its capex projects, but remain comfortable with strong sales in its residential vertical. Reiterate Buy.
Reco price/date: Rs 785/ December 30;
Current/target price: Rs 799.45/ Rs 908
With a higher revenue share in domestic business, limited competition product launches in the US and pick-up in JV businesses, expect a sharp improvement in margins with 200 bps expansion (against 100 bps earlier) for FY15E. This, coupled with the decline in capex intensity going forward (to be directionally lower, as per the management), expect return on equity/ return on capital employed to improve by 260bps/220bps, respectively, over FY13- FY15E. Upgraded rating on the stock to Buy (from Hold earlier) with a revised target price of Rs 908 (from Rs 728 earlier). Buy.
-Nirmal Bang
TATA GLOBAL BEVERAGES
Reco price/date: Rs 160/ January 1;
Current/target price: Rs 160.25/ Rs 168
Tata Global Beverages' (TGB) international operations, housed in Tetley, comprises 45 per cent of its turnover and 28 per cent of EBIDTA. A disproportionately large portion of the tea sold by Tetley consists of black tea largely sourced from Kenya. Prices of Kenyan black tea have been trading in a band of US$ 2.1-2.2/kg this quarter. Even Ceylon (Sri Lanka) teas, comprising 10% of Tetley's raw material, have been range-bound at US$3.6-3.7/kg during the period. This is positive for Tetley as stable raw material prices are a harbinger of decent profitability, especially in the face of intensifying competition and declining volumes in the international, branded black tea market. TGB's domestic and international coffee businesses have been going from strength to strength, on account of a reinvigorated product portfolio and volume growth due to better distribution. Downgrade to HOLD.
-Anand Rathi
GATEWAY DISTRIPARKS
Reco price/date: Rs 138/ December 31;
Current/target price: Rs 140/ Rs 178
Gateway Distriparks (GDL) has appreciated by close to 40 per cent in the last three months. In addition to the improving macro data-points, the move to unlock the value in its subsidiaries (especially the cold chain business, Snowman, through a possible public offering) has gone down well with investors. GDL, a leading and well managed logistics company, would benefit from any possible uptick in its core business (driven by export import trades) and is the preferred pick in the logistics sector. Thus, maintain Buy recommendation on the stock with a price target of Rs 178 (due to the rollover of valuations). Maintain BUY.
-Sharekhan
SOBHA DEVELOPERS
Reco price/date: Rs 313/ December 31;
Current/target price: Rs 319.95/ Rs 475
Management recognizes the super-luxury high-ticket product is a slow-moving affair (with exhaustion of the sub- Rs 1 crore product) and hence plans to launch lower variable products to maintain current volumes (protecting realisations) in Bangalore. Realising the increasing competition and hence evaluating to reintroduce the 'Dream' series like apartments to push for further volume growth and consistent (one at a time) growth in new markets to work towards consolidated volume growth. Expect debt to increase in the next two years as Sobha will fund its capex projects, but remain comfortable with strong sales in its residential vertical. Reiterate Buy.
-Kotak Institutional Equities