JB Chemicals & Pharmaceuticals
Reco Price: Rs 131,
Target Price: Rs 156
JB Chemicals & Pharmaceuticals is set to show a steady growth on the back of a deeper penetration in the existing markets (prescription sales in India and aggressive sales promotion in Russia/CIS), entry into newer markets (emerging countries like South Africa, Venezuela, Romania, Australia) and launch of new products. Contract manufacturing from Lozenges with orders from Australia and European Union (EU) companies would also boost the growth as all of its manufacturing facilities are approved by the authorities of leading regulated markets, like the USFDA, UK MHRA and TGA (Australia). Given the strong free cash flow, a low debt /equity ratio of 0.2x, return on equity of 20 per cent plus and a limited capital expenditure, the company is well placed to pursue inorganic opportunities. Maintain buy.
—Sharekhan
Godrej Consumer Products
Reco Price: Rs 401,
Target Price: Rs 460
Godrej Consumer Products (GCPL) has acquired liquid detergent brand Genteel and hair wash soap brand Swastik Shikakai from Muskan Projects Pvt Ltd for an estimated Rs 50 crore. Both brands have estimated combined sales of Rs 30 crore annually, which values the deal at 1.7 times sales. The Genteel acquisition will consolidate GCPL’s market share in the liquid detergent category to 90 per cent from 76 per cent currently. Swastik would give the company a presence in the niche Shikakai-based hair wash soap segment. Besides Swastik, the only other major brand in this category is Wipro Consumer Care’s Wipro Shikakai soap. Analysts believe there would be no significant earnings impact on GCPL given the small size of the acquisition. Maintain HOLD .
—Religare
Diamond Power Infrastructure
Reco Price : Rs 197,
Target Price: Rs 297
Diamond power infra (DPIL) is the only EPC player with major captive facilities (80 per cent of the project cost) which gives the company an advantage (higher margins & lesser volatility, lower cost of carry) over other EPC player who outsources 60 to 70 per cent of the project work. With adequate liquidity in place, and experience in T&D over years DPIL will be able to monetise on $100 billionn spend in T&D sector. Moreover company has not only targeted to increase top-line but has made constant efforts to improve and sustain margins through backward integration (Conductors, EPC and cables). While long-term looks promising, in medium term PGCIL pending order finalisation, strong execution and earning surprise could act as catalyst. Initiate coverage with buy.
—Anagram
Strides Arcolab
Reco Price: Rs 420,
Target price: Rs 557
Strides Arcolab is set to transform itself from a general formulations player to a large supplier of specialty products from India. A strong product portfolio, ramp-up of recently expanded capacity and marketing tie-ups with Pfizer and GSK will drive 60 per cent EPS CAGR over CY09-12. Revenue contribution from this segment could go up from 27 per cent in CY09 to 45 per cent in CY12. The company has an impressive product pipeline in the specialty with 104 ANDA filings and 73 ANDAs awaiting approval. Besides, large manufacturing capacities are in place to support a revenue scale-up. The company's internal cash flow and debt refinancing will fund its financial commitments of US$250 million by CY12. Debt is expected to be stagnant at Rs1600 crore over CY10-12, reducing gearing from 2.6x in CY09 to 1.1x in CY12. Initiate coverage with Buy.
—Motilal Oswal
