Hold Bajaj Corp Ltd. For Target Rs.271


Outlook
Bajaj Corp Ltd (BCL) continued to post a robust volume growth of 23.4% in its flagship brand ADHO (Almond Drops Hair Oil) primarily driven by rural penetration (increased distribution reach). We have incorporated FY15 forecasted financials from this quarter and accordingly expect revenues to grow at a CAGR of 24.7% to Rs 916.9 crore over the forecast period of FY13-15 on the back of steady volume growth (~20% avg.) and sustained leadership position in its flagship brand Almond Drops.
At a CMP of Rs 253, Bajaj Corp is trading at 19.6x and 17.7x its estimated earnings for FY14 and FY15. Given the stretched valuations, we reiterate a HOLD on the stock with the revised price target of Rs 271 (as against our revised target of Rs 209) representing a limited potential upside of ~6.2%. However, prospective inorganic growth, strong cash availability (~Rs 477 crore) and potential new product launches is an added attraction.
Key Takeaways
* BCL yet again reported a robust top-line growth of 31.8% YoY to Rs 148.1 crore in Q3FY13 as against Rs 112.3 crore in Q2FY12 primarily led by volume growth of ~23.4% YoY from its flagship brand (Almond drops). The growth is also attributable to the rural penetration on the back of increased distribution reach (2.54 mn retail outlets vs. 2.43 mn in Q2FY13). The company reported net profit at Rs 42.2 crore in Q3FY13 as against Rs 28.9 crore in Q3FY12 (+46.2% YoY) partially attributable to the price hike (~8.5%) taken in April 2012 and softening raw material prices (benefit of ~Rs 1.85 crore in Q3FY13).
* EBITDA margin at 29.03% for the quarter, expanded by 352 bps YoY on account of price hike taken in April, 2012 and decline in RM costs (LLP – Rs 79.1/kg; ~ -4.5% YoY) partially offset by rising refined oil prices (Rs 80.2/kg; +14.1% YoY). Moreover, BCL has entered into a deal with its LLP supplier (its key raw material; ~36.8% of total cost) which will enable it to buy LLP at an average price of ~Rs 75/kg in Q4FY13. This, we believe will help BCL to maintain its EBITDA margin in the range of ~26-27% in FY13 amidst volatile raw material prices.
* BCL’s flagship brand ADHO witnessed a healthy volume growth (23.4% YoY) and value growth (33.1% YoY) which was far ahead from the LHO market growth (volume - ~17.9% YoY and value - ~26.1% YoY). The volume and value market share enjoyed by Almond drops continue to command leadership status i.e. ~51.9% and ~54.6% respectively. Moreover, we believe that Dabur’s foray into LHO category (Dabur Almond Hair Oil)
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Accumulate Petronet LNG Ltd For Target Rs.180


Petronet LNG’s (PLNG’s) Q3FY13 result was better than our expectation on the EBITDA and bottom-line front. Top-line registered a growth of 33.1% YoY to Rs84.2bn (Rs63.30bn) on account of 38% YoY growth in realisations, while the volumes were down on YoY basis at 140.6TBTU. EBITDA/TBTU witnessed an expansion, from Rs34.7/TBTU in Q3FY12 to Rs37.6/TBTU in Q3FY13, broadly in line with our estimates. Bottom-line, during the quarter, stood at Rs3,185m (Rs2,954m), an increase of 7.8% YoY as against our expectation of Rs3,003m.
* Confluence of higher spot marketing margins and higher volumes: Our calculation suggests that the company made gross marketing profits on spot volumes of Rs1,663m (27.4% of the reported gross margins for the quarter). Spot volumes increased ~11.3% QoQ to 30.5 TBTU, while tolling volumes -declined QoQ to 13.5TBTU. Despite higher spot volumes QoQ, lower marketing margins resulted in EBITDA per TBTU declining to Rs37.6 per TBTU (-2.0% QoQ).
* Outlook: We believe the benefit of strong marketing margins and utilizations at Dahej is adequately captured into the CMP and stock price appreciation from the current juncture will be contingent on positive developments on Kochi terminal (increased linkages at affordable prices), coupled with timely execution of the Phase-II pipeline. In our view, muted earnings growth over the next couple of years, along with potential regulatory risks (overhang of potential regulation of the re-gasification tariffs as well as marketing margins), outweighs potential positive triggers. We maintain ‘Accumulate’ with DCF-based target price of Rs180/share, implying target P/E of 12.4x FY14.
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Buy Wipro Limited For Target Rs.403.00




