Stock Views on GODREJ INDUSTRIES, WELSPUN CORP

UBS on WELSPUN CORP

UBS maintains `Buy' rating on Welspun Corp and downgrades the target price to 250. Sebi has directed promoter/promoter group entities not to buy, sell or deal in Welspun Corp (WCL) shares till further notice. This is on a preliminary Sebi enquiry on alleged trading by the Dangi/promoter entities to possibly influence WCL's price. Entities can file their objection within 21 days and request a hearing. WCL clarifies that the Sebi order has no bearing on any of its business/financials. Further, promoter entities have also indicated that they are taking professional advice and believe they are in full compliance with all applicable laws. Sebi's ex parte order may not have a significant impact on the existing business. However, required cost of capital is likely to increase and any potential capital raising would be difficult. UBS downgrades the price target to 250 from 400, on higher WACC (weighted average cost of capital) and slightly lower long-term growth.

MOTILAL OSWAL on GODREJ INDUSTRIES

Motilal Oswal initiates coverage on Godrej Industries with a `Buy' rating and a 12-month target price of 252 per share. GIL will be the biggest beneficiary of growth opportunities available in Godrej Properties Ltd., through its about 69% holding in GPL. This to be a key trigger for GIL's growth. GCPL is the second largest player in `90b toilet soaps category with a market share of about 10% and is a market leader in the `8b hair dye/colour segment with market share of about 35%. Hair dye/colour segment is one of the fastest growing categories in the FMCG market with growth rates expected to average over 20% a year. GIL and GCPL together form about 56% of our SOTP (sum of the parts) valuation. Godrej Agrovet Ltd (GIL's subsidiary) is in the business of agri inputs, animal feeds, oil palm plantation and poultry. The oil palm business has good potential in India due to favourable climatic conditions in various states. The company has been allotted exclusive rights of new territories for oil palm cultivation with total acreage of about 40,000 hectares and it is expected to reach two lakh hectares in the next five years. Based on SOTP methodology, we have valued GIL at `252. This provides 40% upside from the current levels in the next 12-18 months.