LARSEN & TOUBRO
Reco price/date: Rs 1,069/ January 2;
Current/target price: Rs 1,036/Rs 1,050
The management does see potential risk to project finalisation due to the upcoming general elections. However, it maintains that despite this the company should be in a position to meet its target order accretion of Rs 1 lakh crore as ordering from domestic urban infrastructure projects as well as from overseas locations remains robust. Although we remain broadly positive on L&T in terms of order intake and execution, we note that the stock has given strong returns of 54 per cent from market lows. Post Q2FY14 results, the stock has rallied 23 per cent on the back of signs of domestic execution gaining momentum and improvement in gross margins. At our revised target price of Rs 1,050 (Rs 960 earlier), there is a minor downside to the stock. Downgrade to Reduce from Accumulate earlier.
BIOCON
Reco price/date: Rs 462/December 31;
Current/target price: Rs 461/Rs 560
Biocon's inspiring stock performance (25 per cent in last month) has been on account of its strong earnings growth trajectory coupled with improving visibility for future growth. Notwithstanding the outperformance, we expect further re-rating of the stock as we believe the company has multiple growth levers which are not captured in the current valuations. These include a ramp up in Rh-insulin in the emerging markets, progressive launch of biosimilar herceptin in ROW markets, improved visibility for biosimilar pipeline in US market and monetisation of its Rh-insulin and novel biologic molecule - Alzumab for advanced markets. Incorporating for these fundamental drivers, we now value the company at 20x FY15E earnings. Maintain Buy.
LUPIN
Reco price/date: Rs 917/ January 1;
Current/target price: Rs 906/Rs 1,075
The company has received the US Food and Drug Administration's (USFDA) tentative approvals of its abbreviated new drug application (ANDA) for niacin (500mg,750mg and 1,000 mg extended release tablets), which is currently marketed by Abbvie (Abbott) under brand name of Niaspan. Lupin is expected to launch these products during March 2014 (after Teva Pharmaceutical's [Teva] 180-days exclusivity terminates on March 16, 2014). Niaspan generates near $1.2 billion of annual revenue and therefore provides a significant opportunity for Lupin. Apart from Lupin, players like Sun Pharmaceutical Industries Ltd (Sun Pharma) and Barr Pharmaceuticals (Barr Pharma) are also likely to join the niacin extended release market. Estimate an incremental revenue of $29 million in Q3FY14 and $92.7 million in Q4FY14 from six key products that were launched during Q3FY14. This is apart from the addition of products like Alinia, Locoid lotion and the new strength of Antara being added to its branded products portfolio. These products are expected to give a substantial upside to its US business in H2FY14. Lupin generated $347 million of revenue in H1FY14 from the US market. We expect FY15 to be crucial for Lupin, which will see some blockbuster drugs like Nexium (market size $2.2 billion), Lunesta (market size $800 million), Namenda (market size $1.75 billion), etc getting out of the patent protection. Buy.
TATA GLOBAL BEVERAGES
Reco price/date: Rs 160/January 1;
Current/target price: Rs 154.85/Rs 168
Tata Global Beverages (TGB) has been incurring higher ad and promotion spends in the past two quarters, which has impacted its operational profitability. Prices of key inputs such as Kenyan black tea, Ceylon (Sri Lanka) teas have been range-bound in the past few months and is a positive for Tetley. Analysts expect TGB to maintain its operating margin at 10 per cent in Q3FY14 in its Indian tea business due to firm prices. Rising International coffee prices though could hit TGB's international coffee operations with higher priced inventory. However, the stock price has rallied sharply in the recent past and currently leaves very little elbow room in terms of upside, from a valuation perspective. Downgrade to Hold.
Reco price/date: Rs 1,069/ January 2;
Current/target price: Rs 1,036/Rs 1,050
The management does see potential risk to project finalisation due to the upcoming general elections. However, it maintains that despite this the company should be in a position to meet its target order accretion of Rs 1 lakh crore as ordering from domestic urban infrastructure projects as well as from overseas locations remains robust. Although we remain broadly positive on L&T in terms of order intake and execution, we note that the stock has given strong returns of 54 per cent from market lows. Post Q2FY14 results, the stock has rallied 23 per cent on the back of signs of domestic execution gaining momentum and improvement in gross margins. At our revised target price of Rs 1,050 (Rs 960 earlier), there is a minor downside to the stock. Downgrade to Reduce from Accumulate earlier.
-kotak Securities
BIOCON
Reco price/date: Rs 462/December 31;
Current/target price: Rs 461/Rs 560
Biocon's inspiring stock performance (25 per cent in last month) has been on account of its strong earnings growth trajectory coupled with improving visibility for future growth. Notwithstanding the outperformance, we expect further re-rating of the stock as we believe the company has multiple growth levers which are not captured in the current valuations. These include a ramp up in Rh-insulin in the emerging markets, progressive launch of biosimilar herceptin in ROW markets, improved visibility for biosimilar pipeline in US market and monetisation of its Rh-insulin and novel biologic molecule - Alzumab for advanced markets. Incorporating for these fundamental drivers, we now value the company at 20x FY15E earnings. Maintain Buy.
-philipcapital
LUPIN
Reco price/date: Rs 917/ January 1;
Current/target price: Rs 906/Rs 1,075
The company has received the US Food and Drug Administration's (USFDA) tentative approvals of its abbreviated new drug application (ANDA) for niacin (500mg,750mg and 1,000 mg extended release tablets), which is currently marketed by Abbvie (Abbott) under brand name of Niaspan. Lupin is expected to launch these products during March 2014 (after Teva Pharmaceutical's [Teva] 180-days exclusivity terminates on March 16, 2014). Niaspan generates near $1.2 billion of annual revenue and therefore provides a significant opportunity for Lupin. Apart from Lupin, players like Sun Pharmaceutical Industries Ltd (Sun Pharma) and Barr Pharmaceuticals (Barr Pharma) are also likely to join the niacin extended release market. Estimate an incremental revenue of $29 million in Q3FY14 and $92.7 million in Q4FY14 from six key products that were launched during Q3FY14. This is apart from the addition of products like Alinia, Locoid lotion and the new strength of Antara being added to its branded products portfolio. These products are expected to give a substantial upside to its US business in H2FY14. Lupin generated $347 million of revenue in H1FY14 from the US market. We expect FY15 to be crucial for Lupin, which will see some blockbuster drugs like Nexium (market size $2.2 billion), Lunesta (market size $800 million), Namenda (market size $1.75 billion), etc getting out of the patent protection. Buy.
-sharekhan
TATA GLOBAL BEVERAGES
Reco price/date: Rs 160/January 1;
Current/target price: Rs 154.85/Rs 168
Tata Global Beverages (TGB) has been incurring higher ad and promotion spends in the past two quarters, which has impacted its operational profitability. Prices of key inputs such as Kenyan black tea, Ceylon (Sri Lanka) teas have been range-bound in the past few months and is a positive for Tetley. Analysts expect TGB to maintain its operating margin at 10 per cent in Q3FY14 in its Indian tea business due to firm prices. Rising International coffee prices though could hit TGB's international coffee operations with higher priced inventory. However, the stock price has rallied sharply in the recent past and currently leaves very little elbow room in terms of upside, from a valuation perspective. Downgrade to Hold.
-Anand Rathi Research