Bosch Ltd
Reco price: Rs 3,725
Current market price: Rs 3,725
Target price: Rs 4,336
Upside: 16.4%
Brokerage: Angel Broking
For Q2 CY09, Bosch clocked 13.4 per cent year-on-year (y-o-y) growth in net sales to Rs 1,221 crore, which came on the back of 12.4 per cent y-o-y growth in auto segment and 18.5 per cent y-o-y growth registered by other businesses.
The company’s bottomline, which grew 33.8 per cent y-o-y to Rs 220 crore, was boosted by higher other income of Rs 114.6 crore (Rs 36.3 crore in Q2 CY08) and net un-allocable gains of Rs 70.3 crore (Rs 1 crore in Q2 CY08). Net profit margins improved by 173 bps y-o-y to 16.5 per cent during the quarter.
Currently, industry valuations are subdued as earnings are under pressure due to the sluggish demand. However, newer growth opportunities are emerging for Bosch, with investments in new and innovative technologies like Common Rail System (CRS) and Gasoline System.
In CY07, Bosch sold 1,01,000 CRS in India; the number is expected to touch a high of 1.3 million in CY10 and hit the two-million mark by CY13. At Rs 3,725, the stock is quoting at 17.4x CY09E earnings, which is reasonably lower than its historical five-year average P/E of 22x.
Based on DCF methodology, the target price works out to Rs 4,336, at which the stock would trade at 20x in line with its one-year P/E band of 20-24x.
HDIL
Reco price: Rs 46
Current market price: Rs 452
Target price: Rs 976
Upside: 115.9%
Brokerage: Religare Securities
Housing Development & Infrastructure Ltd’s (HDIL) Q1 FY09 revenue increased 28.6 per cent y-o-y to Rs 570 crore, as the company booked sales on projects covering 0.5 million square feet (msf) and on land development rights of 5.5 msf.
A dominant share of commercial and Slum Rehabilitation Scheme (SRS) projects saw EBITDA margin surge to 85 per cent in Q1 FY09 (54 per cent in Q1 FY08) and PAT increased by 57 per cent y-o-y to Rs 318 crore.
Work on the Mumbai airport SRS project has begun during the quarter, with 53 acres of land acquired from IL&FS for rehabilitation of existing occupants. The first phase is expected to be completed in 18-24 months, during which HDIL will develop 6-8 msf of rehabilitation area with simultaneous construction of 5 msf of saleable area.
HDIL has 22 ongoing projects aggregating to 88 msf, of which 81 per cent are in the Mumbai Metropolitan Region. The management expects to complete both planned and under-construction activity over the next six to seven years. In light of increased debt exposure during the quarter and market risk of the airport project, the brokerage has revised the FY09E and FY10E earnings. It has also assigned a lower value to the company’s airport project and the core construction business, and thus lowered the price target to Rs 976 (Rs 1,334 earlier).
HDFC Bank
Reco price: Rs 1,032
Current market price: Rs 1,092.50
Target price: Rs 1,327
Upside: 21.5%
Brokerage: Prime Broking
HDFC Bank reported a PAT growth of 44.6 per cent y-o-y to Rs 464.4 crore over an increase of 48.7 per cent y-o-y in operating income to Rs 2,316.9 crore in Q1 FY09; includes financials of Centurion Bank of Punjab (CBoP), which was merged with HDFC Bank effective May 23, 2008.
NII grew by 74.9 per cent y-o-y and NIMs increased to 4.1 per cent as compared to 4.4 per cent in Q1FY08. The bank's gross NPAs increased to 1.5 per cent (about Rs 1,500 crore) from 1.3 per cent the previous quarter and net NPAs increased to 0.5 per cent (about Rs 500 crore) from 0.4 per cent. This is largely on account of the merger with CBoP.
The recently acquired network of over 400 CBoP branches, the expanded coverage across 444 cities plus the higher client base will help HDFC Bank strengthen its market share among private banks. However, in the short term, the lower credit offtake, coupled with the cleanup of the CBoP balance sheet will play itself out.
Although the bank has re-priced its asset book, the hike in policy rates in addition to the lower current and savings account (CASA) of 44 per cent are likely to push NIMs downwards to 3.9 per cent in FY10E. Based on a P/ABV multiple of 3.0x, the brokerage has downgraded its recommendation on the stock to a Buy with a price target of Rs 1,327 (Sep 2009).
Glenmark Pharmaceuticals
Reco price: Rs 677
Current market price: Rs 661.50
Target price: Rs 797
Upside: 20.5%
Brokerage: IL&FS Investsmart
Glenmark Pharmaceuticals (Glenmark) reported consolidated revenues of Rs 461 crore (up 31.2 per cent y-o-y) and earnings of Rs 115 crore (up 102 per cent y-o-y) in Q1 FY09. The highlight of the quarter was a strong performance in the US generics market, where Glenmark registered sales of $45.86 million (up 131 per cent y-o-y).
Glenmark and its partners have 33 products in the US market; they also have another 35 products awaiting FDA approval. Further, the company has filed three FTF para IV applications with the US FDA till date.
Melogliptin (GRC 8200), the DPP-IV inhibitor for diabetes, has completed phase IIA trials and is currently undergoing phase IIB trials; Glenmark expects to enter phase III for Melogliptin in H2 CY09.
Also, Glenmark had received the global rights back for Melogliptin from Merck Serono; the company is in discussion with other potential partners and hopes to conclude over the next 6-12 months. At Rs 677, the stock is trading at a P/E of 23x and 16.6x its FY09E and FY10E earnings respectively. Maintain Buy with a price target of Rs 797.
UTV Software Communications
Reco price: Rs 765
Current market price: Rs 770.35
Target price: Rs 873
Upside: 13.3%
Brokerage: Kotak Securities
UTV Software Communications (UTV) posted revenues of Rs 135.8 crore in Q1 FY09, a growth of 142.6 per cent y-o-y and de-growth of 27.4 per cent q-o-q. Growth was driven by the movies segment that grew multi-fold to Rs 93.1 crore.
Adjusted net profit grew 119 per cent y-o-y and 6 per cent q-o-q to Rs 19.9 crore. Overall, financials are not strictly comparable post consolidation of India Games (IG) and Ignition, which are reported in the 'Interactive' segment.
UTV had one production (Aamir) in addition to revenues from its earlier releases (Race and Jodha Akbar) accounted in the current quarter, which resulted in the EBIT margin increase to 24 per cent (6 per cent in Q4 FY08).
UTV’s movie slate for FY09 include releases like Fashion, Dilli 6 and Mr & Mrs. Khanna. UTV has launched four channels in the recent past that have got off to a sober start in terms of popularity ratings.
At Rs 765, the stock is trading at 27x standalone FY09E earnings. The brokerage has given a price target of Rs 873 and has maintained its ‘Hold’ rating on the stock, pending greater visibility on FY10E earnings.
Increased traction in business post the Disney relationship (it is a co-promoter at 32 per cent stake), likely significant upsides from gaming business (expected to kick-in only in FY10E) and/or impact of any inorganic moves, given the company's cash balance, have not been factored in the stock’s valuations.
Current market price as on July 30, 2008
