Stock Views on COAL INDIA, BRITANNIA INDUSTRIES, TVS MOTOR

DEUTSCHE BANK on TVS MOTOR

Deutsche Bank initiates the coverage of TVS Motor with a `Buy' rating and target price of 100. The buy rating has two key drivers: 1) expanding addressable market size due to entry into three-wheelers and launch of a new scooter, and 2) increasing revenue share of higher margin three-wheelers should boost profitability. Domestic demand for two-wheelers is expected to remain reasonable and Deutsche Bank forecasts a CAGR (FY11-13E) of 12.5%. TVS has managed to garner a market share of 5% in the Indian three-wheeler market within two years of launch versus a 15% share in the two-wheeler segment where it has been operating for more than three decades. TVS Motor's FY12E EPS is in line with consensus, whereas FY13E EPS and target price are above consensus.

RELIGARE on BRITANNIA INDUSTRIES

Britannia Industries is a major player in the Indian foods market with leadership position in the bakery category. Its brand portfolio includes Tiger, Marie Gold, Good Day, 50:50 and Treat. Britannia Industries' Q2FY11 top-line growth of 27.5% Y-o-Y was in line with market expectations, though profits fell short. The 50% drop in adjusted PAT to 32.8 crore stemmed from lower margins and higher interest as well as tax costs. Britannia's net sales for Q2FY11 increased by 27.5% Y-o-Y to 1,090 crore. The decline in margins was led solely by a gross margin erosion of 550 bps Y-o-Y, which could be on account of high-cost wheat and sugar inventory lying with the company. This in turn negated the benefit of a 120 bps Y-o-Y reduction in marketing expenses to 7.1% (of sales). Britannia has launched NutriChoice Diabetic Friendly Essentials Ragi and Oats cookies.

IIFL on COAL INDIA

CIL's Q2FY11 was adversely affected by high wage costs in a seasonally weak quarter. H1 production growth has been muted, at 0.7% Y-o-Y, but growth is picking up - production was up 4.3% Y-o-Y in the first two months of Q3. IIFL expects the company to maintain its earnings growth trajectory, aided by: 1) higher blended realisations due to increased proportion of e-auction sales and ongoing negotiations; and 2) trending down of employee costs in H2. Any weakness in the stock due to the underwhelming Q2 presents an opportunity to buy the secular coal shortage theme. H1 contribution margin expanded 400 bps Y-o-Y as against our estimate of a marginal decline. But H1 employee costs were much higher than our full year estimates. The 10% Q-o-Q increase in wage costs was driven by leave encashment and bonus-related payments. Hence, employee costs are to trend down in H2.