Stay neutral on stocks of Hindalco Industries

“Hindalco is on the verge of a massive expansion plan, wherein it is expanding its aluminium and alumina capacity three-fold over the coming 4-5 years. In light of recent events such as clearance of Mahan coal block by Group of Ministers (GoM), delay in projects, declining aluminium prices and rising input costs (crude oil derivatives), we revisited Hindalco’s financials for its upcoming projects under various scenarios. Our findings reveal that all three projects will generate ~17% RoE in a scenario where aluminium prices are at least at US$2,400/tonne (INR-USD53) and the projects have the backing of captive bauxite and coal mines�" a scenario that looks remote in the coming 2-3 years.”

“When Hindalco planned this massive expansion, the foreseen scenario was not as gloomy as it is currently. The projects have faced several hurdles, especially in the past two years. Nevertheless, clearance to Mahan coal block from GoM is structurally positive for Hindalco. However, assuming that even if Mahan coal block receives clearance from the Cabinet soon, the captive coal mine is not expected to commence production until the next 18 months in our view, while the Mahan smelter is expected to be ready for commissioning in 1HFY2013. A decline in aluminium prices and higher input and coal costs have impacted profitability of the company’s existing operations and lowered cash flow generation. This may also lead to further equity dilutions for the company’s upcoming projects.”

“We do not expect a meaningful spike in aluminium prices in the near term. Further, with slow clearances for the company’s upcoming mines, we do not rule out further delays in its projects. Post GoM’s clearance for Mahan coal block, we expect the Cabinet’s clearance as well; however, potential delays cannot be entirely ruled out. Further, there has been little progress on the procedural clearance process for the company’s Auranga coal mine and Talbira coal mine �" which are expected to feed its upcoming Aditya and Jharkhand projects, respectively. While forest clearance is pending for Auranga mine, Talbira mine has received no major clearances as of now. While Jharkhand capex has not yet started, Aditya is at an advanced stage of completion, with commissioning due for 4QFY2013, while evidently coal availability from Auranga has low visibility as of now. Going forward, to generate over 15% RoE, Hindalco needs to get clearances for atleast Auranga coal mine (for captive power generation at the upcoming Aditya smelter) alongside higher aluminium prices.”

“Hindalco is expanding its capacities three-fold over the coming four-five years, and we are structurally positive on its integrated capacities. However, low aluminium prices, rising costs and delay in commencement of mining from captive blocks are expected to mute its profitability growth in the next two years. We expect Mahan coal block to be cleared by the Cabinet, which will be structurally positive for Hindalco. However, even then it will take atleast 18 months for Hindalco to commence production from this block. Moreover, we do not rule out delays in the company’s upcoming projects. Hence, we recommend Neutral on the stock,” says Angel Broking research report.

Buy stocks of Titan Industries; target of Rs 249

“Titan Industries is the organization that brought about a paradigm shift in the Indian watch market when it introduced its futuristic quartz technology, complemented by international styling. With India's two most recognized and loved brands Titan and Tanishq to its credit, Titan Industries is the fifth largest integrated watch manufacturer in the world. The success story began in 1984 with a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation. Presenting Titan quartz watches that sported an international look, Titan Industries transformed the Indian watch market. After Sonata, a value brand of functionally styled watches at affordable prices, Titan Industries reached out to the youth segment with Fastrack, its third brand, trendy and chic.”

“The company has sold 135 million watches world over and manufactures 13 million watches every year. With over 826 retail stores across a carpet area of over 10,08,083 sq. ft. Titan Industries has India’s largest retail network. The company has over 331exclusive ‘World of Titan' showrooms and over 83 Fastrack stores. It also has a large network of over 700 after-sales-service centers. Titan Industries is also the largest jewellery retailer in India with over 130 Tanishq boutiques and Zoya stores, over 31 Gold Plus stores. It also sports over 204 Titan Eye+ stores. The company has two exclusive design studios for watches and jewellery. Backed by over 6,000 employees, two exclusive design studios for watches and jewellery, 9 manufacturing units, and innumerable admirers’ world over, Titan Industries continues to grow and sets new standards for innovation and quality. The organization is all geared to repeat the Titan and Tanishq success story with each new offering.”

“Titan Industries Ltd has reported net profit of Rs 1442.80 million for the quarter ended on March 31, 2012 as against Rs 838.00 million in the same quarter last year, an increase of 72.17%. It has reported net sales of Rs 22817.70 million for the quarter ended on March 31, 2012 as against Rs 17779.40 million in the same quarter last year, a rise of 28.34%. Total income grew by 28.03% to Rs 23069.60 million from Rs.18019.30 million in the same quarter last year. During the quarter, it reported earnings of Rs 1.63 a share.”

