Buy stocks of IPCA Labs; target Rs 468

IPCA Labs:-

"IPCA Labs’ recorded better than expected revenue growth - up 19.7% YoY to Rs 6.34bn. Growth was primarily driven by rebound in domestic formulation (up 18.6% YoY) and 58% growth in export API’s (ramp-up in recently added capacities as well contribution from Tonira Pharma)."

"On the other hand, export formulations grew mere 9% YoY, restricted due to (1) “Track & Trace” issue & delay in artwork approval in the EU & Russia, (2) lagged US sales due to capacity constraints and (3) delayed shipment in the Institutional segment. The company also received approval for artesunate+amodiaquine - revenue contribution expected by Q4FY13E. The market size for the product is ` 1.5- 2bn and no significant competition is envisaged for next two years."

"IPCA’s growth mantra revolves around creating a competitive position in formulations by leveraging on its API goldmine. We expect acceleration in export formulation revenues mainly led by the generics arm (US market in particular post FDA approval to its Indore site) and sustained growth in branded promotional markets. Healthy rebound in domestic formulation revenues hereon shall add to growth momentum."

"We have increased our FY13E/14E EPS estimates by 8.8%/6.0% to reflect increased revenue contribution from Export API business and higher margins aided by favourable sales mix & currency benefits."

"At CMP, the stock trades at 13x FY13E and 11.4x FY14E earnings. We recommend ‘Accumulate’ on the stock with a revised target price of Rs 468 (13x FY14E EPS)," says Dolat Capital research report.

Buy stocks of CEAT; target Rs 125

 CEAT:-

"CEAT reported good results for Q1FY13 which was driven by sharp improvement in operating margins on YoY basis boosted by declining natural rubber prices and increasing capacity utilization at the Halol plant. However, on QoQ basis the margins were a bit lower which was in line with expectations. We retain our positive view on CEAT and maintain Buy rating on the stock."

"CEAT reported good results for Q1FY13 which was driven by sharp improvement in operating margins on YoY basis boosted by declining natural rubber prices and increasing capacity utilization at the Halol plant. However, on QoQ basis the margins were a bit lower which was in line with expectations. We retain our positive view on CEAT and maintain Buy rating on the stock."

"Sri Lankan business reported net sales of Rs 92.9 cr up 17% YoY and down 4% QoQ. EBITDA margin stood at 14.9% vs 14.5% in Q4FY12 primarily due to benefit of rupee depreciation. Consolidated net sales increased 10% YoY to Rs 1,225 cr; Consolidated EBITDA margin stood at 9.3% with a PAT of Rs 29 cr in Q1FY13."

"We expect CEAT to report continuous improvement in its operating performance, led by improving utilization at the Halol plant and declining raw-material prices. Changing product mix, expanding presence and attractive valuations seem propelling for CEAT at current levels."

"At CMP, the stock is trading at P/E of 3.21x FY13E and 2.54x FY14E earnings with an EV/EBITDA of 3.16x and 3.09x which we believe are lower as compared to peers. We maintain BUY on the stock with a target price of Rs 125 (4x FY13E EPS of 31.2)," says Nirmal Bang research report.

Buy stocks of Allahabad Bank; target Rs 205

Allahabad Bank:-

"Allahabad Bank’s loan book grew at 11.9% YoY and remained flat on QoQ basis. Out of the total advances portfolio, Retail grew 15.5% YoY, agri grew 19.6% YoY and SME grew 11.7% YoY. Management expects to sustain loan growth of 20%+ going forward with major focus on retail book. We have factored in loan growth of 18.5% for FY13E and 18.4% for FY14E."

"NIM stood at 3.17% in Q1FY13, as compared to 3.23% in Q4FY12 and 3.4% in Q1FY12 resulting from higher cost of funds coupled with decline in CASA ratio. Management has reiterated its guidance of maintaining NIMs 3%+ for FY13E. We expect NIMs to be at 3.1% for both FY13E and FY14E."

