Stock Views on Infrastructure Development Finance Corp, Exide Industries

MERRILL LYNCH on EXIDE INDUSTRIES

Merrill Lynch maintains `Buy’ rating on Exide Industries, however, it has cut the target price to Rs 62 on a weak Q3. Exide Industries reported 30% below estimated PAT in 3QFY09 largely due to Rs 20 crore FX loss and in small part due to weaker sales. Merrill Lynch has cut EPS on slower demand, however, it maintains `Buy’ as

(1) FY10E EPS to grow 22% on falling cost and

(2) FY10E PE of 9.9x is close to trough valuation.

Exide Industries, the largest lead acid battery manufacturer of India, reported a net profit of Rs 56.1 crore, a growth of only 1.8% y-o-y in 3QFY09. This was the slowest growth in the last 15 quarters and is driven by

(1) volume growth of only 11% and

(2) foreign exchange loss of Rs 20 crore that reduced profit by 23%. Volume growth weakened considerably from the recent trend of over 15% growth due to slowdown in automobile demand. With FX loss accrued due to unhedged payables of over Rs 450 crore, Merrill Lynch still expects strong EPS growth of 220% in FY10E driven by

(1) lower cost of lead along with rupee appreciation could help expand EBITDA margin by 200 bps and

(2) demand growth of over 12% driven by market share gain in the relative secular segment of the automotive after market.

Thus far, FX loss on account of sharp depreciation of the rupee has been negating the impact of decline in lead cost.

GOLDMAN SACHS on IDFC

Goldman Sachs maintains a `Sell’ rating on Infrastructure Development Finance Corp (IDFC), despite a significant fall in price as lack of growth drivers over the medium term. Infrastructure lending should likely remain constrained by the need to maintain high capitalisation ratios; and capital market-driven revenues should likely remain depressed. A subdued contribution from capital market-related revenues will erode ROA from 3.1% in 2007 to 2.8% in 2008E and 2.4% in 2009E and 2010E, in our view. The constraint for IDFC in growing its balance sheet without additional equity capital infusion due to higher capitalisation requirement is well-known to the market. However, expectations, as implied by consensus estimates, remain high and could be driven by many factors including expectations of lower capitalisation requirement or a possible change in the structure of the company (although we note that the company has not stated any intention of a potential change in structure/form) over the medium term, in our view. Expectations of lower capitalisation requirements are unlikely to fructify until macroeconomic conditions improve.

Angel Broking Views on Exide Industries, Patel Engineering, Bajaj Auto

Angel Broking on Patel Engg - Target Rs 545

Angel Broking has recommended a buy rating on Patel Engineering, with price target of Rs 545, in its report.

"We have valued Patel Engineering on SOTP methodology. We have assigned its Core Construction business a PE of 12x FY2011E EPS of Rs 36.8. Its Real Estate arm has been valued at a huge discount, using the NAV method, at Rs 103/share. In the recent past, the stock had witnessed a sharp appreciation, in line with its construction peers. We believe that, at the current levels, PE is available at reasonable valuations. At CMP, the stock is trading at 11.6x its FY2011E EPS of Rs 36.8, on a consolidated basis without considering its real estate venture. We recommend a Buy on the stock, with a Target Price of Rs 545," says Angel Broking's report.

Angel Broking on Bajaj Auto - Target of Rs 1230

"For Q1FY2010, Bajaj Auto (BAL) clocked Net Sales of Rs 2,339 cr (Rs 2,311 cr), up 1.2% yoy, which was in line with our expectation. Total volumes for the quarter declined 11.7% yoy while average realisations per vehicle improved substantially by almost 10.7% yoy primarily due to the change in product mix and better performance by the 125cc-plus Segment. During 1QFY2010, BAL witnessed a substantial 793bp yoy jump in EBITDA Margins to 19.5% (11.6%). Before Extraordinary items, Net Profit stood at Rs 317.5 cr (up 81.3% yoy) and exceeded our expectations. On a qoq basis too, Margins improved by almost 834bp. We maintain an Accumulate on the stock with a revised Target Price of Rs 1,230 (Rs 1,016 earlier), " says Angel Broking's report.

