HCL Technologies
Reco Price: Rs 384
Target Price: Rs 419
HCL Tech’s infrastructure management services (IMS) segment recorded a compounded quarterly growth rate of 16.5 per cent for the last four quarters and the segment’s revenue contribution to the company’s total revenues at 22 per cent is much higher than that of its peers. In its latest effort to strengthen its position in IMS space, the company has announced to set up a multilingual service desk facility. The traction for new deals in IMS space also is likely to remain strong.
With stronger position the IMS space vis-à-vis its peers, HCL Tech is well placed to grab the opportunities (worth $40 billion of contracts are due for renegotiations). The stock is trading at 15.7x FY11 earnings estimate and 14.1x FY12 earnings estimate. Maintain buy.
— Sharekhan
Cummins India
Reco Price: Rs 588
Target Price: Rs 685
Cummins India (KKC) would invest Rs 150 crore each during FY11E and FY12E at its land at Phaltan (120 acres campus). The company, in the next two years, expects 50 per cent enhancement in capacity across product ranges through the Phaltan capex.
The company’s industrial segment accounts around 15-20 per cent of KKC’s revenues. Management expects 20-25 per cent growth in the overall industrial segment in FY11-12E. Brokerage revised FY11E and FY12E numbers upwards by 4 per cent and 25 per cent, respectively. KKC is currently trading at 23x and 17x, on FY11E and FY12E basis, respectively. KKCs strong market share, coupled with a massive expansion over the next two years will lead to strong 22 per cent earnings CAGR (FY10-12E). Maintain buy.
— Edelweiss Capital
Emami
Reco Price: Rs 687
Target Price: Rs 845
With Emami’s top brands are doing well and with lower raw material prices and adspend, expect the company to report 29 per cent CAGR in earnings over FY10-12. The launch of variants and its sub-segmentation strategy would grow its power brands rapidly. A stronger distribution network and larger investment in brands would also grow Zandu’s ethical portfolio.
Launches, which grew around 100 per cent last year, are key revenue drivers. With 20 per cent fall in the price of crude from its peak, prices of most Emami’s raw materials (liquid paraffin, wax and packaging material) are expected to drop. With lower raw material prices and a 70bp lower adspend-to sales ratio, expect Ebitda margin to improve 110 bps in FY11. Maintain buy.
— Anand Rathi Research
Plethico Pharmaceuticals
Current market price: Rs 380
Fair value: Rs 458
Plethico has emerged as a global player in herbal formulations and nutraceuticals. After its strategic acquisition of Natrol, US, Plethico plans to cross-sell its products to penetrate the existing markets deeper and enter new geographies. The company has earmarked a capex of Rs 200 crore for the new plant near Dubai in UAE, which will be commissioned by August 2010.
Crisil Equities expects Plethico’s revenues to grow at a three-year CAGR of 21 per cent to Rs 2,200 crore in CY12, while EPS is expected to increase from Rs 55.1 in CY09 to Rs 101.9 in CY12. Crisil Equities has used the price-to-earnings method to value Plethico. Consequently, Crisil Equities has given a valuation grade of 4/5 indicating ‘upside’ from current levels.
— Crisil Equities