"Non-interest income of the bank declined 12.8% QoQ and increased 8.3% YoY to Rs 309.5 cr. Fee based income increased 15.5% YoY to Rs 239 cr in Q1FY13 and the bank showed a trading profit of Rs 55 cr vs 26 cr in Q1FY12. Management expects improvement in non-interest income in the coming quarters driven by higher recoveries. We expect non-interest income to grow at 8.5% for FY13E and 12.0% for FY14E."

"Given the current challenging macro-economic scenario, the bank’s strategy is to focus more on improving the asset quality rather than focus on growth and margins. We believe that the bank will continue to focus on strengthening its balance sheet. Being an attractive mid size public bank with above average credit growth, stable NIMs and comparatively healthy return ratios (RoE of ~20% and RoA of 1%+) we believe that Allahabad bank looks attractive at current levels."

"At CMP, Allahabad Bank is trading at 0.65x and 0.55x of its FY13E & FY14E ABV whereas on PE it is trading at 3.26x and 2.66x in FY13E and FY14E respectively. We continue to maintain BUY on the stock with a target price of Rs 205," says Nirmal Bang research report.

Buy stocks of Adani Ports & SEZ; target Rs 145

Adani Ports & SEZ Ltd:-

"Adani Ports & SEZ Ltd handled consol volume of 22.5 MMT (Abbott 3.3 MMT) that led to consol revenue is Rs 1,028 crore and PAT is Rs 276 crore that is impacted by high interest costs of Rs 325 crore. Abbott port recurred losses of Rs 130 crore inQ1FY13 and reveals that income from Abbott port is not sufficient to pay interest obligation for overseas assets in Q1FY13."

"Adjusted Standalone Q1 PAT, Rs 290.6 crore (SEZ land sale to JV AICTPL, Rs 160 crore and forex loses of Rs 32.2 crore) is below to our expected PAT of Rs 308 crore. Standalone cargo volume 17.42 MMT (+15.4%, YoY) is in line to our expectation and realization of Rs 327/ Ton (-3.4%. YoY) led to port revenue of Rs 569 crore below our estimates. EBITDA grew to Rs 472 crore (+30%, YoY) and margins improve by 650 bps."

"We revise our estimates to Rs 6.3 and Rs 9.3 from Rs 7.0 & Rs 10.1 for FY13E and FY14E. We cut the full year cargo volume estimates to 79.1 MMT (-7%) from 85 MMT due to lower demand of imported coal from the coal sector. We retain “BuY” on APSEZ with TP of Rs 145 (from Rs 163) based on 1.) strong operating cashflow of ~Rs 2500 crore supported by 60% fixed revenue contracts 2.) ramp up of new capacities on Dahej, Hazira & Mormugao 3.) better EBITDA margins in the industry," says KRChoksey research report.

Buy stocks of Oriental Bank; target of Rs 320

Oriental Bank of Commerce:-

“Oriental Bank of Commerce (OBC) reported 10% YoY and 48% QoQ PAT growth (24% above estimates), led by (1) higher recoveries from written-off accounts (INR2b), boosting non-interest income, and (2) sequential decline in slippages and higher MTM provision reversals, leading to lower provisions.”

“Reported margins improved 11bp QoQ to 2.79%, as the yield on funds improved 6bp QoQ and cost of funds declined 4bp QoQ, led by sequential decline in bulk deposits (declined 3.5% QoQ to INR415b). Asset quality surprised positively, as contrary to peers, gross slippages declined from INR13.2b in 4QFY12 to INR7b. GNPAs declined 6% QoQ, driven by (1) healthy recoveries and upgradations at ~INR4.3b, and (2) higher write-offs at INR4.8b v/s INR5.4b in 4QFY12. OBC restructured loans aggregating INR20.4b, resulting in net cumulative book of INR109b (9.6% of loans). Loans grew 16% YoY and remained flat QoQ at INR1.14t. While deposits grew 9.4% YoY. Core deposit grew by 20% YoY and 3% QoQ. CASA ratio remained stable QoQ at ~24%. We expect OBC to report RoA of ~0.7% and RoE of ~12.4% over FY13/14. The stock trades at 0.6x FY13E BV and 0.5x FY14E BV. Maintain Buy,” says Motilal Oswal research report.