Angel Broking on Exide Industries - Target of Rs 81

"Exide Industries, India’s largest Auto Battery manufacturer, for 1QFY2010 clocked 0.3% yoy decline in Net Sales to Rs 903.5 cr (Rs 906.5), which was better than our estimate of Rs 797 cr on the back of better qoq growth in Total Volumes during 1QFY2010. During 1QFY2009, Exide witnessed a 665bp yoy increase in EBITDA Margins owing to a 1,002bp yoy fall in Raw Material costs, which accounted for around 58.2% of Sales (68.2% in 1QFY2009). The company reported 48.9% yoy increase in Net Profit to Rs 122.4 cr during the quarter. Interest cost fell 96.3% yoy to Rs 0.4 cr including Exchange gains of Rs 1.03 cr. We upgrade our EPS estimate for the company to Rs 5.5 (Rs4.2 earlier) and Rs 6.0 (Rs 5.2 earlier) for FY2010E and FY2011E, respectively. We maintain an Accumulate rating on the stock, with a revised Target Price of Rs 81 (Rs74)," says Angel Broking's report.

Stock views on Exide Industries, LIC Housing Finance, Thermax

Sharekhan on Thermax - Target Rs 422

Sharekhan has recommended a buy rating on Thermax, with a price target of Rs 422, in its report.

"Thermax has been witnessing slower order inflow on account of a significant cut in the capital expenditure (capex) of India Inc. Recent data shows that cement and metal sectors will be relatively much stable business environment. The revival of capex plans in these two industries in particular could strengthen the order inflows for the company in the future. Thermax' leadership in the captive power generation equipment space and its agreement for utility boiler could also provide a significant boost to its order inflows. We maintain our Buy recommendation on the stock with a revised price target of Rs 422 (12x FY2011E EPS). At the current market price the stock discounts our FY2010E EPS 13.3x and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.6x," says Sharekhan's report.

FinQuest Securities on LIC Housing Fin - Target of Rs 512

FinQuest Securities has recommended a buy rating on LIC Housing Finance with a target price of Rs 512 in its research report.

"Post interest rate cuts and correction in property prices (especially in big cities), the demand for housing loans is picking up. Last two months (March and April) the disbursements grew by 42% and 34% respectively for the company which indicates strong trend. Further correction in property prices coupled with easing of interest rates will boost the demand. We expect disbursemnts to grow at a CAGR of 22% for the company over FY09-11E."

"We expect company's loan book to grow at CAGR% of 22% over FY09-FY11E led by drop in the interest rates and correction in property prices. Net interest margins are expected to remain stable at 3% despite lending rate cuts. Current valuations of 1.1x FY11 BV is attractive considering higher RoE's (26% & 27% for FY10, FY11), better asset quality and huge growth potential in the housing finance segment. We have a target price of INR 512 for the stock which is 1.3xFY11 BV. We recommend 'Buy' on the stock," says FinQuest Securities' research report.

Parag Parikh on Exide Industries - Target of Rs 72.6

Parag Parikh Financial Advisory Services has maintained its buy rating on Exide Industries with a target price of Rs 72.6 in its research report.

"Exide Industries (EIL) has reported a flat top-line growth of 1% for Q409. Net Revenues for the company stood at Rs 7,983 million v/s Rs 7,913 million for Q4 '08. With a surge in taxation, PAT for the company stood 13.6% higher at Rs 2,844 millio for FY09 v/s Rs 2,503 millio for FY08. Exide Industries had recently acquired two lead smelting plants (Tandon Metals and Leadage Alloys) which now contribute 28% of total lead requirement for the company. This captive sourcing of lead and lead alloys will have a positive impact on the company's overall margins. Maintain 'BUY' on the stock with a target price of Rs 72.6/- (16x FY10E earnings and Rs 6.3/- value of investment in ING Vysya Life Insurance)," Parag Parikh Financial Advisory Services' research report.