GODREJ CONSUMER PRODUCTS
Reco price/date: Rs 723/January 28
Current/target price: Rs 722/NA
Godrej Consumer Products (GCPL) has entered into an agreement with private equity firm Creador to divest its non-core food business in Indonesia. GCPL's food business in Indonesia includes cereals, snack and instant food products under the brands Simba and Turbo. GCPL had acquired these businesses in 2010, as a part of its deal to acquire the Megasari group in 2010. GCPL's Indonesian food businesses generated net sales of about $22 million in 2012. Although GCPL has not disclosed the deal, media reports place the value of the deal at $30-34 million. Analysts believe this decision by GCPL would enable it to focus on its core home and personal care business. Analysts expect the company's profit margins to improve and result in better return ratios. Maintain Neutral.
ASHOK LEYLAND
Reco price/date: Rs 25/January 28
Current/target : Rs 25/ Rs 23
Amid low M&HCV volume and margin profile, analysts cut their FY13, FY14 and FY15 EPS by 25, 20 and 24 per cent to Rs 1.1, Rs 2.3 and Rs 2.9, respectively. Currently, the stock trades at 10.8 times FY14 and 8.7 times FY15 estimated earnings. Analysts expect near-term pressure on the stock amid ongoing slowdown in M&HCV segment. However, in view of attractive dividend yield at the current market price and likely to recovery in M&HCV segment in second half of FY14, analysts are comfortable on the current valuation. Downgrade to HOLD from BUY.
SKS MICROFINANCE
Reco price/date: Rs 164/Jan 25
Current/target: Rs 165/ Rs 186
SKS Microfinance's stock has moved up 119 per cent since its QIP in July 2012 on the back of greater clarity on funding and a better regulatory environment. In its Q3 results, the company has delivered a marginal profit, through higher than expected cost cuts and one-off cost savings, which drove a five per cent increase in analysts' profit forecasts from FY15. Given Q3 results were in line with analysts' expectations and the improved visibility on loan growth, analysts have increased its fair value to Rs 186 (from Rs 144). Analysts expect further upside once the microfinance bill is passed and the company sees some recoveries in its Andhra portfolio. Maintain Buy.
