AUROBINDO PHARMA
Reco price/date: Rs 184/August 20;
Current/target price: Rs 185/290
Reiterate high conviction buy rating for Aurobindo Pharma (APL) with a revised target price of Rs 290 from Rs 254 due to its excellent performance during the quarter. Our target price is based on 9x FY15E EPS of Rs 32.2, an upside of 57.6 per cent over the current market price. The company achieved 90 per cent YoY growth in US formulation revenues. It is likely to benefit from a product basket of over 100 injectables for the US market. We have revised our EPS estimates downwards by six per cent for FY14 due to Rs 172 crore mark to market losses and increased our FY15 estimates upwards by nine per cent due to expected margin improvement.
Maintain Buy
-Centrum Research
BHARTI AIRTEL
Reco price/date: Rs 317/August 19;
Current/target price: Rs 318/450
The Bharti stock has declined by eight per cent this month, underperforming the Sensex by three per cent due to concerns around a sharp depreciation in the rupee. The market reaction could be over-done; even a 10 per cent depreciation impacts Bharti's fair value by only Rs 15 a share in the worst case as liabilities increase Rs 5,900. The actual impact on Bharti's valuation is moderate as the Africa business is acting as a natural hedge. We estimate Bharti's Africa currency basket to have depreciated by only two per cent quarter to date versus the dollar as compared to five per cent for the rupee. Assuming a five per cent depreciation in the Africa currency basket and 10 per cent depreciation in rupee versus dollar, the net valuation impact is only Rs 9.4 a share. The stock trades at EV/Ebitda of 7.3x FY14 and 5.9x FY15.
Maintain Buy
-Motilal Oswal Securities
JINDAL STEEL AND POWER
Reco price/date: Rs 213/August 19;
Current/target price: Rs 221/250
The management expects a 60-70 per cent growth in FY15E Ebitda at Rs 11,000-12,000 crore on the back of a full-year contribution from 2.5-mtpa Angul steel plant, 2,400-Mw expansion in Jindal power and 2-mtpa steel capacity in Oman. In the near term, share buyback would lend support to the stock. However, the mining lease of the Utkal B/1 coal mine would hold the key for the stock's performance in the longer run. We value the stock at Rs 250, EV/Ebitda of 5x steel earnings and DCF for JPL valuation. Our price target has an upside risk of Rs 30 a share on account of Utkal B-1 mine clearance. We have seen better earnings quality, judicious capital allocation and the valuations are attractive.
Accumulate
-Prabhudas Liladher
NATCO PHARMA
Reco price/date: Rs 620/August 20;
Current/target price: Rs 611.35/704
We are positive on the company, considering its healthy pipeline of niche products in the US market, which would attract huge cash flows. In its base business, we expect it to register 11.1 per cent revenue and 18 per cent adjusted PAT CAGRs over FY13-15. The company recently received a favourable verdict from the Federal Circuit Court regarding Copaxone (Glatiramer Aceate), which would most likely allow it to launch the product in May 2014, with its partner Mylan depending upon the U S Food and Drug Administration approval. We value the Copaxone opportunity at Rs 287 a share.
Maintain Buy
-ANAND RATHI Research
