Buy stocks of Dish TV; target Rs 82

Dish TV :-

“Dish TV’s Q1FY13 result was in line with our expectation. The company reported net sales of Rs 520crs, a growth of 12% YoY driven by higher subscriber base and increase in ARPU. EBITDA stood at Rs 156crs, a robust growth of 27% YoY on account of higher revenue base and curtailed selling and distribution expenses. EBITDA margins jumped by 350bps over Q1FY12 to 29.9%. At net level, the company reported loss of Rs 32crs against loss of Rs 18crs over same period last year mainly because of increase in interest outgo and higher depreciation. Although digitization didn’t have any marginal impact on new subscriber addition in Q1FY13, the management is confident that new subscriber addition would happen in H2FY13E. With recent base pack hike, we expect increase in ARPU to continue. Strong revenue growth led by higher subscriber base, increase in ARPU and curtailed operating cost leave further room for margin improvement. With healthy free cash flow, we expect leverage ratios to improve in next 2 years.”

“The company reported 12% YoY net sales growth driven by 0.5mn new subscriber addition and 2% increase in ARPU. Gross subscriber base at the of the quarter stands at 13.6mn while net subscribers are 9.6mn. The management has guided new subscriber addition to continue and take a faster pace once digitization process progresses further. We believe the company will maintain in its numero Uno position in DTH market and will benefit the most from digitization. On ARPU front, 2%-3% ARPU growth can be seen for FY13E mainly on account of recent price hike taken in base price and incremental contribution from HD services.”

“Dish TV reported EBITDA margin improvement of 350bps YoY to 29.9% mainly on account of sustained SAC and lower ad spend in the quarter. With strong revenue growth, we expect further room for margin improvement for FY13E & FY14E; however increase in content cost due to renewal in programming contracts would be overhang in near term. Dish TV reported another strong quarter both on sales and EBITDA margins front. With ongoing digitization, we expect boost in new subscriber addition as the company is market leader and commands premium over its peers. Healthy growth in ARPU coupled with higher subscriber base support strong revenue growth. At current price, the stock is trading at 8.8x EV/EBITDA to its FY14E earnings. We recommend BUY with a target price of Rs 82,” says KRChoksey research report.

Buy stocks of Bajaj Auto; target Rs 1,933

Bajaj Auto:-

"Bajaj Auto 1QFY13 results are below estimates, with EBITDA margins at 17.9% (v/s est 18.7%) and adj PAT at INR7.2 (v/s est INR7.27b), impacted by adverse product/market mix and lack of operating leverage. Volumes de-grew by 1% YoY (+6% QoQ) to 1.08m units (v/s est 1.1m). Realizations up 4.7% YoY (-1.4% QoQ) to INR45,095/unit (v/s est INR45,440). Net revenues grew by 3% YoY (5% QoQ) to INR48.6b (v/s est INR49.8b). EBITDA margin declined by 190bp QoQ (+10bp YoY) to 17.9% (v/s est 18.7%), impacted by adverse product (lower 3W volumes) and market mix (lower exports), higher staff cost (+70bp QoQ) despite 6% QoQ higher volume growth and higher other expenses (no benefit of operating leverage). Higher other income at INR1.8b (v/s est INR1.3b) boosted adj PAT to INR7.2b (v/s est INR7.27b) - 1% YoY growth (-5% QoQ)."

"We cut FY13EPS estimates by 1% each to model higher cost push, impact of which is diluted by price increase in domestic market from Jul-12 of ~1% (over & above ~1.25% increase in April). However, we upgrade FY14 EPS by ~5% to INR138, as we change our USD/INR to 52 (v/s 50 earlier). We model volume growth of ~8%/13% for FY13/FY14 and EBITDA margins of 18.6%/18.9% respectively. We model USD/INR rate of 50 each for FY13 and 52 for FY14 (v/s 49.5 for 1QFY13 v/s 48.2 for FY12). Our estimates could see further upgrade as it hedges its FY14 receivables at favorable rate of over 55. If it hedges FY14 Fx exposure at 55, our EPS would see upgrade of ~5% to ~INR145. The stock is valued at 13.9x FY13E EPS of INR109.7 and 11x FY14E EPS of INR138.1, and ~3.3% dividend yield on FY13 basis. Maintain Buy with target price of INR1,933 (14x FY14E EPS)," says Motilal Oswal research eport.

