LARSEN & TOUBRO
Reco price/date: Rs 1,067/December 17;
Current/target price: Rs 1,063/Rs 1,036
Larsen & Toubro (L&T) has registered a smart run-up in the past several weeks and now quotes at a Price/Earnings and an EV/Ebitda of 16.4 times and 12.8 times respectively, discounting analysts' FY14 estimates. Analysts believe that some slackness in pace of order-booking may be evident due to the elections in some large states (Rajasthan, Delhi, MP). Analysts expect the company to aggressively pursue international business in H2FY14 to bridge any shortfall in business from domestic markets. The company appears to be well on track to achieve its stated guidance for order booking and revenues for FY14. By that stretch, it is fairly valued at current levels. Downgrade to Hold from Buy.
-Anand Rathi Securities
ASIAN PAINTS
Reco price/date: Rs 486/December 16;
Current/target price: Rs 490/Rs 532
Analysts' channel checks infuse confidence about the decent demand scenario in H2FY14 on the back of long marriage season and festive related demand in Q3FY14. However, base in Q3FY13 is higher at 18.9 per cent YoY (revenue growth at 18.3 per cent YoY in Q2FY14 on a base of 16.7 per cent). Asian Paints continues to gain market share largely from unorganized players. Foray into home improvement through Sleek and further evaluation of entry in other home decor categories will potentially tap the company's vast distribution network (35,000 dealers). Analysts believe the company is likely to eye inorganic expansion (international, home decor) now that major capex has been completed. Maintain Buy.
-Edelweiss Securities
CANARA BANK
Reco price/date: Rs 251/December 17;
Current/target price: Rs 246/Rs 285
Antique stock broking has increased its earnings estimates for FY14 and FY15 by 10 per cent and seven per cent, respectively, owing to marginal improvement in the asset quality. Canara Bank's management highlighted that the consolidation process was behind them and it would now focus on growing its balance sheet. The bank expects its loan book to grow in the range of 22-24 per cent in FY14, and would focus on lending to corporates having at-least AA rating. The bank management expects gross NPA ratio to improve to 2.4 per cent in FY14 from 2.6 per cent. Analysts have factored in loan loss provision of 0.8 per cent in FY14. Maintain Hold.
-Antique Stock Broking
PETRONET LNG
Reco price/date: Rs 122/December 17;
Current/target price: Rs 117/Rs 175
Petronet LNG's (PLNG) stock price implies that the Kochi terminal would have a perpetual utilisation of less than 50 per cent, owing to a lack of pipeline connectivity. Given India's huge gas deficit and LNG's competitiveness, the pipeline issue would likely be resolved over the next 18-24 months (as ordered by the Madras High Court ruling as well). Concerns on LNG demand are also over-blown, as LNG cost is 11-25 per cent lower than alternative liquid fuels for industrial consumers. PLNG's first-mover advantage of ramping up its capacity places it in a sweet spot to capture the huge domestic gas deficit. Though near-term volume growth is likely to be muted, analysts expect 16 per cent volume CAGR in FY16-20 (leading to an EPS CAGR of 24 per cent). Maintain Buy.
-Ambit Capital
