SOBHA DEVELOPERS
Reco price/date: Rs 308/October 16;
Current/target price: Rs 301/Rs 426
Sobha differentiates itself with its execution, which has enabled it to grow rapidly while maintaining a healthy cash flow and improving return ratios. It offers a combination of judicious capital allocation, a high dividend payout ratio, a healthy dividend yield, moderate leverage, a flexible business model with a proven ability to grow through an in-house land bank and the joint development route, substantial land bank and exposure to healthy southern markets. Sobha has fallen Rs 20 per cent year to date and lagged the Sensex (25 per cent), largely in reaction to macroeconomic fears. Valuations now look attractive at Rs 6.5x EV/Ebitda with a 17 per cent Ebitda CAGR, imply an EV of Rs 4,500 crore for land bank of Rs 2,600 acres, i.e. Rs 180 lakh/acre. Sobha's land bank has become even more valuable with the Land Acquisition Bill raising acquisition costs three-six times. Our NAV-based target price values of ongoing and future projects and the land bank; 22% of gross NAV is from the ongoing projects. Buy
-Citi Research
BOSCH
Reco price/date: Rs 8,586/October 16
Current/fair value: Rs 8,707/Rs 9,360
Bosch India (Bosch) is the largest automobile ancillary player in the domestic automotive industry. With a strong technology leadership and a wide product portfolio, it is one of the few ancillary companies with a significant bargaining power and original equipment manufacturers. Bosch holds a 90 per cent share in domestic commercial vehicles (CV) and tractors in fuel injection systems. With strong technology parentage from the Bosch group, Bosch is poised to benefit from the growth in the tractor and CV segments in CY14E, CY15E. Implementation of new emission norms in CY15E also augurs well for Bosch as it is likely to coincide with an upswing in medium- and heavy-CV segment volumes. Strong export potential from India operations can also provide potential revenue streams. With a stable margin profile across cycles, healthy return ratios, robust FCF, impressive product positioning and a strong technology moat, Bosch is a behemoth in the automotive component industry. Hold
-ICICI Direct
HCL TECHNOLOGIES
Reco price/date: Rs 1,161.15/Oct 17
Current/target: Rs 1,083.15/Rs 1200
HCL Technologies reported in-line dollar term revenues (+3.5 per cent sequentially) but a positive margin surprise (+300 bps sequentially) led by a sharp rupee depreciation. Infrastructure services continued to drive growth (+8.7 per cent sequentially) while application services were sluggish (+0.9 per cent sequentially). Though the sharp margin expansion due to rupee depreciation could drive some earnings-a-share upgrades, growth remains polarised towards Infrastructure services and the revenue beat seen in Infy/TCS is missing. We prefer Infy/TCS in the large-cap IT space. Buy
-Religare Institutional Research
MAHINDRA & MAHINDRA
Reco price/date: Rs 873/October 11;
Current/target price: Rs 867/1,000
Domestic tractor volumes grew 24 per cent yoy over April-September 2013, driven by monsoon and a rise in crop prices. Reservoir levels are 17 per cent higher than the 10-year average, indicating the rabi crop is likely to be good while crop prices are still rising, good for farmer profitability. The stock trades at 10X FY2015E standalone EPS (ex subsidiary value), cheap, given the long-term earnings growth potential is robust, driven by low penetration of utility vehicles and tractors in India. We maintain a target price of Rs 1,000 on sum of the parts. Maintain Buy
-Kotak Institutional Equities