Wipro is 4th largest Company in the world in terms of market capitalization  in  IT services. During  the  quarter  ended,  the  robust growth  of revenue is increased by 23.81% to Rs. 16106.00 million.
* Wipro has added 53 new customers for the quarter.
* Wipro has entered into a long term strategic partnership with Qatar Airways for developing and implementing IP for cargo management and revenue accounting.
* Wipro Technologies has been positioned as a Thought Leadership "Best-In-Class" in the CEB TowerGroupOutsourcing Technology Analysis Report 2012.
* Wipro launched Prepaid Broadband Solution for US Cable Market.* Wipro received the Oracle APAC CRM Partner of the Year 2012 award.
* Wipro  Technologies  announced  its  partnership  with  the  Chennai Runners, as  the  title and  technology sponsor of  “The  Wipro Chennai Marathon (TWCM) 2012".
* Wipro Technologies has become an SAP® services partner of SAP South Africa. 
* The Company’s revenue and PAT are expected to grow at a CAGR of 17% and 9% over FY11 to FY14E respectively.
 
Outlook and Conclusion
* At the current market price of Rs.363.00, the stock P/E ratio is at 14.58 x FY13E and 13.00 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.24.91 and Rs.27.93 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 9% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 9.43 x for FY13E and 8.40 x for FY14E.
* Price to Book Value of the stock is expected to be at 2.69 x and 2.23 x respectively for FY13E and FY14E.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.403.00 for Medium to Long term investment.
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Buy DB Corp For Target Rs.287


Leader with diversified regional play.
We initiate coverage on DB Corp with a Buy rating and target price of INR287 (18x oneyear forward P/E), implying 28% upside. DB Corp has a  strong regional franchise, with leadership position across most of its footprint and a geographically diversified revenue/ earnings profile.  Valuation at ~16x FY14E P/E is attractive given expected earnings CAGR of 18% over FY13E-15E along with high return ratios (20%+ RoE in  down-cycle) and attractive dividend payout (~40%) and yield (2%).
EPS CAGR of 18% over FY13E-15E:
During FY13E-15E, we expect EPS CAGR of 18% and EBITDA CAGR of 14% led by recovery in ad revenues, receding newsprint cost and  lower new circle losses. Expansion plans have been put on hold due to adverse macro environment.
Diversified regional play, no language barrier:
DB Corp publishes the Hindi daily 'Dainik Bhaskar', Gujarati daily 'Divya Bhaskar' and Marathi daily 'Danik Divya Marathi', with a total  readership base of ~19.5m and circulation of ~4.7m. Company's radio business 'My FM' is present in 17 cities and covers 7 states. DB has the most diversified revenue/EBITDA stream in the listed print media space, with not more than 35% revenue/EBITDA contribution coming  from any single state. Established print business is divided into four circles: MP&CG, Rajasthan, Gujarat and CPHH, while emerging  markets include Jharkhand (launched in CY10) and Maharashtra (launched in CY11).
Strong franchise across markets:
DB has leadership position across markets despite being a relatively young brand (15 years or lower) in all markets, except Madhya Pradesh (MP) and Chattisgarh (CG). Company has a strong presence in all of its key markets, holding No.1 or No.2 position in almost all its  major mature markets. Revenue CAGR of 11% driven by ad revenue recovery: We expect ad revenue CAGR of 11% over FY13E-15E  driven by continued strength in local advertising and improvement in national advertising, which has been under pressure. Cover price increases undertaken along with moderate growth in copies should drive ~9% CAGR in circulation revenues for DB.
Expect ~130bp improvement in EBITDA margin over FY13E-15E:
Company's EBITDA margin would decline from a peak of ~32% in FY10/11 to ~23% in FY13 due to decline in mature edition margins and  EBITDA loss from emerging editions. Emerging edition losses seem to have peaked, with quarterly loss run-rate declining from ~INR230m  in 2QFY12 to ~INR100m in 2QFY13 led by stable operating costs and ~50% YoY increase in revenues for emerging editions. Previous  market entries took 3-4 years to reach EBITDA break-even. We expect newsprint costs to post 8% CAGR, thus capping overall opex growth  at 10% CAGR over FY13E-15E.
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Buy Mahindra Holidays & Resorts India Ltd.For Target Rs.451

