Stock Views on Aditya Birla Nuvo, ITC, Divis Laboratories

Indiabulls Sec on Aditya Birla Nuvo - Target Rs 1035

Indiabulls Securities Research has maintained its buy rating on Aditya Birla Nuvo with a target price of Rs 1035.

"Aditya Birla Nuvo (ABNL) reported results, which are above our expectations. The Company's consolidated net sales registered a growth of 15.3% yoy in FY09. Most of the Company’s segments have displayed an improvement in Q4’09. Accordingly, we have upwardly revised our estimates, and it has resulted in an increase in our fair value estimate. Further, we continue to believe that the Company's growing Life Insurance and Telecom businesses along with the improving performances of its other businesses will provide long-term value to the shareholders. Thus, we reiterate our 'Buy' rating on the stock. We have valued the Company by using the sum-of-the-parts methodology; our fair-value estimate of Rs 1,035 suggests a potential upside of 17% from the current market price. Hence, we reiterate our 'Buy' rating," says Indiabulls Securities' research report.

Motilal Oswal on ITC - Target Rs 237

Motilal Oswal has maintained its buy rating on ITC with a target price of Rs 237 in its research report.

"The stock has appreciated by about 12% in the last couple of trading sessions – perhaps the highest rise in reaction to budget pronouncements in recent times. We remain positive on ITC’s long-term prospects. We have upgraded our FY10E EPS to Rs 10.2 (Rs 9.9 earlier) and FY11E EPS to Rs 11 .6 (Rs11.3 earlier), factoring in no excise increase and removal of fringe-benefit tax (FBT). Maintain Buy with FY11E SOTP value of Rs 237," says Motilal Oswal's research report.

Sushil Finance on Divis Lab - Target Rs 1490

Sushil Finance has recommended a buy rating on Divis Laboratories with a target price of Rs 1490 in its report.

"In spite of the economic slowdown, DLL has managed to maintain its above average industry margins in FY09. DLL does expect some pressure on its Custom Chemical Synthesis Business (CSS) business but is banking on API sales of Levirecetam, lopamidol & nabumetone which will offset the slowdown in other businesses. Seeing the growth prospects & above industry average margins the stock deserves to trade at higher multiple. At the CMP, the stock trades at 13.3x its FY11E earnings. It has recommended buy rating on the stocks, target of Rs 1490," says Sushil Finance's research report.

Stock Views on Axis Bank, Pantaloon Retail, Divis Laboratories

Angel Broking on Axis Bank - Target Rs 1024

Angel Broking has maintained its buy rating on Axis Bank with a target of Rs 1024 in its report.

"At the CMP, the stock is trading at 10.2x FY2011E EPS of Rs 73.9 and 2.0x FY2011E Adjusted Book Value (ABV) of Rs 379.1. Overall, given the reasonable mid-cycle valuations, we believe a medium-term investment perspective needs to be adopted to take advantage of the imminent upturn in GDP growth. From this perspective, we retain our preference for Private Banks such as Axis Bank, in light of their stronger core competitiveness. We believe the Bank deserves premium valuations on account of its attractive CASA franchise, multiple sources of sustainable fee income, strong growth outlook and A-list management. We maintain a Buy on the stock, with a Target Price of Rs 1,024, implying an upside of 35% from current levels," says Angel Broking's research report.

Angel Broking on Pantaloon Retail - Target Rs 301

Angel Broking has recommended a buy rating on Pantaloon Retail with a target of Rs 301 in its report.

"We believe that that future growth of the organised Retailing Sector in India would be led by Value Retailing, cascading effects of which would be witnessed in the Lifestyle and Home Retailing Segments as well albeit with a lag effect. PRIL continues to be our Top-pick in the Indian Retail Sector on account of being the largest Retail player in India and having presence across most product categories and price points. We are positive on PRIL as it has been able to sustain decent growth on a Standalone YTD basis despite the apathetic economic scenario."

