APOLLO TYRES
Reco price/date: Rs 106/January 8;
Current/target price: Rs 110.65/Rs 138
Cooper Tires called off the deal in the last week of December. Cooper was unable to file its financials for the September quarter due to unavailability of financials of the Chinese venture. The termination of the deal is a positive for Apollo tyres as the deal would have put significant pressure on the consolidated balance sheet (acquisition cost of $2.5 billion mainly funded through debt). Now that the deal is called off, we revert back to our earlier thesis of Apollo being better placed among the tyre companies in terms of balance sheet and strong free cash flow. Now, in our view, it will play a catch up game with other tyre stocks like JK, MRF and CEAT which have run- up by 50-70 per cent. The stock is trading at attractive valuations at 6.5 times FY14E and 6.2 times FY15E EPS. Recommend BUY.
-Prabhudas Lilladher
COROMANDEL INTERNATIONAL
Reco price/date: Rs 230/January 8;
Current/target price: Rs 242.55/Rs 279
The brokerage expects to see a catch-up in fertiliser demand during FY13-14 and FY14-15. The demand decline for NPK and other decontrolled fertiliser has bottomed out, mostly stemming from increase in global feed stocks prices and unfavourable weather conditions domestically. Also fertiliser producer started controlling productions; hence could see reduction in inventory levels across supply chains going-ahead. Coromandel International Ltd (COIL) holds market leadership in overall NPK 22 per cent & SSP 16 per cent consumption in India. Further, COIL is a third largest producer of decontrolled fertiliser in the country. It's production capacity expanded three-folds in past seven years; revenue CAGR increased 36 per cent over FY06-13. Despite such huge capacity expansion, COIL managed to maintain healthy plant utilisation rate 70 per cent over FY10-12. We believe favourable monsoon in its core markets should enhance plant utilisation level between 70 and 80 per cent in FY14. Recommend BUY.
-IndiaNivesh Securities
INFO EDGE
Reco price/date: Rs 518/January 8;
Current/target price: Rs 496.50/Rs 474
Info Edge's recent initiatives on technology and sales are encouraging and should support growth in the medium term; however, this may delay break-even in the non-recruitment business. Market expectations from the portfolio companies have been running hot since the latest round of funding for Zomato. With the stock now trading at 36.0 times FY15 estimated earnings and about 33 times FY15 EV/Ebitda, the market appears to be assigning unrealistic multiples to Info Edge's investments. Despite the 20 per cent upgrade in Ambit's target price, there is a potential seven per cent downside from current market price. Sell.
-Ambit Capital
ENTERTAINMENT NETWORK (INDIA)
Reco price/date: Rs 332/January 8;
Current/target price: Rs 342.95/Rs 400
Entertainment Network India (ENIL) enjoys market leadership in the radio space with revenue share of 33-35 per cent. The Times Group network helps bring in advertisements given its association with 25,000 plus advertisers. The company has one of the strongest balance sheets in the industry with debt free status, cash of Rs 300 crore in its books. These factors will be important in expanding reach with more stations during the Phase-III auctions, which are expected to be completed in 2014. Phase III will allow expansion to 100 stations. Analysts believe, ENIL will grow its revenues and net profit at 12 per cent and 19 per cent CAGR over FY13-FY15. Initiate coverage with Accumulate.
-MOSL
NRB BEARINGS
Reco price/date: Rs 36/January 2;
Current/target price: Rs 40.15/Rs 46
CRISIL Research has assigned a fundamental grade of 4/5 to NRB Bearings Ltd. The company's engineering capabilities make it as a preferred supplier of customised bearings to leading domestic and global OEMs. Being positioned in the niche customised bearings segment, the company faces less competition from global bearings manufacturers such as SKF (Sweden) and Timken (the US), who largely produce off-the-shelf bearings. The company has a low client concentration risk as no customer comprises more than 10 per cent of revenue. Dependence on the domestic auto market (64 per cent of FY13 revenues) and an elevated inventory cycle are concerns. CRISIL Research expects revenues to increase at a three-year CAGR of 10.3 per cent to Rs 790 crore in FY16. EPS is expected to increase at a three-year CAGR of 11.9 per cent to Rs 6.5 in FY16.
-CRISIL Research