Hold stocks of Axis Bank; target Rs 1205

Axis Bank:-

 "Axis Bank Ltd. has reported decent numbers, which were inline with our expectations, with healthy core performance but slight deterioration in asset quality during Q1FY13. PAT was aided on decent NII and lower operating expenses during the quarter. During Q1FY13, NII grew by a decent 26% YoY to Rs.21,799 mn, on the back of strong Advances growth. Its Advances grew 30% YoY (Ex-currency depreciation 25%), mainly from robust growth of 50% YoY in retail segment (as per outlined strategy). Its Deposits grew by 21% YoY, while CASA grew by 17% YoY. However, its CASA share in total deposit contracted by 148 bps YoY & 248 bps QoQ standing at 39.1%, mainly due to contraction in current deposit and high growth in term deposits. The share of bulk deposits stood at 37% of total deposits against 39% in Q1FY12."

"The Bank reported a sluggish non interest income growth of 9% YoY, supported by fee from retail and agri & SME banking. Treasury income saw a growth of 114% YoY, which includes stake sale from Max India (Rs.890 mn). The Bank expects non interest income growth to track B/S growth. Axis Bank’s operating expenses increased by 16% YoY with employee expenses increasing by 14% YoY and other operating expenses increased by 18% YoY on higher network expansion. Its Cost to Income ratio improved to 44.1% in Q1FY13 as against 46.1% in Q1FY12. Axis Bank’s total provisions in Q1FY13 increased by 47% YoY to Rs.2,588 mn on account of higher provisioning required on loan losses & standard assets (Rs.2.75 bn against Rs.1.37 bn in Q1FY12) from higher slippages. Write back on investment depreciation aided provisions. As a result, the Bank’s Net Profit saw a growth of 22% YoY and stood at Rs.11,535 mn."

"Axis Bank has grown at a very healthy pace in past few years with strong build-up in liability franchise, diversified loan book, stable asset quality and high return ratios. We have largely retained our estimates and going forward, we expect its Advance & Deposit to grow by 19.1% & 17.7% respectively in FY13E and 19.5% & 18.4% respectively in FY14E, while Net Profit to grow at 7% in FY13E & at 16% in FY14E. The steady performance, higher than system growth outlook, focus on retail assets and better deposit franchise will emerge as key value drivers for the stock in medium term. Axis Bank currently trades at an attractive valuation of 1.4x FY14E ABV & 8.2x FY14E Earnings. We change our rating to “Hold” with a price target of Rs.1205," says Sushil Finance research report.

Buy stocks of Sterlite Industries at current level

Sterlite Industries:-

"Sterlite Industries chart looks good. Firstly it has gone through a deep correction and that correction stopped almost exactly at Rs 105, which is a significant support level. That is the point at which we thought the stock should find some support and stem its decline. That happened because nifty was better yesterday. At this point Sterlite is a buy, the stops are very tight. If yesterday’s lows are broken then clearly the trend has not changed. So with a very small risk it’s possible to get a reward, again towards Rs 120-125. It is a very good trade."
He further added, "We have been downbeat on Hexaware Technologies for a long time now. I had suggested that the trend there is giving a distribution pattern and Hexaware has fallen and yesterday it cracked its final support. So even if it rallies a bit today that would be a selling opportunity. I think the stock is going much lower, probably it will go below Rs 90. It is a disappointment but it had a very good rally and it is coming back again that is the way market is."

Buy stocks of Exide Industries at current level

Exide Industries:-

 "I would buy Exide Industries because we have seen improvement in market share and growth coming back over last couple of quarters. Two things for Exide going forward over the next 3 quarter perspective, this is a period which coincides with the strong recovery in auto sales which you saw three years back post the financial crisis. So, the replacement cycle looks very well positioned for them and they make most of the money in replacement market anyway. So, that should board well in terms of growth rate and margins."
He further added, "Second a slightly more medium term perspective is a huge opportunity - two wheeler batteries, they are the dominant player in two wheeler batteries, but two wheeler has seen a massive shift from kick start to push start which mean battery becomes much more critical and after market demand for that has still not come through. That should start coming through from the December quarter. Two wheeler market is much bigger than car market. So, that is a big medium term driver for them."