We initiate coverage on Mahindra Holidays & Resorts India Ltd (MHRIL) as a BUY with a Price Objective of `451 representing a potential upside of ~37.0% over a period of 15 months. At the CMP of `329, the stock is trading at 23.7x and 19.0x its estimated earnings for FY13 and FY14 respectively. MHRIL is the market leader in the Vacation Ownership (VO) industry and faces limited competition (other sizable player being Sterling Resorts). MHRIL is expected to witness healthy growth of 17.7% CAGR in its top-line to `867.2 crore by FY14 on the back of acceleration in net member additions (13.4% CAGR). We believe that this acceleration is achievable owing to huge untapped opportunity for VO industry in India, adherence to its “Member First” policy and focus towards increasing room inventory (FY13 - ~600 rooms; FY14 - ~425 rooms). While in the recent past, MHRIL was plagued by significant member cancellations, its refurbished business model coupled with increasing room inventory should help in stemming the attrition; boosting net member additions and consequently revenues.
* Robust model with front ended cash flows and steady annuity income streams
Owing to MHRIL’s stable stream of cash flows and self funding nature of the business model, the company has been able to maintain its debt at negligible levels as compared to the hotel industry which has high gearing. MHRIL’s strategy is to fund capex (building room inventory) and customer acquisition costs from membership fees (via both upfront and securitization of receivables). Also, majority of the resort and company level expenses are funded through Resort income and Annual subscription fees (ASF). With an estimated growth of membership base at a 13.4% CAGR, the fund flows, going forward, will ensure that the company maintains debt at negligible levels. Also, the annuity stream in form of ASF will become stronger. Further, we believe that the low gearing status is an added advantage especially during the period of hardships (viz slowdown in membership base, delay in payment of membership fees) as it will be in a good position to raise liquidity from external sources.
* Valuation
We initiate coverage on MHRIL as a BUY with a Price Objective of `451 representing a potential upside of ~37.0% over a period of 15 months. At the CMP of `329, the stock is trading at 23.7x and 19.0x its estimated earnings for FY13 and FY14 respectively. MHRIL is the market leader in the VO industry and faces limited competition (other only organized player being Sterling Resorts). We believe that MHRIL should be able to witness robust uptick in member additions on the back of its revamped growth strategy. The VO industry which is the fastest growing component of the tourism segment in India provides enough room for MHRIL to gain its rightful share.
While the stock has traded at an average PE of 29.0x its one year forward earnings, currently the company is being quoted at its lowest valuations. With the new management team in place coupled with key customer centric initiatives (“Member First” philosophy, inventory additions, value added services), we expect the company’s valuations to re-align to its historical levels. We have valued the company at a PE of 26.0x, which is at a 10% discount to its historical average of 29.0x.
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Buy Eros International Media Ltd For Target Rs.228.00 




Eros International Media Ltd (EIML) is a eading global company in the Indian filmed entertainment industry that acquires coproduces and distributes Indian language films in multiple formats.
* During the quarter, the robust growth of Net Sales is increased by 31.16% to Rs. 2292.70 million.
* Eros International Plc & HBO Asia made a joint announcement to launch two new premium advertising-free movie channels, HBO DEFINED and HBO HITS in India.
* EIML has released 19 films during Q2FY13 in different languages (3 Hindi, 16 Tamil & other regional language films 23 films in Q2 FY12.
* EIML has bagged the Top Grossing Banner & Excellence in International Distribution awards at the Zee ETC Bollywood Business Awards 2012.
* EIML recently signed a licensing agreement with colors’ Viacom18 Media Pvt. Ltd.
* Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 22% over 2011 to 2014E respectively.

