Stock Views on TATA CHEMICALS, GODREJ PROPERTIES, SUN PHARMA

CITIGROUP on SUN PHARMA

Citigroup maintains `Hold' rating on Sun Pharma with a target price of 1,920. While Sun is entitled to 180 days exclusivity, thanks to the long delay in getting approval and full genericisation of the capsule form likely in January '11, the actual exclusivity may be shorter. Citigroup expects this product to add about $38 million and about $26 million to Sun's top line and PAT respectively. The long-awaited approval for Sun's generic version of venlafaxine hydrochloride XR tablets has finally come through. Assuming 30% price erosion and 50% market share, Citigroup expects this product to add about $38 million and $26 million to Sun's revenues and net income respectively during the exclusivity period. This works out to a one-time upside of 5.7/share to FY11 earnings. This, along with shared exclusivity in generic Exelon, would provide some support to earnings over the rest of FY11 although they are unlikely to make up for the loss of sales from generic Protonix and Eloxatin. Citigroup believes the best is behind in terms of earnings momentum and does not expect valuations to materially re-rate from current levels.

MOTILAL OSWAL on GODREJ PROPERTIES

Motilal Oswsal initiates coverage on Godrej Properties (GPL) with a Neutral' rating. GPL is a focussed mid-income housing player, with a pan India presence and a differentiated business model. Almost 77% of GPL's land bank of about 50 msf comprises joint development (JD) projects. The JDA approach allows GPL to enjoy a low risk, low capital intensive business model. The advantages of GPL's model are reflected in its superior RoEs. Several real estate (RE) players have been trying to position themselves as pan-India players. The Godrej group enjoys tremendous brand recall and trust across the country. Motilal Oswal expects GPL to trade at a premium to NAV due to its strong growth visibility, asset-light model and brand equity. GPL currently trades at 46% premium to FY12E core NAV and 10% premium to option-adjusted NAV. It is richly valued at 4.6x FY12E BV of 167 and 24x FY12E EPS of 32. Going forward, the key catalysts which could further re-rate GPL are: (i) traction on disclosed MoUs, (ii) visibility on development of other group land bank (particularly at Vikhroli) and (iii) continued momentum on new third party JD projects.

UBS on TATA CHEMICALS

UBS maintains `Buy' rating on Tata Chemicals (TTCH) with a new price target of 500. TTCH is a leading player in various agriculture-related areas such as fertilisers and pesticides. TTCH is focused on driving future revenue and profit growth from segments related to farmers and agriculture, such as the Swach brand of water purifiers, customised/specialty fertilisers, etc. with production capacities in the US, the UK, Africa, and India. UBS expects the soda ash capacity to generate healthy cash flows and help TTCH reduce the debt on its balance sheet. Additionally, we argue that soda ash fundamentals are at a trough and will improve from here. The average soda ash FOB (free on board) China price was 13% higher in Q1FY11 than in FY10. The stock is trading at an attractive 16% cash flow yield. UBS raises the FY11/FY12 EPS estimates by 49%/34% from Rs24.6/29.9 to Rs36.6/40.2. Meaningful changes in volume, price and margin outlooks for the soda ash and urea businesses have driven the price target and earnings estimate revisions.