Buy stocks of Tata Power at current level

Tata Power:-

 “Tata Power is a stock that is now entering in uptrend and therefore it is a share that we want to buy every time we can. At current prices assuming that this market is bottoming out in the short-term, Tata Power becomes a buying opportunity.”
He further added, “The same cannot be said for the other power stocks either it is Adani or even Reliance Power , it is best to avoid them, it is too early. The rally is about one hour old; I don’t think we need to rush into it.”

Tata Power`s trailing 12-month (TTM) EPS was at Rs 5.36 per share. (Mar, 2012). The stock's price-to-earnings (P/E) ratio was 18.36. The latest book value of the company is Rs 52.29 per share. At current value, the price-to-book value of the company was 1.88. The dividend yield of the company was 1.27%.

Buy Stocks of MindTree; target of Rs 708

Buy MindTree:-

 “MindTree reported in-line operational performance for 1QFY2013, with PAT coming in ahead of our expectation because of higher than expected forex gain. MindTree has been one of the good performers on the revenue ass well as margin front in the Indian IT mid-cap space, posting a 3.6% CQGR in its revenue over the past eight quarters. Management sounded confident of meeting Nasscom’s average revenue growth guidance for FY2013. We maintain Accumulate rating on the stock.”

“For 1QFY2013, MindTree reported USD revenue of US$105.5mn, on the back of 0.2% and 0.4% qoq volume and pricing growth, respectively. EBITDA margin improved by 211bp qoq to 20.9%, aided by 230bp qoq gain form INR depreciation and 80bp qoq benefit derived from operational efficiency. EBITDA margin was negatively impacted by 100bp qoq due to wage hikes given to 80% of the employee base from June 1, 2012.”

“Management is confident that its IT services business would continue its momentum and has given offers to 3,000 campus graduates for FY2013. Overall, the management indicated that the company will achieve Nasscom’s current industry growth guidance of 11-14% yoy in FY2013. To achieve this, the company requires minimum ask rate of 3.8% from 2QFY2013- 4QFY2013, which looks a bit stretched. Keeping that in notice, we expect USD revenue to grow by 9.5% yoy in FY2013. Overall, we expect the company to record a 9.8% and 14.8% CAGR in USD and INR revenue, respectively, over FY2012-14E. We expect the company’s EBITDA margin to increase from 15.3% in FY2012 to 18.6% in FY2013. Further, we expect the company to record a 22.4% CAGR in its EBITDA over FY2012-14E. We value the stock at 10x FY2014E EPS, i.e., with a target price of Rs708, and maintain Accumulate rating on the stock,” says Angel Broking research report.

Buy stocks of Cox & Kings around Rs 120-135

"Cox & Kings has to be under tremendous pressure in the short-term. But eventually it is a very attractive buy around Rs 120-135 range because of a couple of reasons. The price, right now, is reflecting the worst in that global scenario. Thus, we feel there is hardly 10% downside on the stock."

He further added, "Take a call on our quant model that we have been suggesting for various stocks like Sintex, United Breweries etc. In the last five years, they have gone for inorganic growth. They have acquired assets of high quality. That is what is attracting me at the current market price. Holiday Breaks PLC, the company's recent acquisition last year is very attractive for the future growth. It is a proper vertically integrated play on the tourism sector."

"Now, if you look from valuation perspective, Thomas Cook recently got acquired at Rs 14.8 annualised equivalent value. From FY13-end perspective, we finished trading somewhere around at AV of almost 20%. That means 30% minimum upside from next 18 months perspective. But we feel that the stock should go and stabilise. Right now, it is bit vibrating between this level of Rs 130 and 140. It will stabilise around at Rs 170-175 levels. So, someone who is taking a call from next six-twelve months perspective, I think he should be looking atleast 25% jump from hereon."

"If I take a valuation call, we are roughly working out with the number of close to Rs 188-202, depending upon how global scenario comes up in next twelve-eighteen months. So, this stock is very safe and the worst is already factored in into the stock price. Thus, if someone is taking a bet, he has hardly anything to lose on downside and he can use the fresh strategy to accumulate the stock. On upside, even if he gets Rs 170-175, he will make a handsome return of 25-30% in a very short span of time."

