Pipavav Shipyard
Reco Price: Rs77,
Target price: Rs64
Pipavav Shipyard (Pipavav) is a play on merchant shipping. Pipavav’s key strengths are – features amongst the largest shipyards in Asia, great execution capabilities, clean balance sheet and greater focus on defence sector. However, analysts are concerned about its low orderbook, revenue visibility and inexperience in ship building. Its focus on merchant ship building comes at a time when the near-term prospects do not look inspiring. Thus, the company has revenue visibility only up till FY13. Orderbook growth will be erratic, defence orders could provide some upside. Analysts have factored in Rs 250 crore new orders from the Navy every two years. The stock may remain under pressure in the near term as lock in period for 12 per cent of holders expired in Oct’10. Initiate with sell.
—ICICI Securities
IDBI Bank
Reco Price: Rs167,
Target Price: Rs210
IDBI Bank will merge its two subsidiaries, IDBI Home Finance and IDBI Gilts. Earlier, attempts to sell the housing finance subsidiary failed as the business could not fetch required valuations. Analysts believe the merger would lead to better synergy and help in the expansion of the bank’s retail business. However, given the smaller size of the two businesses there will be no major impact of the merger on financial estimates. Recently, the bank received Rs3,119 crore capital from the government, increasing the cash reserve ratio to 14.2 per cent. The government now holds 65.14 per cent (versus 52.67 per cent) in the bank. The capital infusion will reduce the dependence of the bank on high-cost deposits, leading to an improvement in its margins. Maintain Buy.
—Sharekhan
Cipla
Reco Price: Rs 371,
Target Price: Rs 370
Media reports suggest that Cipla is close to entering an outsourcing deal with an MNC. While the management had indicated that the company may look for a partner to tap into emerging markets (EMs), it is yet to confirm the deal. However, if the deal materialises, it will be a logical extension of the company’s partnership model from the US and EU to EMs. Also, the deal will lead to an earnings upgrade for the company, as it will include milestone payments and additional sales from newer geographies. There is no other visible catalyst for Cipla’s base business. Currently, the stock is trading at a Price to earnings ratio of 23.7 times FY12e earnings - at the higher end of its historical trading band. Maintain hold.
—Religare Institutional Research
Titan Industries
Reco Price: Rs 3,695,
Target Price: Rs 3,461
Titan has 60 per cent value share in the watches market in India; penetration is only 27 per cent. Its brands (Sonata, Fastrack, Titan and Xylus) across price segments and strong network are positives. Tanishq has 50 per cent share in the branded segment. Titan is an early mover in Rs 1,500-1,800 crore (20 per cent CAGR) prescription eyewear market. Titan has launched Titan Eye+ (eyewear), Fastrack (youth watches, sunglasses and accessories), Helios (premium multibrand watch stores) and Zoya (premium jewelry) for its next leg of growth. Analysts expect Titan to emerge as a debt-free company with cash surplus of Rs 1100 crore by FY13.A 240bp margin expansion will enable 44 per cent net profit CAGR over FY10-13. Success in the Rs20b prescription eyewear segment and its Fastrack sunglasses and accessories have created another growth engine for the company. Maintain Neutral.
—Motilal Oswal Securities
