Stock views on Bombay Rayon Fashion, Century Enka, Unichem Laboratories

Sushil Finance on Bombay Rayon Fashion - Target Rs 282

Sushil Finance has maintained buy rating on Bombay Rayon Fashion with a target of Rs 282 in its report

"Bombay Rayon Fashion Ltd. (BRFL) is one of the leading, vertically integrated textile companies in India. It has a strong presence across the entire value chain of design, yarn dyeing, weaving, fabric processing, garment manufacturing & retail and operates through 32 manufacturing facilities. BRFL has a strong presence in designer garment segment & is catering to various international brands like Zara, Guess, Next, Polkar, Warrior, Massimo Dutti, DKNY, Wrangler etc. Its exports are mainly in USA and Europe and it contributes 65% of its revenues."
"BRFL has acquired 3 business units in the past viz. UK based “DPJ Clothing”, “Leela Scottish Laces” and “LNJ Apparel”.

The acquisitions have helped in increasing capacities & expanding customer base in India & abroad. It also acquired ‘GURU’, an established high- end European retail brand. Most of its expansions has gone on stream this year and hence we expect BRFL to post a consolidated APAT growth of 34% in FY10 and 53% in FY11. At the CMP of Rs 191, the stock trades at an attractive valuation of 7.9x its FY11 earnings and P/BV of 0.7x FY11E. Buy. Target Rs 282, "says Sushil Finance research report.

Sunidhi Securities on Century Enka - Target Rs 320

Sunidhi Securities & Finance has come out with a research report on Century Enka (CEL). The research firm has recommended buy rating on the stock with a target of Rs 320, in its report
"CEL is likely to post an EPS of Rs 54.8 in FY10, which would go up to Rs 61.5 in FY11. At CMP of Rs 260, the share is trading at a P/E of 4.7x on FY10E and 4.2x on FY11E. Century Enka in its weekly chart can be seen in a clear uptrend since early-2009. The index is expected to reach its primary peak at Rs 275. The ability of the stock to sustain above Rs 275 should take it to Rs 320. We recommend buy with a target of Rs 320", says Sunidhi Securities & Finance.

Karvy Stock Broking on Unichem Labs - Target of Rs 340

Karvy Stock Broking has recommended outperformer rating on Unichem Laboratories with a target of Rs 340, in its research report.

“Unichem Laboratories has a balanced portfolio of products in the acute and chronic space. Acute therapy products comprise around 43% of the product basket whereas the remaining is contributed by chronic therapies. In the acute space the company has major products in the antibiotics space namely Ampoxin whereas in the Chronic space revenues mainly come from CVS, diabetology and CNS products. Losar group of products is the main product in the chronic space. While the chronic therapy franchise of the company has been growing, acute therapy products have witnessed stagnant sales. Though gross margins are lower in acute the ramp up can be quicker in this segment.”

“Going forward, the company intends to focus on acute products and hospital business in the next six months. The company also intends to enter gynaecology and injectables antibiotics business in the medium term. We expect the acute products business to gain traction in the near term. Unichem intends to launch 20 new products in the next 12 months which will also include nephrology products. The company is hopeful of a revenue growth of 10% for FY2010 and 10-12% for FY2011. On account of revenue traction in domestic formulations business the most profitable business segment and possible breakeven of UK subsidiary, ramp up in US business and API export business. We maintain our revenue and earnings estimates for FY 10E and FY 11E. On account of price performance in the stock we downgrade our rating on the stock to Outperformer with a price target of Rs 340 based on 8.5x FY 2011E.”

Stock Views on Bombay Rayon Fashion, United Breweries

Merrill Lynch on Bombay Rayon Fashion

Merrill Lynch has maintained `Buy’ rating on Bombay Rayon Fashion. However, it has reduced the price targer to Rs 225 from Rs 270 to reflect both earnings cut and higher risks. It cut FY10E EPS by 5% and FY11E by 14%, primarily to factor in lower sales of its brand Guru, as management has stalled its growth plans, following the global slowdown. The stock has corrected sharply in the last few months and valuations look attractive at 3x FY10E PE. It expects EPS growth of 32% in FY10 helped by new capacities coming onstream by March 2009. These capacities would enjoy several fiscal benefits making them globally cost competitive, which should help BRFL gain market share. Management had aggressive plans for expansion of the Guru operations which have now been put in the back burner. After the sharp cut in Guru’s estimates, it now accounts for less than 5% of BRFL’s consolidated EBIDTA versus 9% earlier. We estimate BRFL’s gearing to peak at 2.1x in FY09 and fall to 1.4x by FY11. After a 70% price correction in the last six months, the stock is trading at only 3x FY10E PE. The current stock price more than factors in the macro risks and the correction is clearly overdone.

Indiabulls Securities on United Breweries

Indiabulls Securities maintains `Sell’ rating on United Breweries (UBL) with a target price of Rs. 70. UBL’s net sales in Q309 grew substantially by 24% yo-y to Rs. 370 crore. The EBITDA margin advanced 200 bps y-o-y to 9.4% in the quarter, from 7.4% for the same period in FY08, on the back of a 243 bps y-o-y fall in advertisement and sales promotion costs (as a percentage of sales). Indiabulls sees significant downside in the stock due to high financial leverage and limited expected improvement in margin performance. Moreover, Indiabulls’ valuation gives a fair value of Rs 70, suggesting a ~10% downside from the current market price. UBL has a highly leveraged capital structure with a debt-to-EBITDA ratio of around 4x, largely attributed to its expansion activities and acquisitions in the recent times. The company has raised Rs. 425 crore through a rights issue; however, this money is to largely meet the CAPEX requirements for FY09 and FY10. Subsequently, UBL’s financial leverage is to remain at least 3x for FY09E. As a result, it will continue to bear a substantial interest burden, which will drag its net margins. We expect the EBITDA margin to improve by ~80 bps in FY10 to 11.3% as raw material prices have fallen recently. Moreover, the company should benefit from economies of scale and better realisations on the back of a strong brand equity.