Buy stocks of South Indian Bank

"South Indian Bank, DCB and many banks which are available in this particular range of Rs 20-60, we have gone and studied how big banks have become very big and how that Rs 70-80 stocks became Rs 250-300 and we try to took a snapshot of those patterns and we felt two things that could benefit and how their model shaped out."

He further added, "They had been slowly growing in terms of branches and secondly, they have been investing on loan books, which was relatively safe and South Indian Bank is a conservative bank with almost 650 branches approximately 637 to be precise and targeting 700 branches by the year end. We feel this is one stock, which is relatively undervalued given the marketcap is Rs 2,800 crore."

"We had gone and studied how banks were acquired, which were in too distressed at much higher valuation than South Indian Bank and the roughly valuation that now we are pegging at is Rs 6.5 crore to Rs 7 crore branch for banks like South Indian Bank on conservative side because it has got good asset quality and there was last quarter where we expected a slippage of one big number, which has now been reversed which the management has guided in last quarter itself. So if you see we are expecting close to Rs 125 crore for this particular quarter and over Rs 550 crore for the full year."

"This is one story, which should be in a bet for three-four years. We have seen Karur Vysya Bank, ING Vysya Bank even PSU banks like UCO Bank, Vijaya Bank from Rs 38, Allahabad Bank, they all shaped out with development into their story and once they reach that more than 750 branches, their valuation got refined and South Indian Bank is the perfect proxy in this particular scenario where we feel given there is a strong support at Rs 22-23, which is because right now the stock is at Rs 25 because of the good expectation from numbers but is a very good buy at this Rs 22-23-25 levels from three-four years perspective."

"If the bank crosses Rs 1,200 by FY15-FY16 because as far basel III norms are concerned, they require roughly around Rs 1,400 crore. So if I adjust that also, shareholders who are buying right now, they would get atleast 20-23% year-on-year (YoY) growth from next three-four years perspective and asset which gives you more than 20% growth from next three-four years perspective, I think it is a blind bet and you have hardly anything to lose on valuation front on these kind of banks. So a win-win situation for long-term players and that is why we have put this in a portfolio bet."

Buy stocks of CMC; target Rs 1050

“CMC reported Q1FY13 results touch ahead of our/consensus expectation at top-line. However, the strong performance at the bottom-line was led by a margin surprise, higher other income and lower tax rate. The strong growth in SI is also aided by the currency; moreover, the weakness in ITES remains a matter of concern. The margin profile continues to be volatile due to continued investment in the business. We reiterate our ‘Accumulate’ rating, with a revised target price of Rs1,050 (from Rs1,140) as we cut our multiple due to growing uncertainty around demand.”

“CMC reported revenue growth of 10.3% QoQ to Rs4.5bn (PLe: Rs4.5bn, Cons: Rs4.2bn). However, excluding SEZ, top-line grew by 9.1% QoQ to Rs4.4bn. EBITDA margins expanded by 198bps QoQ to 16.6% (PLe: 15.6%, Cons: 14.3%), due to currency depreciation & cost optimization. PAT grew 36% QoQ to Rs584m (PLe: Rs463m, Cons: Rs428m), due to other income of Rs57.1m (PLe: Rs25.4m) and tax-rate of 22.6% (PLe: 29%). We expect the revenue momentum to stay in the mid-twenties, with stable margin profile. We reiterate ‘Accumulate’, with a target price of Rs1,050, 14x FY13E earnings estimates,” says Prabhudas Lilladher research report.

Buy stocks of TCS; target Rs 1290

“Tata Consultancy Services (TCS) reported Q1FY13 results touch-ahead of PLe/ consensus expectations. The management indicated no worrying signs in clients’ spending behaviour. Moreover, they indicated that some of the delays that they had witnessed at the beginning of the last quarter are allaying away. We see uncertain demand environment and weak pricing environment to restrict consensus estimate upgrade.”

“According to the management, the deal pipeline is more broad-based and the growth has come across the vertical. The strong growth in BFSI and telecom is led by one client ramp-up in each vertical. We see the growth getting scarce as the demand environment gets challenging. However, already pocketed deals for TCS gives better visibility of revenue compared to peers. The management is confident of achieving higher end of NASSCOM guidance in the constant currency terms.”

