The Lucky 13
The second half of 2012 has brought hope of a promising 2013 for equities. Also, with 2012 behind us, the supposed ‘end of the world’ predictions would hopefully have been put to rest. Pessimists though, always manage to find a bagful of excuses to remain fearful and depressed. Doomsday predictors may turn to the so called ominous number 13 in the New Year. However, you may be surprised to know that ‘13’ is considered lucky by many. In reality, it’s a case of seeing the proverbial glass ‘half full’ or ‘half empty’. We see good reason to be hopeful for equities in 2013. Although there are headwinds to the India story, the positives will likely outweigh negatives in the coming 12 months. We believe government action will continue. The worst looks over for the INR and global growth and easing policies will support portfolio flows into India. A key market trigger is the peak out of the interest rate cycle. We expect a Repo rate cut of 25 basis points in the January 2013 review meet. There is a case for a 75-100bps rate cut in 2013. Nifty valuations are reasonably placed at 14.5x FY14E and the earnings downgrade momentum is waning. We recommend 13 growth stories for 2013 and beyond, in our special theme report titled ‘The Lucky 13’.
Wishing you and your loved ones a Happy and Prosperous New Year!
Buy recommendation summary
Company
|
Sector
|
CMP (Rs)
|
18-month Target (Rs)
|
Upside (%)
|
FY12-15 PAT CAGR (%)
|
P/E (x) FY15E
|
RoE (%)
FY15E
|
EV/EBIDTA (x)
FY15E
|
ACC**
|
Cement
|
1,432
|
1,755
|
22.6
|
18.5
|
12.4
|
21.5
|
7.1
|
DEN Networks
|
Media
|
200
|
290
|
45.0
|
112.8
|
19.3
|
13.6
|
7.3
|
Dr Reddy's
|
Pharma
|
1,834
|
2,358
|
28.6
|
21.8
|
13.2
|
26.8
|
8.1
|
Financial Tech
|
IT
|
1,138
|
1,510
|
32.7
|
(18.7)*
|
16.6
|
10.4
|
18.8
|
ITC
|
FMCG
|
287
|
353
|
23.0
|
18.3
|
21.8
|
40.5
|
15.6
|
Petronet LNG
|
Oil & Gas
|
158
|
208
|
31.9
|
12.0
|
8.0
|
24.1
|
5.0
|
United Spirits
|
Breweries
|
1,953
|
2,400
|
22.9
|
68.5
|
31.5
|
9.7
|
17.7
|
Wipro
|
IT
|
397
|
495
|
24.7
|
12.8
|
12.1
|
19.7
|
7.4
|
Wockhardt
|
Pharma
|
1,562
|
2,089
|
33.7
|
17.0
|
12.0
|
34.2
|
7.5
|
*FY12 included a one off large stake sale of MCX holding of Rs2.5bn
** Calendar year ending.
Financials
| ||||||||
Company
|
Sector
|
CMP (Rs)
|
18-month Target (Rs)
|
Upside (%)
|
FY12-15 PAT CAGR (%)
|
P/BV (x) FY15E
|
ROA (%)
FY15E
|
ROE (%)
FY15E
|
HDFC Bank
|
Financials
|
685
|
850
|
24.1
|
19.7
|
3.4
|
1.6
|
14.5
|
ICICI Bank
|
Financials
|
1,159
|
1,500
|
29.4
|
23.5
|
1.7
|
1.7
|
21.7
|
LIC Housing Fin
|
Financials
|
297
|
390
|
31.3
|
25.2
|
1.7
|
1.8
|
21.5
|
Shriram Trans Fin
|
Financials
|
754
|
950
|
26.0
|
11.4
|
1.8
|
2.5
|
18.6
|
Source: India Infoline Research
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