COLGATE-PALMOLIVE
Reco price/date: Rs 1,217/September 4
Current/target price: Rs 1,218/Rs 1,250
Colgate-Palmolive’s (Colgate) robust volume growth is likely to remain strong through the coming quarters, owing to a rise in penetration and per capita consumption. New categories like sensitive toothpaste and mouthwash would further enhance growth and premiumisation. Analysts expect Colgate to be one of the biggest beneficiaries of Proctor & Gamble's soft stance (delayed entry into the toothpaste segment). However, analysts would watch out for HUL's new product, Pepsodent Expert Protection. Analysts like Colgate's continued focus on innovation, market stronghold and building brand equity. The stock appears to be fairly valued over the near term. Maintain 'Hold'.
Edelweiss Securities
TECH MAHINDRA
Reco price/date: Rs 821/September 5
Current/target price: Rs 831/Rs 860
Tech Mahindra has announced the acquisition of Hutchinson Global Services for an upfront investment of $87.1 million. The acquisition comes with assured revenue of $845 million over five years and is similar to captive buyouts by peers like Tata Consultancy Services and Wipro in recent years. At 0.5 times the sales, the transaction appears reasonable and is an earnings-per-share accretive deal. The move lends scale to the company's international business process outsourcing operations and fortifies its footprint in the Hutchinson group, with an opportunity to cross-sell to both new clients and Hutchinson's operations in other regions. Emkay has raised its FY13/14 pro forma earnings per share estimate for the Tech Mahindra-Mahindra Satyam combine 1.8/2.5 per cent. Maintain 'Accumulate'.
Emkay Global
THOMAS COOK INDIA
Reco price/date: Rs 56/September 3
Current/target price: Rs 58/Rs 66
The travel industry has benefited from the strong economic growth in the past decade, which led to a 14-year compounded annual growth rate (CAGR) of 10 per cent in outbound tourists from India. This trend may moderate this year, owing to the economic slowdown. However, it is unlikely to be impacted severely, keeping the structural story intact. The fact that Thomas Cook India's revenue rose 18 per cent annually in the January-June period supports this theory. The company aims to drive cost improvements by increasing internet-based delivery of products and services, and outsourcing non-core functions. Analysts factor in revenue CAGR of 12 per cent during 2011-13, driving earnings CAGR of 18 per cent during the period. Initiate with 'Buy'.
ICICI Securities