Hold stocks of Maruti Suzuki; target of Rs 1175

Maruti Suzuki India:-

“Maruti Suzuki India, Net sales stood at Rs 107.7 bn (+26% YoY, -8% QoQ), driven by volumes of 296k units (+5.1% YoY, -17.9% QoQ) and sharper than expected increase in realizations (+20% YoY, +11.9% QoQ). Export realizations showed a sharp increase (+19.9% YoY, +5.4% QoQ) aided by Rs 1 bn revenue from the Ertiga (FY13 mgmt target at Rs 4bn). EBIDTA stood at Rs 7.8 bn vs our est. of Rs 8 bn, 2% below estimates. EBIDTA margins stood at 7.3% vs our est. of 7.6%. RM Cost/Sales was lower by 180 bps QoQ on benefits of price hike and a richer product mix; however, 170 bps QoQ increase in other expenses largely offset the benefit. Adverse forex movement impacted royalty by 100 bps QoQ. Despite an in-line operational performance, net profit at Rs 4.2 bn was 10% below estimates owing to a lower other income (Rs 1.1bn vs Rs 1.8bn YoY).”

“Our TP on MSIL at 13xFY14E EPS of Rs 90 stands at Rs 1175. The stock is currently trading at 17.5x/12.3x FY13/FY14E earnings. In the near-term plant shutdown and currency remain key negative catalysts. We have upgraded the stock to HOLD largely owing to the recent underperformance but believe that the valuations still do not provide sufficient cushion,” says Emkay Global Financial Services research report. 

Hold stocks of Yes Bank; target of Rs 379

Yes Bank:-

“Yes Bank’s (YBL) post tax income grew by +34% YoY on the back +33% growth in NII and a surprising +74% growth in non interest income. CASA deposits at Rs. 81.7 bn grew by 72% (albeit on a lower base), the highest recorded growth in the past six quarters. NIMs capped at sub 2.8% past seven quarters continued to disappoint. Notwithstanding restructured advances remained virtually stable at 0.51%, deteriorating NPLs cautioned towards bleak economic environment taking toll on the banks asset quality.”

“YBL reported 16.4% YoY growth in credit but its customer assets (advances + credit substitutes) grew 32.4% YoY. Flipping higher yielding advances (~12%-13%) with lower yielding credit substitutes (~10.5%-11%) coupled with higher share of bulk deposits (52.3%) resulted in curbed margins of 2.8% (reported) for YBL. NIMs could have been lower had it not been for some short term funds borrowed by the bank at rates lower than that of retail term deposits.  We expect 2.9% NIM for FY13E, on the back of strengthening CASA ratio. The bank’s CASA ratio improved by 123 bps to 16.3% as against 15.0% in Q4FY12, backed strong growth in granular SA deposits which grew by Rs. 5.0 bn sequentially.”

“We expect 18.0% CASA ratio for FY13E on the back of the bank’s robust branch expansion spree. Non Interest Income grew by 74.3% y-o-y from Rs. 1,653 mn in Q1FY12 to Rs. 2,881 mn in Q1FY13. The Financial Markets segment (up 282% YoY, including Rs 0.3-0.4bn of trading gains) was a key driver. Growth in the other segments too was above balance sheet growth.  Cost to income ratio was at 39.5% in Q1FY13 as against 37.4% in Q1FY12, given the branch expansion plans of the bank but it still continues to be at sub 40% comfort zone.  We expect 41.3% efficiency ratio for FY13E. We rate Hold on the stock with a target of Rs. 379 with a PBV target multiple of 2.1x on FY14E BV of Rs 183,” says SKP Securities research report.