Investment Highlights
Results updates- Q2 FY13,
Eros International Media Ltd. is a global player within the Indian media and entertainment arena, reported its financial results for the quarter ended 30 Sept, 2012.
The company’s net profit declines to Rs.260.80 million against Rs.273.50 million in the corresponding quarter ending of previous year, a decrease of 4.64%. Revenue for the quarter rose 31.16% to Rs.2292.70 million from Rs.1748.00 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.2.84 a share during the quarter, registering 5.02% decrease over previous year period. Profit before interest, depreciation and tax is Rs.440.30 millions as against Rs.421.70 millions in the corresponding period of
the previous year.

Outlook and Conclusion
* At the current market price of Rs.204.00, the stock P/E ratio is at 10.42 x FY13E and 8.78 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.19.58 and Rs.23.23 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 22% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 6.38 x for FY13E and 5.41 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.85 x and 1.53 x respectively for FY13E and FY14E.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.228.00 for Medium to Long term investment.
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 Buy Pfizer Ltd For Target 1300.00

Pfizer Ltd provides prescription medicines for humans and animals in India & internationally.
During the first quarter ended the robust growth in the Net Profit of the company and it is rose by 11.26% to Rs. 522.80 million.
Pfizer has launched 26 Branded Value Offerings (BVOs) during the year mainly in anti infective, analgesic, CNS, CVS & diabetes segment.
Pfizer made clinical research investments of US$ 1.18 million in pharmaceutical R&D is one of the highest spenders in India.
Pfizer has approved the sale of its wholly owned subsidiary Pfizer Animal Pharma Pvt Ltd to Pfizer Animal Health India Ltd, a 100 percent indirect subsidiary of Pfizer Inc, USA for Rs 471.60 crore.
Pfizer entered into chronic segments such as neuroscience which is one of the fastest growing markets in addition to new products in India.
Pfizer Ltd (India) has a turnover of US$ 184.96 million (March 2012).

Outlook and Conclusion
At the current market price of Rs.1150.00, the stock P/E ratio is at 15.10 x FY13E and 13.70 x FY14E respectively.
Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.76.14 and Rs.83.95 respectively.
On the basis of EV/EBITDA, the stock trades at 6.71 x for FY13E and 5.57 x for FY14E.
Price to Book Value of the stock is expected to be at   2.24 x and 1.93 x respectively for FY13E and FY14E.
We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.1300.00 for Medium to Long term investment.
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Buy VST Industries Ltd For Target Rs.2073.00



VST Industries Ltd. is a public conglomerate tobacco company headquartered in Hyderabad, India.
* VST Ltd. is third largest cigarette manufacturing company in India.
* VST Ltd has recommended dividend for the year 2011-12, Rs. 65.00 per Equity Share of Rs. 10.00 each.
* During the quarter ended, the robust growth of Net Sales is increased by 6.94% to Rs. 1761.90 million.
* Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 30% over 2011 to 2014E respectively.
* Company has recorded leaf export turnover  of Rs. 154 crore, in the year 2011-12.
* During the year under review the cigarette volumes stood at 762 millions up by 12% when compared to 2010-11.
* The company manufactures & distributes cigarettes under the brands Charms, Charminar, Gold.
Investment Highlights
Results updates- Q2 FY13,
The company’s net profit jumps to Rs.276.00 million against Rs.335.90 million in the corresponding quarter ending of previous year, a decrease of 17.83%. Revenue for the quarter rose 6.94% to Rs.1761.90 million from Rs.1647.60 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.17.88 a share during the quarter, registering 17.83% decrease over previous year period. Profit before interest, depreciation and tax is Rs.458.50 millions as against Rs.541.40 millions in the corresponding
period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.1885.00, the stock P/E ratio is at 16.15 x FY13E and 13.94 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.116.74 and Rs.135.18 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 30% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 10.04 x for FY13E and 8.75 x for FY14E.
*  Price to Book Value of the stock is expected to be at 9.16 x and 8.37 x respectively for FY13E and FY14E.
*  We recommend ‘HOLD’ in this particular scrip with a target price of Rs.2073.00 for Medium to Long term investment.

