Bajaj Auto Ltd.
Reco: BUY
CMP: Rs 1,558
Target Price: Rs 1,920
Exports to drive performance, Maintain BUY
· Results above est. with EBITDA at Rs 10.6bn (est of Rs 10.3bn and APAT at Rs 8.4bn (our est of 8.1bn)
· Momentum in exports to continue in FY13, outlook for domestic two wheelers subdued. FY13 exports hedged at a base rate of USD/INR of 47
· Lower our FY13 dom. volumes growth to ~9%YoY (vs ~13% earlier) and maintain exports at ~16%YoY in FY13. Factor in USD/INR at 49.5. Lower our FY13E EPS by ~5% to Rs 123.7
· Retain BUY, Lower our target multiple by 10% to PER/EV-EBIDTA of 15.5x/10.2x as performance will be driven by exports
Hero MotoCorp Ltd
Reco: HOLD
CMP: Rs 1,951
Target Price: Rs 2,170
Limited Upside, Downgrade to HOLD
· Results below est. with EBIDTA at Rs 9.4bn (est of Rs 9.8bn) and APAT of Rs 6.1bn (est. of Rs 6.3bn). Tax rate at 15.3% was lower than our est. of 16.7%
· Expects >10% volume growth in FY13 for industry with rural demand outpacing urban demand. Retail sales in January 2012 have been encouraging
· Fine tune our estimates for FY12, lower FY13 EPS by ~3.5% to Rs 140.1. Key upside arise from favorable currency as imports accounts for ~15% of RM (direct +indirect)
· Downgrade rating to HOLD, revise TP to Rs 2,170 (FY13 PER 15.5x). Continue to have concerns with concentrated product portfolio and lack of clarity on R&D
Axis Bank
Reco: HOLD
CMP: Rs 1,008
Target Price: Rs 1,380
Strong results; Asset quality comfortable
· Axis Bank (AXSB) Q3FY12 NII inline with estimates. However aided by strong fee/ trading income, net profit at Rs11.0bn was ahead of expectation
· Strong advance growth of 6.2%qoq and stable NIM’s at 3.75% drive growth in NII. CASA saw marginal decline led by cannibalization of deposits, as reflected in lower SD growth
· Asset quality held up well with GNPA/NNPA ratio broadly stable at 1.1%/ 0.4%. Slippages came in @ Rs5.4bn. Problem loans (GNPA + restructured) form mere 3% of loans
· With slippages coming under control we believe that AXSB could trade at its historic average valuations at 2.3x 1-year forward. Maintain HOLD with TP of Rs1,380
Wipro Ltd
Reco: REDUCE
CMP: Rs 414
Target Price: Rs 400
Decent improvement in metrics, but in the price
· Inline performance with IT Svcs rev at US$ 1,505 mn (+2.2%QoQ). EBIT mgns at 20.8% (+80 bps QoQ) despite tailwinds from weak currency and pricing increases
· Improvement on client metrics continues. Growth led by top clients (top 1/5 clients +8%/4% QoQ). HC addition remains strong at ~5k with attrition dropping to lowest levels in 8 qtrs
· March’12 qtr revenue guidance at 1-3% QoQ encouraging. Management cites some pressures in client budgets but emphasizes strong focus on client management
· FY12/13E EPS unchanged at Rs 23.2/26.7. Stock out performance in the recent past captures ‘relatively decent’ results. Wipro remains the least preferred Tier I stock for us
Rallis India
Reco: HOLD
CMP: Rs 127
Target Price: Rs 120
No positive surprise, Maintain HOLD
· Results marginally above est with consol APAT Rs 310 mn (-8%yoy) vs our est of Rs 280 mn and consensus of 342 mn. Sales Rs 3.2 bn (+20%yoy) is broadly in line with est
· Reported profit of Rs 77 mn is adjusted for provision of Rs 242 mn for impairment of assets of Turbhe plant and Rs 82 mn forex loss (we are yet to get clarity on this) in Q3FY12
· Stand alone revenue growth of14% is lowest in last 7 quarters. Though seed business contributed revenues of Rs 151 mn it reported losses of Rs 24 mn
· Foreseeing the pressure on revenue growth and margins in near future, we maintain our HOLD rating on the stock with price target of Rs 120
Hindustan Zinc
Reco: BUY
CMP: Rs 127
Target Price: Rs 159
Stable performance continues