“At the current market price of Rs 214, the stock is trading at 25.97 x FY13E and 21.84 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY143E is seen at Rs.8.40 and Rs.9.98 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 27% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 17.06 x for FY13E and 14.50 x for FY14E. Price to Book Value of the stock is expected to be at 8.82 x and 6.28 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 249 for medium to long term investment,” says Firstcall Research report.

Accumulate stocks of Subros; target of Rs 36

“Subros (SUBR) reported better-than-expected results for 4QFY2012, driven by strong volume growth and margin expansion on account of localization benefits. Reported net profit increased significantly, benefitting from exceptional income of Rs29cr (~65% of PBT). Going ahead, we expect passenger car demand to improve, led by easing of interest rates, thereby benefitting SUBR. We recommend Accumulate on the stock.”

“SUBR reported strong 21.5% yoy (45.4% qoq) growth in its net sales to Rs369cr, driven largely by a 17.2% yoy (47.7% qoq) jump in net volumes. Net average realization also increased strongly by 5.3% yoy (flat qoq) during the quarter. Volume performance benefited from strong sequential volume growth at Maruti Suzuki (major customer). The company’s operating margin surprised positively as it expanded by 254bp yoy (295bp qoq) to 11.4%, led by raw-material cost savings (raw-material to sales ratio declined by 250bp yoy) due to commencement of local production of certain components (mainly evaporators). However, a 90bp yoy increase in staff cost restricted further margin expansion. Led by strong operating performance and exceptional income of Rs29cr (profit on sale of immovable property), net profit registered significant 221.2% yoy growth to Rs35cr. Depreciation expense increased sharply by 78.9% yoy (59.2% qoq) during the quarter.”

“We expect revival in the company’s volumes in FY2013E, led by improvement in demand for passenger cars with the easing of interest rates. Further, we expect margins to remain stable, led by localization benefits. Thus, we recommend Accumulate on the stock with a target price of Rs36, valuing SUBR at 7x FY2014E earnings,” says Angel Broking research report.

Buy stocks of South Indian Bank; target of Rs 30

“South Indian Bank (SIB), net profit for the current quarter increased 49.1% YoY (19.3% QoQ) to Rs1219.5 mn from Rs817.7 mn for Q4 FY11 despite sharp spike in cost / income ratio (989 bps YoY, 929 bps QoQ). The growth in PAT was mainly driven by 28.4% increase in the NII at Rs2845.6 mn (on the back of robust business growth coupled with stable NIMs), lower provisioning during the quarter (-53.3% YoY & -44.4% QoQ) and lower tax expense (-36.1% YoY & -47.3% QoQ). The Bank has provided Rs220 mn of incremental liability as per the actuarial valuation of employee benefit for FY12, Rs100 mn for additional 100 employees who have not opted for the retirement benefits earlier and also Rs50 mn on incentives scheme resulting into higher operating cost during the quarter.”

“Net Interest Margins (reported) improved by 5 bps sequentially driven by higher increase in yield on advances (20 bps) as compared to cost of deposits (17 bps) during the quarter coupled with 167 bps improvement in CD ratio from 74.0 to 75.7. Added to this, higher yield on investments during the quarter further helped in improving margins. The management expects the NIM in the current fiscal to be at around current levels. Total business of the bank registered a robust growth of ~27.0% YoY (8.9% QoQ) as at Q4 FY12. Deposits grew by 22.8% YoY (7.9% QoQ) from Rs297.2 bn in Q4FY11 to Rs365.0 bn in the current quarter, whereas Net Advances grew by 32.9% YoY (10.3% QoQ) from Rs208 bn to Rs276.4 bn over the same period. The growth in advances was mainly driven by increase in gold loan portfolio and corporate loan book. Low cost deposits constitute 19.7% of total deposits as at Q4FY12. The management has guided for ~22% growth in total business in the current fiscal and also indicated that going forward the key focus area would be to increase CASA. The management expects the CASA ratio to improve to ~23% by FY13E. The Capital Adequacy Ratio (CAR) stood at 14% with Tier 1 Capital ratio of 11.5% as on March 31, 2012. The bank is planning to mobilize Rs4.0 bn of capital in FY13. The management indicated that the total capital requirement to meet Basel III requirements in next 4-5 years is Rs14 bn (even after ploughing back profits).”

“We estimate SIB to report an EPS CAGR of 19.0% over FY12-FY14E. ABV is estimated to grow at 19.3% CAGR during the same period. The stock currently trades at 0.9x FY14E ABV and 4.8x FY14E EPS. Going forward, we expect the bank’s margins to come under slight pressure given the bank’s increased focus towards low yielding corporate segment. We expect the bank to deliver healthy net interest income growth (CAGR 22.3% over FY12-14E) and earnings growth (CAGR 19.0% over FY12-14E) driven by strong traction in business growth and stable asset quality going forward. We retain our BUY rating on the stock with a target price of 30.2 (1.15x FY14E ABV), thus giving an upside potential of 25.8% from current levels,” says Aditya Birla Money research report.