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 Buy Puravankara Projects Ltd For Target Rs.102.00


SYNOPSIS
* Puravankara Projects Ltd is one of the leading real estate developers of the country response to the growing need for quality housing & commercial space in metropolitan cities of  India.
* During the quarter, the robust growth of Net Profit is increased by 89.12% to Rs. 501.93 million.
* Sale value for the quarter was INR 2,346 million, representing an 18% increase versus INR 1,994 million in the quarter ended 30 September 2011.
* Purva Venezia won the award for ‘Mid-range Housing Project of the Year’ at the Bangalore Real Estate Awards 2012.
* Puravankara launched an ultra-luxury project, Purva Whitehall, at Sarjapura, off Outer Ring Road, Bengaluru in October 2012 and has sold
35% of the total inventory with sizes ranging between 1900-2500 sqft.
* For the first half of this fiscal year, the company recorded a 34% increase in consolidated revenue to INR 5220 million from INR 3890 million in H1FY12.
* Net Sales and PAT of the company are expected to grow at a CAGR of 29% and 26% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q2 FY13,
Puravankara Projects Ltd is a part of Purvankara Group is one of the leading real estate developers of the country response to the growing need for quality housing and commercial space in the metropolitan cities of India, reported its financial results for the quarter ended 30th Sep, 2012. The 2nd quarter witnesses a healthy increase in overall sales as well as profitability on account of demand for ready- tomove –in units and new Projects Developments.
The company’s net profit jumps to Rs.501.93 million against Rs.265.40 million in the corresponding quarter ending of previous year, an increase of 89.12%. Revenue for the quarter rose 37.91% to Rs.2730.25 millions from Rs.1979.80 millions, when compared with the prior year period. Reported earnings per share of the company stood at Rs.2.35 a share during the quarter, registering 89.12% increase over previous year period. Profit before interest, depreciation and tax is Rs.1232.07 millions as against Rs.466.50 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.89.90, the stock P/E ratio is at 9.83 x FY13E and 7.50 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.05 and Rs.11.85 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 29% and 26% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.95 x for FY13E and 5.00 x for FY14E.
*  Price to Book Value of the stock is expected to be at 1.01 x and 0.89 x respectively for FY13E and FY14E.
The second quarter witnesses a healthy increase in overall sales as well as profitability on account of Sale of ready- to- move –in units and new Projects Execution. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the  coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.102.00 for Medium to Long term investment.
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 Accumulate Tata Consultancy Services Ltd For Target Rs.1,400



 
Tata Consultancy Services (TCS) reported Q3FY13 results which were largely in line with PLe/Consensus expectation. Revenue was touch ahead, whereas margin was stronger than expectation. The management retained their positive tone, but valuation leaves limited room for upside. We retain our ‘Accumulate’ rating.
* Touch ahead of expectation: TCS reported Q3FY13 results touch ahead of PLe/consensus expectation. Revenue grew by 2.9% QoQ to Rs160.7bn (PLe: Rs160.14bn; Cons: Rs159.05bn) and 3.3% QoQ in USD terms, led by better-thanexpected realization growth of 1.3% QoQ (PLe: 0%). EBIT margins expanded by 51bps (PLe: -40bps, Cons: -30bps) to 27.3%. EPS grew by 0.3% QoQ to Rs18.15 (PLe: Rs17.60, Cons: Rs17.36).
*  Fresher hiring – Does it indicate growth moderation ahead? TCS retained its fresher hiring guidance of ~25k for FY14. The guidance is softer compared to FY13 (~35k) and FY12 (~24k). According to the management, the fresher hiring number is not an indication of weakness in demand. The company is looking to hire onsite and at other delivery centres (like Latin America). The company was confident of hiring from off campus and improving business-mix. However, we see moderation in hiring as an early indication of weaker growth for FY14.
* Margin levers stretched: The company has done a great job in expanding EBIT margin for Q3FY13. However, EBIT margin eased off by ~200bps over the last three quarters despite ~6.6% currency depreciation. We continue to see margin headwinds for the company as freshers come on board, project starts to rampup (increase in onsite) and there is an increase in subcontracting costs. The management is confident of retaining margin using improved productivity, higher realization, increasing utilization and tight cost management.
* Valuation & Recommendation – Retain ‘Accumulate’ with TP of Rs1,400: The current valuation factors in strong performance by TCS. We see revenue momentum to decelerate and margin to remain under pressure in FY14 as peers turns aggressive for growth. We tweak our model; but, retain our target price at Rs1,400, 17x FY14E earnings estimate.