Clariant India
Recommendation: Buy at Rs 133
TAIB Securities
TAIB Securities feels that Clariant India is undervalued at Rs 133. Despite being a top-notch speciality chemicals company with well diversified presence across various industries, Clariant trades at a discount when compared to peers.
It trades at a P/E of 5.9x and 3.9x Ev/EBIDT for the financial year 2003-04. It is quite low for a company poised to grow at a compound annual rate of at least 15 per cent for the next three years.
Besides, given the unique business model with focus on outsourcing, the company's fixed cost very low at 10 per cent of sales, and working capital is a mere 12 per cent of sales.
Cement Sector
Recommendation: Overweight
CLSA Emerging Markets
CLSA is bullish on the cement sector, with its top pick as ACC. A strong 9.5 per cent growth in demand has absorbed most of the excess supply.
Going forward, the supply addition in the system will be a modest 9m MT (5 per cent per annum) and with demand growth expected to sustain at 8-10 per cent, capacity utilisation for the sector rising to nearly 90 per cent by financial year 2004-05. But the brokerage house expects Gujarat Ambuja to significantly underperform the market.
Hindalco
Recommendation: Market performer at Rs 540
TAIB Securities
After maintaining a negative view on Hindalco and the aluminium sector for last one year, TAIB Securities has upgraded Hindalco from 'sell' to a 'market performer' rating at Rs 540.
Though the brokerage house is still not optimistic about any uptrend of prices in the sector and remains concerned about Hindalco's fundamentals, the scrip has underperformed the markets and trades in a comfort zone of supportive valuations. That apart, the merger of Indo Gulf's copper business is accretive to net earnings and provides the company with growth in coming years.
Reliance Industries
Recommendation: Buy at Rs 287
Merrill Lynch Securities
Merrill Lynch has put a 'buy' recommendation on Reliance Industries at Rs 287, with a price objective of Rs 315 based on 8x financial year 2003-03 estimated earnings.
To keep pace with the growing domestic demand, Reliance has recently announced to increase its polyester capacity by 5 per cent to 8.5 lakh tonnes.
Going forward, the company is likely continue to add capacities to both its polyester and polymer plants in line with domestic growth trends, as part of its strategy to keep the domestic market oversupplied by 5-15 per cent. This would keep competition from putting up any large fresh capacity as well as ensure that its own market share does not fall.
Ranbaxy Laboratories
Recommendation: Buy at Rs 535
CLSA Emerging Markets
In an update on Cefuroxime axetil litigation, CLSA has maintained its 'buy' recommendation on Ranbaxy at Rs 535 (price as on December 4, 2002).
The hearing on Glaxo SmithKline's patent infringement lawsuit against Apotex on cefuroxime was concluded recently, and the judgement is expected in January. This development increases the probability of Apotex entering the market in mid Feb or March 2003.
However, the adverse impact will be offset by the upside from launch of isotretinoin and augmentin. The scrip trades at 16.7x its 2002-03 estimated earnings.