Buy stocks of Wipro; target of Rs 490

“Wipro's growth strategy revolves around focusing on select segments- be it verticals, clients, geographies or services; and developing deep expertise in the chosen segments. The company has shortlisted 138 clients, with a potential to grow to USD50m+, as its growth drivers. Within the momentum verticals, Wipro's focus is on sub-verticals in each of BFSI, Healthcare, Retail and Energy & Utilities. For example, in Energy & Utilities, the company clearly sees and targets (1) spends happening in "Digital Oilfields", where through Big Data, analytics are performed on huge amounts of seismic, geological and spatial data, and (2) investments being made in Smart Grids in multiple geographies (US, UK, China, Canada, New Zealand are a few cases in point). Geography-wise, Wipro is looking to drive growth in India/Middle-East, Africa, APJ, France and Germany. Within Services, it aspires to achieve leadership in new areas like Cloud, Mobility and Analytics. Wipro will also seek to grow by gaining market share amidst the churn happening among vendors, which the management sees as an opportunity over the next 24-36 months.”

“Pharma is going through a "patent cliff". The industry lost USD234b in revenue last year, with a number of patents expiring, and is expected to lose more revenue in the next couple of years. The share of revenue from BRIC nations has gone up from 10% few years ago to 18-25% today. Within the vertical, opportunity in collaborative efforts is estimated at USD3b-4b, Data-driven Insights at USD5b-7b and Risk, Safety and Compliance at USD2b-3b. Wipro's list of clients within Healthcare & Life Sciences includes 4 of the top-5 pharma companies, 3 of the top-10 commercial health plans, and 2 of the top-5 providers. The company's growth strategy revolves around focusing on select segments - be it verticals, clients, geographies or services. It has shortlisted 138 clients, with a potential to grow to USD50m+, as its growth drivers. Wipro will also seek to grow by gaining market share amidst the churn happening among vendors. Wipro's organization restructuring in terms of workforce realignment is complete, but alignment of capabilities is still underway.”

“We expect Wipro to grow its revenue at a CAGR of 15.3% and EPS at a CAGR of 16% over FY12-14. The stock trades at 15.5x FY13E earnings. Valuations may be tested in the near term on a high ask rate to meet the mid-point of Nasscom's guidance. However, valuations at 15x FY13E earnings imply a price of ~INR390, which we see as the bottom for the stock. We believe risk-reward is favorable at Wipro on multiple levers to drive efficiency and growth. Maintain Buy, with a price target of INR490,” says Motilal Oswal research report.

Buy stocks of Maruti Suzuki; target of Rs 1458

“The Board of Maruti Suzuki (MSIL) has approved the merger of Suzuki Power train (SPIL), a diesel engine and transmission manufacturing SPV. MSIL owns 30% of SPIL and its parent, Suzuki owns 70%. Post merger, Suzuki’s stake in MSIL would increase from 54.2% to 56.2%. Also, MSIL would be Suzuki’s only operating four-wheeler subsidiary in India. We believe that the merger valuation is fair and that it does not compromise the interests of minority shareholders. We estimate cash flow from operations at ~INR5.2b, and given the limited capex, the merger valuation is less than 5x FY12 FCF and ~4.6x FY12 EV/EBITDA.”

“The merger would result in integrated operations for diesel vehicles within a single entity, and the diesel vehicle profitability would fully reflect in MSIL (S/A EBITDA margin of 7.8% v/s merged entity EBITDA margin of 9.4% in FY13E). The management indicated that there is scope to improve operating performance, with levers in the form of (a) reducing import content from the current 30%, (b) common sourcing and economies of scale upon commencement of MSIL’s diesel engine facility in mid-FY14, and (c) working capital reduction. The stock trades at 15.3x FY13E consolidated EPS of INR75.1 and 8.6x FY13E cash EPS of INR132.6. Maintain Buy, with a price target of INR1,458 (~11x FY13E cash EPS),” says Motilal Oswal research report.

