Karvy Stock Broking views on Axis Bank, Nitin Fire Protection, Ipca Laboratories

Karvy Stock Broking on Axis Bank - Target of Rs 629

Karvy Stock Broking has maintained its buy rating on Axis Bank with a target price of Rs 629 in its research report.

"We have revised our Axis Bank earning estimates after a visit to the bank's senior management; we expect that the bank's credit growth would moderate to 31.5% (Y/Y) to Rs 1,146 billion from our earlier credit book estimate of Rs 1,226 billion in FY10. Net interest margin is estimated to shrink by 30 bps to 2.57% in FY10.The bank's core fee income growth momentum is expected to come down to 28% (Y/Y) in FY10 from 70% in FY08 and 50% in 9MFY09. The bank's management did not provide with any guidance or estimates on non-performing assets front; we expect 152% (Y/Y) rise in gross NPA in FY10 to Rs 21.5 billion and increased credit cost to 1.3% in FY10 from 0.71% in FY08 and 1.1% 9MFY09."

"We increase our earning estimates for FY09 by 5.0% to Rs 17.7 billion and reduce for FY10 by 9.6% to Rs 15.5 billion and reduce our target price by 29% to Rs 629 per share.We estimate the bank to record RoAE of 18.8% and 14.4% in FY09 and FY10 respectively. We re-iterate our BUY rating on the stock with a target price of Rs 629 at 2.2x adjusted book value FY10," says Karvy Stock Broking's research report.


Karvy Stock Broking on Nitin Fire Protection

Karvy Stock Broking has changed its recommendation on Nitin Fire Protection Industries from buy to outperformer with a price target of Rs 160 in its research report.


"In the fire protection and security business, the demand has been negatively impacted due to slowdown in construction activity - both commercial and residential. Of the various contracts awarded to the company, Nitin Fire has not been able to execute few of them because of the client's decision to slowdown or hold that particular project. Accordingly that would lead to difficult 4QFY09 for the company."

"We expect the company's earnings to grow by 32% during FY10E primarily on back of better capacity utilization of the company's Vizag plant. However due to slowdown in the construction activity and corporate capex plans; we expect the company's fire protection and industrial cylinder segment would be hampered in FY10E. On back of lowering of our EPS estimates and lowering of PE multiple to reflect the current market valuation, we are reducing our price target by 33% to Rs 160 and change our recommendation from BUY to Outperformer," says Karvy Stock Broking's research report.


Karvy on Ipca Laboratories - Target of Rs 500

Karvy Stock Broking has maintained its buy rating on Ipca Laboratories with a price target of Rs 500 in its research report.


"The company's domestic formulations business which accounts for 40% of FY 2008 revenues should grow by 10% in FY 2009. The low growth has been on account of the tender business of Rs 600 million in FY2008 which is marginal in the current year. The overall branded revenues are Rs 1800 million as against Rs 1200 million in the previous year. The export API revenues should do around Rs 2500 million as against Rs 1940 million in the previous year. We maintain BUY on the stock with a price target of Rs 500 based on 7.1x FY 2010E," says Karvy Stock Broking's research report.

Take Your PICK: Part III - SMALLCAP STOCKS

IPCA Laboratories (CMP: Rs 540): The company’s focus on branded formulations business and emerging economies is expected to be its key growth driver. New products launches in domestic and UK markets coupled with supplies to new emerging economies and US markets should lead to a compounded annual growth rate (CAGR) of 17% in revenues and 22% in profits over next two years. It is expected to clock an earning per share (EPS) of Rs 69.7 and Rs 82.6 for FY09 and FY10, respectively. Currently, the stock is trading at 7.5x FY09 and 6.2x FY10 earning estimates.

Numeric Power Systems (CMP: Rs 601): The company, a leading manufacturer of uninterrupted power supply (UPS) systems and power conditioners in India, commands 60% share in IT and 82% share of the ATMs. The strong demand for company’s products (India has peak power deficit of 16.6%), increased focus on high margin equipment servicing and significant international presence make NPSL a fast-growing multinational in the power management solutions. The stock is attractively valued at 6.5x FY09 EPS of Rs 94.2.

Indian Overseas Bank (CMP: Rs 91): The company is a leading South Indiabased bank with a strong balance sheet. IOB has a healthy current and savings account (CASA) ratio of 33.5% and strong return ratios, with a return on assets (RoA) and return on earnings (RoE) of 1.3% and 28%, respectively. The net profit for FY09E and FY10E is expected to be Rs 12.42 billion and Rs 13.91 billion, respectively, resulting in an EPS of Rs 22.8 and Rs 25.5 for FY09E and FY10E, respectively.

LIC Housing Finance (CMP: Rs 306): The company is expected to continue to benefit from the growing demand for housing. A lower mortgage/GDP ratio of 6% offers huge potential. The company expects 22% year-on-year (yoy) business growth to Rs 268 billion and 20% yoy growth in net profit to Rs 4.61 billion for FY09. Improving asset quality and strong return ratios augur well for LICHF.

Bharat Electronics (Rs 1,154): The company is the premier defence contractor for the government. Over the years, the company has developed several competencies in the area of defence electronics. It is expected to benefit from the defence offset clause that the government mandates for import of defence equipment above Rs 3 billion. The order backlog is comfortable at Rs 94.5 billion and equivalent to over two years of FY08 revenues. The modernisation of the Indian defence sector is expected to throw significant opportunities for BEL.

Source: Kotak Securities