Stock views on Bajaj Auto, JSW Steel, Marico

IIFL on Bajaj Auto - Target of Rs 670

IIFL has recommended a buy rating on Bajaj Auto with a target price of Rs 670 in its research report.

"After two years of declining volumes, Bajaj Auto is poised for profitable growth, on the back of a series of model launches in the high-margin 125cc+ segment. We believe strong margin expansion aided by volume growth in this class of bikes will drive a re-rating in the stock. The stock is trading at a PE of 9x on FY10ii—a 30% discount to Hero Honda, which is trading at 12.8x. We value the stock at 11x FY10ii and rate it a BUY with a target price of Rs 670," says IIFL's research report.

Karvy on JSW Steel - Target of Rs 834

Karvy Stock Broking has maintained its buy rating on JSW Steel with target price of Rs 834 in its research report.

"JSW Steel, India's third-biggest producer, is on target to achieve robust sales volume growth during Q4FY2009. It is likely to sell 1.2 million tonnes of steel as against 0.7 million tonnes during Q3FY2009. However, it is to be noted that the YoY sales volume is likely to be flat."
"We believe that the sales volume growth could help the company in posting EBIDTA growth on QoQ in absolute terms, but the EBIDTA margin of 15% is expected to be under pressure due to the lower price realization. In our opinion, the current rally in JSW Steel and other steel stocks is driven by the strong sales volume growth during Q4FY2009. We maintain our BUY rating on the stock with target price of Rs 834," says Karvy Stock Broking's research report.

IIFL on Marico - Target of Rs 80

IIFL has recommended a buy rating on Marico with a target price of Rs 80 in its research report.

"The recent hike in minimum support price (MSP) for copra by the government has given rise to concerns on Marico’s margin outlook for FY10. Historical evidence leads us to believe that the MSP hike will not alter copra price dynamics. NAFED (National Agriculture Marketing Federation), the nodal procurement agency for copra, has in the past not been as effective in supporting copra prices."

"Perishable nature of copra as well as the dearth of funds has compounded the problem of NAFED being not an end-user itself (unlike FCI), necessitating liquidation of copra inventory in the market within four months of procurement. Importantly, copra demand, over 50% of which comes from edible coconut oil, has fallen this year as consumers switch to cheaper options such as palm oil, creating downward pressure on copra prices. Copra prices are likely to rule 7-8% lower in FY10 (YoY) benefiting Marico, supporting a 110 bps gross margin expansion in FY10, in our estimate. BUY with a target price of Rs 80," says IIFL's research report.