· Revenue at Rs 27.9 bn up 6% on both YoY and QoQ basis broadly in line with estimates. The fall in LME was offset by depreciating rupee giving steady realizations
· EBITDA at Rs 14 bn was down 7% YoY and 12% QoQ primarily due to increased mining costs. EBITDA margin stood at 50% down 700 bps YoY basis and 1000 bps on QoQ basis
· APAT at Rs 12.8 bn, broadly in line with estimates was flat on YoY basis. The shortfall on account of lower margins was offset by higher other income Rs 3.9 bn (up 84%)
· We refine our FY12E and FY13E assumptions of LME and exchange rate. No change in earnings; retain BUY with a target price of Rs 159 (6xFY13 EV/ EBITDA)
JSW Steel
Reco: REDUCE
CMP: Rs 647
Target Price: Rs 590
Uncertainty looming large
· Overall standalone performance remain in line, however, uncertainties remain on future volume. Topline stood at Rs 78.8 bn, up 36% YoY and 3% QoQ on higher volume of 1.9 mt
· EBITDA at Rs 12.5 bn fell 3% QoQ on higher RM costs with margin contracted by 104 bps to 15.9%. EBITDA/ tonne stood at Rs 6565 (US$129) lower QoQ though higher than estimates
· Despite a lower PBT on QoQ, reported PAT rose 32% QoQ to Rs 1.68 bn on account of Rs 1.4 bn tax credit. The company again suffered a forex MTM loss of Rs 5 bn due to weak INR
· Considering uncertainty on iron ore supply in Karnataka, Ispat’s operations and current higher valuation we downgrade the stock to Reduce with a target price of Rs 590
M&M Financial Services
Reco: BUY
CMP: Rs 659
Target Price: Rs 800
Results inline with expectation
· MMFS’ results inline with expectation with NII at Rs4.2bn and net profit at Rs1.5bn. Strong AUM growth of 40%, with slight margin contraction of 30bps drives growth
· Strong growth in new/used CV drives improvement in product mix. Lower share of bank term loans in funding (-468 bps) and higher bonds/securitization helps protect NIMs
· MMFS’ asset quality witnessed slight deterioration with GNPA / NNPA increasing by 10.4%/ 14.1% qoq. Provision cover also came down by 84bps qoq to 74.4%
· Consistent increase in branch addition along with interest rate cycle reversing, to keep the earnings momentum strong. Maintain BUY with PT of Rs800
Reliance Industries
Reco: ACCUMULATE
CMP: Rs 792
Target Price: Rs 913
Results disappoint, core business under pressure
· RIL reported disappointing set of numbers on the back of margin pressure on refining and petchem business
· Higher Other Income at Rs17bn v/s Rs7.4bn in Dec11Qtr, stalling the decline in net profit to 13.6%yoy and 22%qoq to Rs44.4bn
· Company has announced Buy Back plan of upto 120mn fully paid shares at a price not exceeding Rs870 per share, upto aggregate amount of Rs104.4bn from open market
· Going ahead we remain cautious on refining and petchem margins on the back of new capacities and/or weakening demand. We downgrade our reco to Accumulate and cut our target price to Rs913
Ultratech Cement Ltd
Reco: REDUCE
CMP: Rs 1,214
Target Price: Rs 1,150
Cost Pains ahead. Downgrade to REDUCE
· An in line quarter with EBITDA of Rs9.6bn (+36% yoy)- APAT of Rs51 bn (+60% yoy) Report net of Rs6.17bn boosted by subsidies led one-offs
· P&F costs continue to haunt- INR depreciation impacting imported coal prices & higher E-auction prices resulted in 8.7% sequential increase in P&F cost
· CIL’s new pricing mechanism effectively a coal price hike of 28%- CIL to review prices of some grades- However we factor in 20% hike in coal prices& cut FY13 EPS by 3.9%
· Cement demand remains sluggish (12M rolling avg growth at 5.4%). UTCEM’s rich valuation (PER of 14.4X & EV/t USD138) fully captures positives & ignores co’s limited FCF generation & subdued return ratios. Downgrade to REDUCE
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