Analysts' corner: Hero Honda

Motilal Oswal Securities maintains its "buy" recommendation on Hero Honda. The report states that the management is optimistic on volume growth. Two wheelers have witnessed a CAGR of 10 per cent, while motorcycles have witnessed a CAGR of 25 per cent over the last decade.

Next five year growth would be comparable and even higher if rural renaissance is to occur as the current penetration is very low at just five per cent (three per cent for motor cycles) for two wheelers.

This will be aided by availability of finance, improved road infrastructure, rising incomes and favourable demographics. Replacement demand is emerging as a strong growth driver for motorcycles driven by launch of new models and is 25-30 per cent of total sales.

Management expects a 15 per cent CAGR in two wheelers going forward. The company is scaling up production capacity at its existing plant at Dharuhera from 4,500-5,000 units per day to 6,500 units.

Ashok Leyland

Enam Securities, in its visit note on Ashok Leyland, states that the company expects sales of 67,000 units (23 per cent y-o-y growth) in FY06, driven by an uptrend in M&HCV demand (in the goods category) in Q4 FY06. The report, however remains guarded in its assessment and projects sales of 61,348 units (12 per cent growth).

The company plans a soft launch of its newly developed J series Hino engine from Q4 FY06. The company is optimistic about a pick up in demand in south India (which accounts for 45 per cent of total sales) in Q4 FY06, where the recent floods have impacted sales. Exports are expected at 5,300 vehicles in FY06 and about 6,000 in FY07.

Though there is a gradual shift to higher tonnage vehicles, which is the company's dominant niche, the report finds its expectations to be optimistic. The company's expectations imply a monthly run rate of 7,570 vehicles for the four months of Dec-March FY06.

Venus Remedies

Brics PCG Research recommends a "buy" on Venus Remedies. The report believes that the appointment of Dr Anil Gulati as an independent director of the company would be a valuable guiding force. He has six inventions to his credit.

The company can leverage Dr Gulati's technical consultation for a number of important issues, including on its IPR for its R&D products and for getting the US FDA approval for its Baddi unit. The management's stated goal is to become the number one oncology product company in Asia by 2010.

The company is focused on high-value specialty products including the latest generation cephalosporins, anti-cancer, carbapenem and FDC segments, as well as the super specialty product segments including anti-inflammatory and NSAID formulations.

The FDC of ceftriaxone fortified by sulbactam has become an Rs 70 crore brand since seven months of launch and is expected to become a Rs 500 crore brand over next 3-4 years. Merck Speciality has launched four oncology products developed by the in-house R&D of Venus.