Stock views on JK Tyre, Apollo Tyres, Tinplate Company of India

Emkay Global Financial Services on JK Tyre - Target Rs 192

Emkay Global Financial Services has recommended buy rating on JK Tyre and Industries with a target price of Rs 192.

“Despite concerns on account of spiraling raw material prices and strike at its Rajasthan plant, we find JK Tyres (JKT) an attractive valuation pick. We are factoring in a sharp drop of 27% in our FY11 consolidated earnings estimates to Rs 38.5 per share. For standalone business, we expect a 25% decline in FY11 earnings to Rs 30 per share. For its subsidiary, 'Tornel' we expect a 41% earnings decline in FY11 to Rs 8.5 per share. We are conservative in our estimates on Tornel due to limited availability of information.”

“Despite such a sharp drop in FY11E earnings, at CMP of Rs 150, the stock trades at a PER, EV/EBIDTA and P/B of 3.9x, 4.2x and 0.7x respectively. We believe that there is ample scope for positive surprises - like commencement of new TBR capacity from October 2009, increase in PCR capacity by 10% to 5 mn tyres in FY11, price hikes to pass on the cost pressures. Similarly for Tornel, higher capacity utilization is likely to result in positive surprises. We are not assuming any significant increase in capacity utilization at the current juncture. We initiate coverage on the stock with a Buy rating and a target price of Rs 192,” says Emkay Global Financial Services.

Emkay Global Financial Services on Apollo Tyres - Target Rs 60

Emkay Global Financial Services has recommended buy rating on Apollo Tyres with a target of Rs 60, in its research report.

“We like Apollo Tyres (ATL) for its thirst for market leadership with a clear focus on profitability in the domestic markets. Similarly, we like its inorganic strategy of - focusing on complimentary product profiles and selecting strategically important locations to become a leading global player. ATL is well placed to reap the benefits of the strong demand momentum in domestic markets as well as demand recovery in South African and European markets (through subsidiaries).”

“At a CMP, the stock trades at a PER, EV/EBIDTA and P/B of 7.3x, 4.4x and 1.3x our FY11E consolidated earnings (excluding VBBV). We are factoring in a 15% earnings decline in FY11 due to raw material pressures. Barring a further spike in rubber price, we expect positive earnings surprises. We believe that the biggest surprise shall come from subsidiaries.

Our estimates factor in a profit contribution of 15% from subsidiaries in FY11E as compared to 35% contribution to revenues. We initiate coverage on the stock with a BUY rating and a target price of Rs 60. At our target price, the PER, EV/EBIDTA and P/B works out to 8.9x, 5.1x and 1.5x our FY11E consolidated earnings.”

Hem Securities on Tinplate - Target Rs 80

Hem Securities has recommended buy rating on Tinplate Company of India with a target of Rs 80, in its research report.

“With economic growth, the packaging industry in India is also poised for growth which would lead to growth in tinplate demand and Tinplate Company of India, being the market leader would reap such benefit. Further, with increase in competency via setting up second cold rolling mill and increasing production going forward and preference of use of cans than bottles by consumers gives visibility to revenue stream in coming future. In wake of such growth, Tinplate Company of India Ltd seems to be extremely attractive investment opportunity.”

“Presently, the stock is trading at Rs 64 which is at 5.32 times to its earnings and 2.47 times to its book value of Rs 25.92. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with a target price of INR 80 in medium to long term investment horizon expecting an appreciation of about 25% from the current level of INR 64, says Hem Securities research report.