TATA MOTORS
Reco price/date: Rs 297/June 17;
Current/target price: Rs 297.10/Rs 323
Jaguar Land Rover's (JLR's) May 13 wholesale volumes have come in at 31,210 units; up four per cent y-o-y. This is slightly below our estimate of 32,000 units. However, Land Rover volumes were down six per cent y-o-y, possibly due to the run-down of volumes of Range Rover Sport ahead of the new launch. Jaguar volumes were up 62.6 per cent, which helped drive growth. We are factoring in 12.6 per cent volume growth for JLR in FY14E. There might be some concerns relating to the decline in Land Rover volumes and that may lead to a negative stock reaction. Maintain Neutral.
-Nomura Equity Research
SPECIALTY RESTAURANTS
Reco price/date: Rs 163/June 17;
Current/target price: Rs 163.80/Rs 167
We believe fine dining is the worst hit segment in the current slowdown as companies are cutting budgets with customers, reducing the frequency of eating out. The company is facing dual challenges of increasing prices to mitigate inflation that could impact demand and a drop in footfall due to the economic environment. Though the company is on track to open 15 restaurants in FY14 and FY15, we believe this will lower return ratios and delay FCF generation to FY16 on the back of lower profitability. The stock is trading at 24.8x and 19.4x FY14E and FY15E, respectively. We continue to value the company at 20x FY15E EPS of Rs 8.4 with a revised target price. Downgrade to Neutral.
-CENTRUM BROKING
J K LAKSHMI CEMENT
Reco price/date: Rs 106/June 17;
Current/target price: Rs 109/Rs 143
J K Lakshmi Cement (JKLC) is a north-India based cement player with presence in the north and west. The company has an installed capacity of 5.3 mtpa, expected to increase to 9.1 mtpa by FY15E. With the ongoing expansion, JKLC would have an all-India presence (excluding in south). We expect the return ratios to improve with the ramping up of new facilities, as free cash generated would be used to repay debt. The company is also among the most cost-efficient in the country. With capacities expected to double in the next two years, we expect JKLC to deliver above-industry volume growth while higher regional diversification could drive a potential re-rating. Buy.
-Edelweiss Securities
CROMPTON GREAVES
Reco price/date: Rs 88/June 18;
Current/target price: Rs 86.4/Rs 116
Crompton Greaves (CG), part of the Avantha Group, is leading Engineering Corporation with a presence across countries. CG finished rejig of European operations where it has downsized Belgium operations (high-cost facility) and is ramping up Hungary operations (low-cost facility: European hub for transformer). After the rejig, the brokerage expects margins to improve in FY14E to 6.4 per cent compared to 4.1 per cent in FY13. In consumer appliance, CG is leader in fans with a market share of 23.5 per cent. To sustain leadership, it is focused on raising penetration, brand enhancement and product offering. Consumer segment will continue to register a healthy growth of 17 per cent over FY13-15 on back of initiatives by the company and domestic consumption. Order backlog is Rs 9,126 cr, 0.8 times its trailing twelve month's sales. Buy.
-Kisan Ratilal Choksey Shares and Securities