“The current price factors in strong performance by TCS. We tweak our model; hence revise our target price to Rs1,290 (from Rs1,270), 17x FY14E earnings estimate. We value TCS on FY14 due to better revenue visibility compared to Infosys, which we value on FY13 estimates. We retain our 'Accumulate' rating, with a revise target price of Rs 1,290,” says Prabhudas Lilladher research report.

Buy stocks of Infosys; target Rs 2530

“Infosys (For 1QFY2013) reported yet another disappointing quarterly result, broadly underperforming on all fronts. The most disappointing thing in Infosys result was revision of FY2013 USD revenue growth guidance downwards to at least 5% from 8-10% earlier, tad lower than our estimate of 6-8%. In addition, the company has stopped issuing quarterly guidance citing uncertainly in demand environment which is discomforting. The stock has got corrected significantly.”

“For 1QFY2013, Infosys reported revenue of US$1,752mn, down 1.1% qoq, impacted due to 3.7% qoq decline in pricing and a hit of US$15mn as a one-time reversal in a transformation project from a European utilities client. EBITDA margin declined by 181bp qoq to 30.8%, despite having benefits from ~8% qoq INR depreciation against USD because operating margins were impacted adversely by pricing decline (co attributing the decline to change in business mix with some sporadic pricing resets in FSI) and US$15mn of revenue reversal on account of a project cancellation.”

“Management has given a disappointing FY2013 guidance of atleast 5% yoy growth from 8-10% earlier, tad lower than our estimate of 6-8%. Post 1.1% qoq decline in USD revenue in 1QFY2012, the company requires ~3% ask rate in 2Q-4QFY2013 to achieve 5% growth in FY2013, which, at current scenario of company’s performance, looks a bit stretched. Hence, we expect USD and INR revenue to post a CAGR of 7.1% and 11.2%, respectively over FY2012-14E. On the EBIT margin front, for FY2013, the management expects it to go down by 50-100bp yoy in FY2013 which does not factor in the wage hike. Over FY201214E, we expect a CAGR of 11.4% and 9.5% in EBIT and PAT, respectively. At the CMP of Rs 2,265, the stock is trading at 14.0x FY2013E and 13.0x FY2014E EPS. We maintain Accumulate rating on the stock with a target price of Rs 2,530 but in the near term though we do not expect Infosys to give considerable absolute upsides,” says Angel Broking research report.

Sell stocks of Gujarat State Fertilizers; target Rs 350

“Gujarat State Fertilizers Company (GSFC), caprolactam-benzene spreads have declined by 50% in US$ / 30% in INR to $1175/mt by June’12 which is likely to have 30%yoy drop in FY13 earnings. Despite attractive valuations, sharp drop in company’s earnings and absence of any positive trigger will put pressure on the stock in near term. We downgrade our FY13 earnings estimates by 10% to Rs 65.6 (20% below consensus) and downgrade the stock from Accumulate to REDUCE with revised price target of Rs 350. sharp reversal of Caprolactam-Benzene spread and announcement of any special dividend are key risks to our recommendation.”

“Company’s chemicals segment contributes 1/3rd to total revenues while contribution to profit is 2/3rd. Caprolactam contributes ~70% to chemical revenues / profits and hence company’s earnings closely follow its Caprolactam Benzene spread. (Kindly refer to chart on next page). On account of sharp drop in spreads, we expect GSFC to enter into earnings degrowth phase in FY13 with each quarter reporting earnings drop of 20%- 40%. This earnings degrowth phase along with no positive trigger in near term is likely to keep pressure on company’s stock price.”

“We downgrade our FY13E EPS est by 10% to Rs 65.6, which is 20% below consensus est, on account of sharp decline in chemical segment margins. Historically we have seen company’s stock price following its chemical business profitability and downward pressure on chemical segment margins is likely to keep the stock price under pressure. We downgrade our recommendation from Accumulate to REDUCE and wait for improvement in Caprolactam-Benzene spread. However we expect GSFC to benefit marginally from higher ammonia prices,” says Emkay Global Financial Services research report.