| Barring toilet soaps and processed foods, the company registered double-digit sales growth in most other key categories. |
| "The trend of decline in HLL's profits has reversed during this quarter. While the operating profit has increased only 4.7 per cent y-o-y, it is up by 33.4 per cent on a sequential basis. With higher treasury gain and lower interest cost, the recurring profit grew 17.2 per cent to Rs 300 crore," the report adds. |
| They expect the trend of improvement in performance to continue in the subsequent quarters. The stock appears to be fairly valued at CY05E P/E of 28.5x. |
| The growth in the company is due to the anniversary impact of price cuts in shampoos and detergents, increase in realisations on back of price hikes in home & personal care segment, beneficial impact of VAT, market share gains and refilling of inventory with distributors. |
| Sun Pharma: Upside potential |
| Enam Securities has graded Sun Pharmaceuticals as outperformer relative to the sector at Rs 616. The target price is Rs 668 with an eight per cent potential upside. The company has acquired a raw material and dosage form manufacturing facility in Hungary from Valeant Pharmaceuticals International, US. |
| The report states that the acquisition would facilitate Sun's entry into European generic market, complementing its existing UKMHRA approved plant in India. The transaction is in keeping with its strategy of acquiring cheap assets and restructuring them to turn a profit, using any tax shield available to reduce its own tax burden. |
| However, such small deals, although of incremental value, may not really boost turnover appreciably. The report adds, "We believe Sun Pharma would be easily able to finance the acquisition. The stock trades at 23.2x FY06 and 18.9x FY07 estimated earnings." |
| GlaxoSmithKline: Premium valuation |
| Refco Global Research grades GSK Pharma as the market outperformer at Rs 882. "We believe that higher growth for strategic brands, aggressive new launches and the sale of Mulund and Bangalore properties have positive implications for the company. On the other hand, possibility of price controls on patented products will de-rate the stock. We believe that the merged entity deserves premium valuations due to strong parentage," said the report. |
| GSK Pharma is currently valued at 25.6x at CY05E and 20x CY06E earnings. The report attaches a target multiple of 22x CY06E earnings for the merged entity implying an appreciation of 10 per cent from current levels. |
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