"At Rs 270, the stock is trading at 17.3x FY2011E Earnings and 3x FY2011E P/BV. We have valued PRIL Standalone at Rs240. We have valued PRIL's stake in FCH, HSRIL and Future Bazaar at Rs31, Rs12 and Rs18, respectively. We recommend a Buy on PRIL with a target price of Rs 301," says Angel Broking's research report.

Karvy Stock Broking on Divis Laboratories - Target Rs 1260

Karvy Stock Broking has maintained its buy rating on Divis Laboratories with a target of Rs 1260 in its report.

"Revenues for the quarter have gone up by 9.4% to Rs 2.9 billion for the quarter. This is in line with lower traction in revenues on account of slow down in growth in CRAMS business. We believe the second half would be better than the first half. Operating margins of the company would be 42 % compared to 41.5 % in the corresponding quarter of the previous year. Profits for the quarter would be up by 7 % to Rs 1010 million. Divi's Labs will be a major beneficiary of the pharmaceutical outsourcing and will see greater traction in H2 FY 2010 and FY 2011. The company had provided lower tax on account of SEZ in FY 2008 and FY 2009 to the tune of Rs 400 million. This has been on account of the amendment being valid from FY 2010 as against retrospective effect. The company will now have to provide the same in the current year. We downgrade our multiple from 15.5x to 14x on account of higher tax outgo and impact on cash flows on account of MAT. We reduce our price target by 10 % to Rs 1260 based on 14x FY 2011E. We however maintain our 'BUY' rating on the stock, “ says Karvy Stock Broking's report.

Take Your PICK: Part I - LARGECAP STOCKS

Divis Laboratories (CMP: Rs 1,393): An established player in the generic active pharma ingredient (API) space and leader among Indian contract research and manufacturing services (CRAMS) players, the company has attained market leadership in several key products. It has 20 of the top 25 innovator companies as its client in CRAMS segment. It recently commissioned a nutraceutical facility for the $1 billion global market, which has high entry barrier in the form of complex chemistry skills.

Sun Pharma (CMP: Rs 1,414): With strong earnings visibility and industry-leading earnings before interest, taxation, depreciation and amortisation (EBITDA) margins, Sun Pharmaceuticals has one of the best business models among the peers. The company’s business in the US is also maturing, with windfall gains expected from 180 days exclusivities apart from a healthy product pipeline.

Aban Offshore (CMP: Rs 2,695): The largest offshore rig operator in India, the company is ideally placed to capitalise on exploration and production (E&P) boom. It renewed contracts with ONGC at a sizeable premium, boosting its top-line visibility. It will deliver four jack-up drilling rigs in FY09 and is set to expand its fleet to 21 vessels. The addition of drill ships will reduce dependence on jack-up rig operations and attract premium rates due to low availability.

Tata Steel (CMP: Rs 618): It is the world’s sixth largest steel company. In India, it has just raised its crude-steel capacity from 5 million tonnes per annum (tpa) to 6.8 million tpa, of which 60% is rolled into flat products and the rest sold as long products. It also sells ferro alloys, tubes, bearings and some mineral products. TSL India’s raw material security and operating efficiencies put it among the lowest-cost producers globally. Its focus on high-value products and branding helps it earn high EBITDA margins of 40%. It should benefit from the likely rise in domestic prices in August this year.

Reliance Industries (CMP: Rs 2,147): The company has interests in E&P, refining, petrochemicals, textiles, telecom, electricity, financial services and infrastructure. Its petrochemicals business is vertically integrated with an output of around 11 million tons. It also operates India’s largest and most complex refinery with a capacity of 33 million tons. It is expected to start RPL and KG Basin production from Q3 FY09, which is expected to drive growth for the company. Also, it plans to invest $7.5 billion on semiconductor and polysilicon facilities at Jamnagar. Looking at higher crude prices and strong gross refining margin (GRM), this company has strong future prospects.

This research is made by Religare Securities