Aditya Birla Money Stays neutral on Shoppers Stop

“In 4QFY12, standalone net sales for SSL increased by 25.7% YoY to Rs5864.7 mn, led by healthy LTL growth of 10%. The LTL growth was mainly price driven with increase in ASP by 9% and volume growth of 1%. The moderation in volume growth is mainly due to 15- 18% price increase witnessed in Apparels (contributed 58.8% and 58.7% to the topline in 4QFY12 and FY12 respectively). Gross margin declined by 20 bps YoY to 31.6%, led by extension of discounted sale by 1.5 week. For FY12, net sales increased by 16.7% YoY to Rs20877.5 mn mainly driven by rapid store expansion (opened 13 stores) and LTL growth of 7% (ASP increase of 9% and volume degrowth of 2%). EBITDA declined by 2.8% YoY to Rs363.3 mn mainly due to increase in operating expenses across the board led by full impact of opening of 6 SS stores in the 3QFY12 and part impact of opening of 2 stores in 4QFY12.”

“Overall, EBITDA margin declined by 180 bps YoY to 6.2%. For full year FY12, EBITDA declined by 6.2% YoY to Rs1427.3 mn and margin declined by 70 bps YoY to 6.8%. Rapid opening of new stores and its capitalisation led to increase in depreciation expense by 34.4% and 21.7% YoY to Rs114.7 mn and Rs377.2 mn, in 4QFY12 and FY12 respectively. Interest cost increased by 135.8% and 72.2% YoY to Rs73.8 mn and Rs250.4 mn in 4QFY12 and FY12 respectively. This is due to increase in debt led by new store capex and increase in working capital requirement. Overall, in 4QFY12 and FY12, PAT declined by 31.0% and 14.5% YoY to Rs137.4 mn and Rs642.6 mn respectively.”

“Going ahead, we expect healthy sales traction in Shoppers Stop led by gradual ramp-up of new stores and improvement in consumer sentiments based on various growth led policy actions from govt and RBI. However, operating overheads will take 18-24 months to get fully absorbed and hence will lead to subdued margins. We expect sales and EBITDA to grow at CAGR of 27.7% and 36.4% during FY12-FY14E period respectively. We expect the company to post EBITDA margin of 7.3% and 7.8% in FY12E and FY13E respectively. Overall, we expect PAT to grow at CAGR of 43.4% during FY12-FY14E. We have assumed 8 store addition each in FY13E and FY14E. Hypercity is progressing well and we expect it to breakeven at EBITDA level in next 18-24 months.”

“At CMP, the stock is trading at P/E ratio of 30.6x and 18.8x FY13E and FY14E earnings respectively. Our fair value of the stock based on SOTP methodology comes to Rs289/share. We have valued standalone SSL on DCF valuation method, 51% stake in Hypercity on FY13E EV/sales multiple of 1.0x and all equity investments on book value. We reiterate our “Neutral” rating with 31st Mar13 target of Rs289/share. Upside risk to stock price in the near term could be policy change as regards the FDI in multi-brand retail,” says Aditya Birla Money research report.

Buy stocks of GAIL India; target of Rs 406

“GAIL India, results were significantly below our and street expectation. Revenue for the quarter was at Rs.104.8bn, growth of 17.7% YoY. EBITDA during the quarter was at Rs.7.7bn, decline of 40% YoY and 57% QoQ. Lower than expected EBITDA was mainly due to one-off impact of retrospective cuts in Gas (Rs.2.5bn) and LPG (Rs.0.44mn) transmission tariff. During the quarter the company reported net profit of Rs.4.8bn, decline of 38% YoY. Subsidy payout grew by 18% YoY and 22% QoQ at Rs.10.6bn, mainly due to higher crude oil prices compared to previous year.”

“Gross margin in Transmission segment declined by 27% YoY 38% QoQ to Rs.4.5bn, more over volume and realisation also declined by 5% QoQ to 115.5mmscmd and 18% to Rs.0.74/scm, respectively. Lower transmission margin was mainly due to 1) company has provided provision of Rs.2.5bn for retrospective cut in tariffs for Mumbai gas network and Agartala gas network and 2) lower KG D6 volumes which is partially offset by RLNG. Moreover Gross margin in trading segment also declined by 38% YoY and 48% QoQ to Rs.1.7bn. Lower margins in trading was mainly due to 1)company has provided provision of Rs.400mn for debtors and 2) lower margin on spot LNG cargoes. However trading volume for the quarter remains flat on YoY and QoQ at 85.5mmscmd. We believe transmission volume for Q1 FY13 would be around 117-118mmscmd. During the quarter Gross margin in petchem has improved by 265bps YoY and 35bps QoQ to 50%, due to higher polymer sales and better realisation. Sales volumes have increased by 4.4% QoQ and realisation has increased by 5.3% QoQ to Rs.80.1/Kg.”

“Decline in domestic gas production leading to decline in transmission volumes would weigh on the stock. Also the recent news on proposed cap on gas marketing margin, which is to be decided by PNGRB would keep the stock under pressure until any clarity emerges. However we don’t see major earnings risk as it charges MoPNG-determined marketing margins on APM and PMT volume, which accounts for 80% of the total volume. Based on the lower volume outlook and concerns on marketing margin, we have lowered our PE multiple from 12x to 10x and cut our SOTP target price to Rs.406 from Rs.434 earlier. However recent correction in the stock price offers good buying opportunity. Hence we upgrade our ratings from Accumulate to Buy. At CMP, the stock trades at 9.7x FY14E EPS and 1.5x P/BV,” says Emkay Global Financial Services research report.

Hold stocks of JP Associates; target of Rs 75

“JP Associates, APAT of Rs2.8bn sharply ahead v/s exp. Rs2bn on the back of higher construction & real estate revenues as well as margins. Higher revenues coupled with robust 23.9% construction EBIT margin led to an 19%yoy increase in total EBITDA at Rs9.8bn. Construction revenues at Rs17.7bn although flat yoy were higher v/s est. of Rs13.5bn. Real estate revenues at Rs5.6bn although down 6% yoy were higher v/s estimates of Rs4.6bn. With the completion of Yamuna Expressway & Karcham Wangtoo project, we believe the construction revenues are expected to fall 5% in FY13E to Rs 54.4bn. Interest expense jumped 43%yoy to Rs5.8bn owing to inclusion of Bank charges. Effective tax rate @ 9.1% for Q4 came in lower than v/s exp. giving boost to the quarter.”

“Cement plants in west & south India were de-merged into a 100% subsidiary with effect from 1 April 2011 and adjustments were effected in Q4FY12. Hence cement number are not comparable. Like to like (Ex JCCL) cement revenues at Rs 16.9bn growth of 22.4% qoq led by 2.8% qoq jump in realization to Rs 4016/ton. Volumes increased 19% qoq to 4.2MT. However Cement EBIT improved just 3.4% qoq to Rs 2.13bn, led by higher freight as well as higher depreciation. EBIT/t witnessed decline of Rs76/t to Rs507/t. JPA has report Q3FY12 numbers Ex JCCL. Ex JCCL, JPA Q3FY11 EBIT/t stands at Rs583/t as v/s earlier reported EBIT/t of Rs399. This implies JCCL made EBIT loss Rs359mn. JPA set to commence first leg of de-leveraging. (parent debt - Rs210bn (Parent + JCCL)) JPA looks to divest full or partial stake in it’s recently hived-off cement subsidiary JCCL which has capacity of 10 mtpa (5mtpa in Gujarat and 5 mtpa in South). The company is first contemplating a complete sale of its Gujarat Cement Plant. JPA is in advance talks with strategic buyers. Gujarat plant has been operational for over two years and it dispatched 2.95mn in FY12 (utilization of 58%). Hence there is high possibility that the plant will likely find a buyer first and valuations could be upwards of USD 130/t. At EV of USD140-150/t we estimate that the deal could result in cash inflow of Rs21-23 bn (net of Tax). This coupled with ~Rs12 bn transfer of debt on Gujarat Plant would mean debt reduction of Rs32-34 bn from JPA's B/S, which is a good 15% of JPA current debt.”

“Divestment of cement subsidiary will remain critical to the de-leveraging of the parent balance sheet. We value JPA’s cement business at USD 110/t & maintained our FY13E estimates of capacity addition to 33.4 MT(inclusive of JV capacity). We have reduced the construction multiple to 5x EBITDA for FY13E from 6x based on the fact that two major orders i.e. Karcham Wangtoo and Yamuna Expressway witnessed completion in FY12. With limited addition of large ticket orders the construction vertical is likely to witness 5% decline in revenues for FY13E. We believe the stock price has already factored partial upsides from the probable divestment of JCCL. We believe the stock at 9.4x FY13E EBIDTA is fairly valued, hence maintain HOLD with a Target price of Rs 75. Fair value leaves little upsides. The Correction in Target price also led from the fact that the listed subsidiaries have corrected on the bourses which is leading to a reduction in overall fair value of the listed subsidiaries. We have also incorporated 20% holding company discount for the listed subsidiaries,” says Emkay Global Financial Services research report.

Hold stocks of V-Guard Industries; target of Rs 250

“V Guard posted a strong quarter in terms of Net Sales/EBITDA/PAT growing 24.3%/69.9%/34.7% respectively. The EBITDA margin improved by 320bps YoY to 11.9% and 300bps QoQ on account of strong EBIT margin in all the business segment supported by decline in raw-material cost and selling & distribution expenses. The PAT registered a growth of 34.7% YoY to Rs. 19.17 crores and 54% QoQ. The PAT margin was improved by 50bps YoY to 6.9% and 200bps QoQ. We remain positive on the stock owing to strong domestic business, steady penetration in non-south market and gradually expansion of product portfolio, V Guard is set to outperform in the consumer durable space.”

“Net Sales for Q4FY12 increased by 24.3% YoY to Rs. 276.46 crs and was up by 8.8% QoQ on account of price hike to the tune of 2-3% during the quarter. The revenue was up YoY due to the good growth recorded in the Electronics (55.6% YoY growth) and Electricals (13.2% YoY growth). Electronics EBIT margins was maintained to 16.2% and Electrical EBIT margin improved by 340bps YoY to 8.3%. Stabilizer, Pump, Wire, LTT Cables, Fans and Inverter reported a strong improvement in EBIT margin which overall improved the operating margin for the company. The company also got the benefit of low cost raw-material inventory which also boosted the margin. The PAT was up by 34.7% YoY to Rs. 19.17 crores and 54% QoQ. The PAT margin was up by 50bps YoY to 6.9% in Q4FY12 and by 200 bps QoQ. The strong sales growth mitigated the impact of increase in interest and depreciation cost by 21.6% and 29.6% respectively. The tax rate also zoomed to 28.6% as against 21.4% in Q4FY11 and 24.1% in Q3FY12.”

“The management has guided 25% top-line growth for FY13E where all the product segment is expected to register strong growth. Management also stated that due to rupee depreciation, the imports which accounts for 5% of the total sales will negatively impact the operating margins and further guided increase in advertisement expenditure to the tune of Rs. 46 crores in FY13E as against Rs. 38 crores in FY12 and increase in distribution margin will keep a check on operating margin which is expected to be around 10% in FY13E. The company is also on the verge of two product launches 1) domestic switchgear and 2) induction cook top in the near term.”

“At CMP of Rs. 215, the stock is trading at a PE of 10.1x in FY13E and 7.6x in FY14E whereas on EV/EBITDA it is trading at 6.1x and 4.9x in FY12E and FY13E respectively. We believe that V Guard is well �" placed amongst its peers on the consumer electrical space in India, on the account of increasing penetration into Northern India, extensive distribution network and continuous launch of products in the consumer durable space. We have introduced FY14E estimates. We have revised our target of Rs. 250 valued at PE 12x FY13E (Rs. 231). We recommend a “HOLD” rating,” says Nirmal Bang research report.

Hold stocks of Mcleod Russel; target of Rs 300

“Mcleod Russel registered a mere ~12% decline in its standalone net profit for FY’12 at Rs2,601 mn owing to loss of crop during the months of November, December and March. On the profit side, the company has posted a standalone net loss of Rs1,572 mn for the fourth quarter of FY’12 in comparison to a net loss of Rs1,229 mn in Q4FY’11”

“For the quarter ended March’12, the company has reported ~14% increase in the total sales at Rs2,601 mn and ~28% increase in net loss Rs1,572 mn. Sales for the quarter grew ~13% to 190 lakh kgs while crop size declined sharply ~72% to ~7 lakh kg. Prices remained flat at Rs1,373 mn per kg in quarter under review. On the price front, the season has started off on a positive note for McLeod. The ruling price today is Rs30 to Rs40 higher than last year. This is due to two reasons. From the month of November the company had lost crops due to early winter and we lost crop in Nov’-Dec’ and March. Basically, the inventory levels at the frontend are depleted and buyers had to come in with a higher force to pick up the tea. Going into the FY’13E season, if the weather holds well, we believe that this deficit of April and May will not really catch up. However, weather forecast for the FY’13E period does not holds good & might see fall-out in crops in Q1FY’13E.”

“North India and with the prices at Rs30-Rs40 higher, should remain at a much higher level going into the season. At CMP, the stock trades at a P/E of ~8.7x and P/BVPS of ~1.5x of FY’13E EPS. We revalue Mcleod Russel from our earlier TP of Rs215 to Rs 300, however, re-iterate our HOLD stance with a potential upside of ~7.5% from current levels. At our TP, the stock would be trading at a **P/E of ~9.3x and P/BVPS of ~1.7x, factored over FY’13E EPS of Rs32 and BVPS of Rs181,” says R K Global research report.

Hold stocks of Jaiprakash Associates

"Jaiprakash Associates Ltd reported 3.1% yoy increase in revenues to Rs 4,026.4 crore as against Rs 3903.9 crore reported in the previous corresponding quarter. However, EBITDA for the quarter stood at Rs 1019.4 crore, up by 21% yoy, driven by strong construction margins. The net profit stood at Rs 283.8 crore, down 6.5% yoy led by lower other income, higher interest and depreciation costs."

"Cement division’s revenues registered a 8% yoy and 22% qoq growth to Rs.1,686.7 crore on the back of higher dispatches of 5.8 mt (+38.6% yoy, 20.3% qoq). Volume growth was on the back of the recently commissioned cement plants. The EBIT margins for the cement division stood at 13%, down 200 bps on the back of higher depreciation and high raw material expenses."

"Robust assets and strong execution capability defines JP Associates, However, servicing of the huge debt remains a major concern on the stock. In addition, the forthcoming FCCBs repayment adds to the woes. The ability to repair balance sheet is the key to sustain the stock price. However, we are hopeful that the management through either stake sale or divestment of non-core assets would able to reduce its debt. Further, current proposition for prepayment of FCCBs, augur well for the company. At the CMP of Rs 62, the stock is currently trading at 10.2x and 8.4x its FY13 and FY14 consensus earnings estimates, we recommend a HOLD on the stock," says Ventura Securities research report.

Buy stocks of Mahindra and Mahindra

"Mahindra and Mahindra (M&M) reported strong revenue growth of 39.3%, which stood at Rs. 9,241.3 crore v/s Rs 6633.8 crore reported in the previous corresponding quarter. However, EBITDA for the quarter stood at Rs 969.4 crore, on the back of higher raw material costs. Consequently, EBITDA margins stood at 10.3%, down by 260 bps yoy. Exceptional items and tax benefits arising from the merger of MADPL with M&M led to 30 bps improvement in net profit margins at 9.3%. M&M posted a net profit of Rs 874.5 crore for the quarter."

"With global economic witnessing a slowdown and Indian Economy too witnessing significant headwinds in the awake of rising trade deficit, depreciating rupee and weak GDP growth, which is weighing high on consumer sentiments. Low consumer sentiment, high interest rates and rising petrol prices are hitting hard the auto industry in India, which until recently was touted as one of the fastest growing markets globally."

"M&M with new product launches and strong product portfolio is expected to grow higher than the industry rate. Despite slowdown in rural demand, we expect tractor segment to grow in line with the industry on account of normal monsoon forecast and revival of demand in H2FY12. Further, we expect the company to restrict the fall in margins on the back of better product mix. At a CMP of Rs. 645, the stock is trading at 11.1x and 9.3x its estimated FY13 and FY14 earnings estimates and we recommend a BUY on the stock," says Ventura Securities research report.

Buy stocks of PTC India Fin; target of Rs 22

“Outstanding loan book as on Q4FY12 was Rs12.66 bn as against Rs10.65 bn on Q3FY12 and Rs6.8 bn as on Q4FY11, registering a YoY growth of 86.2% (18.9% QoQ). The Company has sanctioned loans aggregating to Rs14.37 bn during Q4 FY12 and Rs35.17 bn during entire FY 2012 compared to Rs16.78 bn in entire FY11. Post FY12 till date, PFS has further sanctioned loans aggregating to Rs9.17 bn to 6 power projects. The management expects to maintain growth in sanctions of FY'12 in FY'13 as the company has loan applications in waiting of around Rs20 bn while loan enquiries around Rs25 bn taking total loan pipeline to be around Rs45 bn. The company is also looking for diversification within the power sector to reduce risks in the business and is looking towards renewable sector mostly wind energy. NIM during the quarter stood at ~8.8% (excluding interest on fixed deposits) as against 8.1% for Q3FY12 and 5.4% for Q4FY11. The expansion in NIMs was largely on the back of lower cost of borrowing through ECBs and deployment of IPO proceeds during the quarter. The company has further headroom to raise funds upto $50 mn through ECB in the coming quarters. During Q4 FY12, the company has raised Rs1596.0 mn by way of long term tax saving secured Infrastructure Bonds. The management expects share of bank borrowing to come down going forward to ~20.0% by FY14E, while NCDs, ECBs and infrastructure bonds are likely to constitute around 40.0%, 30.0% and 10.0% respectively.”

“We believe there is value in the company considering its equity investment book and zero exposure to distribution companies. However, environmental clearance, fuel security and linkages, long term PPA’s and overall timely execution are critical to the success of projects and therefore its Equity and debt investments. We have maintained our target multiple for loan financing book at 0.7x for FY13E and continue to value the company’s equity investment book at 10% discount to its fair value considering inherent risk in private equity type model and the current apprehensions in the sector. We maintain our target price at Rs22.0, implying an upside potential of 56.3% from current levels,” says Aditya Birla Money research report.

Buy stocks of SBI; target of Rs 2725

“State Bank of India (SBI), over the last two years, SBIN has reported significantly higher net slippages as compared to peers, leading to the perception of higher asset quality issues. While reported net slippages have been higher, restructured loans as a percentage of overall loans are one of the lowest among public sector banks (PSBs).In FY12, SBIN reported flat net stress loans (NSLs), while peers reported an increase of 75-140bp excluding AI and SEBs and 170-450bp including AI and SEBs. Notably, SBIN has the lowest NSLs (%), despite moderate loan growth. Despite taking the pain upfront, SBIN has also managed to improve provision coverage ratio (PCR) on the back of strong core operating performance (for further details, please refer to our sector update dated 31 May 2012).”

“Re-pricing of high cost deposits, strong CASA traction and significant re-pricing of loan book led to sharp improvement in SBIN’s FY12 NIM, despite higher net slippages. Its peers, on the other hand, witnessed a 10-60bp decline in NIM. Fall in interest rates, moderation in loan growth, rising competition for CASA deposits and moral suasion by the Government of India (GoI) to reduce lending rates will put pressure on NIM. However, reduction in CRR (release of INR130b, ~10bp NIM push) and equity infusion (INR79b, ~5bp NIM push) will provide cushion. In FY12, SBIN’s earnings were marred by higher one-off provisions and loss on investments (20% of PBT). Adjusting for these, core PBT would have already been at ~1.8% (of average assets) as against the reported 1.4% in FY12 and 1.5% in FY11. Lower base of fee income over FY11/12, coupled with continuous traction in fees pertaining to transaction banking , letters of credit, bank guarantees (over 75% of overall fee income in FY12) will lead to fee income CAGR of 15% over FY13-14. Healthy NIM, higher fee income, control over opex, and absence of one-offs will help SBIN to post earnings CAGR of 25%+ over FY13-14, one of the highest among PSBs.”

“We retain SBIN as our top pick in the sector, on the back of (a) strong improvement in core operating performance, (b) one of the lowest net stress loans (NSLs) amongst PSBs, and (c) one of the highest earnings CAGR of 25%+ over FY12-14. The stock trades at 20%+ discount to LPA. Buy for 31% upside,” says Motilal Oswal research report

Hold stocks of GAIL India

"GAIL India’s Gas trading business registered a robust performance with revenues increasing by 27.5% to Rs 9121.3 crore on the back of higher realizations. The volume for the quarter stood flat at 85.5 mmscmd. However, the segment EBIT declined by 38.8% to Rs 165.9 crore on back of lower marketing margins earned on volumes due to higher contribution by the APM gas. The company purchased 16 cargoes during the year and plans to purchase 30 cargoes depending of the availability of the Dabhol LNG terminal."

"Driven by strong performance by the gas trading business, GAIL India Ltd. (GAIL) reported a 17.9% yoy growth in revenues Rs 10,488.4 crore v/s Rs 8893.6 crore reported in previous corresponding quarter. Lower volumes, higher subsidy, retrospective tariff cuts forced the company post 38.3% decline in earnings to Rs 483.3 crore v/s Rs 783.1 crore in the previous corresponding quarter."

"With increasing demand for Natural gas and increased focus on clean energy, India in light of its objective of energy security would need to have secure assets and ensure gas availability either through domestic sources or imported LNG. GAIL, is a play on India’s gas demand. In addition, its foray into upstream and petrochemical sector would make GAIL a prefect growth proposition. With no major near term triggers, we expect GAIL to move sideways. GAIL is currently trading at 9.8x and 8.9x its FY13 and FY14 consensus earnings estimates, we recommend a HOLD on the stock," says Ventura Securities research report.

Hold stocks of Jaiprakash Associates

"Jaiprakash Associates Ltd reported 3.1% yoy increase in revenues to Rs 4,026.4 crore as against Rs 3903.9 crore reported in the previous corresponding quarter. However, EBITDA for the quarter stood at Rs 1019.4 crore, up by 21% yoy, driven by strong construction margins. The net profit stood at Rs 283.8 crore, down 6.5% yoy led by lower other income, higher interest and depreciation costs."

"Cement division’s revenues registered a 8% yoy and 22% qoq growth to Rs.1,686.7 crore on the back of higher dispatches of 5.8 mt (+38.6% yoy, 20.3% qoq). Volume growth was on the back of the recently commissioned cement plants. The EBIT margins for the cement division stood at 13%, down 200 bps on the back of higher depreciation and high raw material expenses."

"Robust assets and strong execution capability defines JP Associates, However, servicing of the huge debt remains a major concern on the stock. In addition, the forthcoming FCCBs repayment adds to the woes. The ability to repair balance sheet is the key to sustain the stock price. However, we are hopeful that the management through either stake sale or divestment of non-core assets would able to reduce its debt. Further, current proposition for prepayment of FCCBs, augur well for the company. At the CMP of Rs 62, the stock is currently trading at 10.2x and 8.4x its FY13 and FY14 consensus earnings estimates, we recommend a HOLD on the stock," says Ventura Securities research report.