Sector View on FMCG

Motilal Oswal Securities on ITC
THE 18% growth inQ3 PBIT has been encouraging. Growing demand and high entry barriers for other players will ensure steady double-digit profit growth. Poor performance from hotels business is already priced in. Market share of 2.5% in the toilet soaps & rising consumer acceptability in skin care is positive for the company.

Motilal Oswal Securities on Nestle

NESTLE India is best placed to ride on the expected growth in processed food market due to the strong technology of the parent company. Dominant market share and strong brands will prevent margin erosion of the company. Going ahead, high penetration and innovative prod-uct launches would further fuel its growth.

Antique Stock Broking on Britannia Industries

AFTER witnessing consistent drop for four years, Bri-tannia’s market share has stabilised over the last two years, both in value and volume terms. Going ahead, Britannia’s sales would be driven by Good Day, growing at 25-30% in the premium category and Tiger brand, growing at 18-20% in the value-for-money category.

Motilal Oswal Securities on Marico

CONSOLIDATED net sales of Marico recorded a 23% YoY growth, largely led by 15% price increases and 7% volume growth. Brands in pure coconut oil category — Parachute & Nihar — have reported a volume growth of 9% and 15%, respectively. GLobal business grew 44% YoY. Decline in copra and safflower oil prices benefited the co.

Invest Shoppe on Ruchi Soya

RUCHI Soya enjoys the leadership position in the domestic edible oil market. Its processing capacity (the largest in India), experienced mgmt, increasing share of sales from branded products and consistent profit growth despite volatile commodity prices are some of the positives. It is expected to benefit once oil prices start rising.

Invest Shoppe on McLeod Russel

THE tea price boom helped McLeod Russel to post 61.48% growth in net profit in the last quarter. It attributes the improved performance to strong domestic demand. It plans to acquire Vietnam-based Phu Ben Tea for $2 million. McLeod, the world’s largest bulk tea player, will continue to gain from increased preference to tea world over.

Stock Views on IDBI Bank, Marico, JP Associates

Sunidhi Securities on IDBI Bank - Target Rs 115

Sunidhi Securities & Finance has recommended a buy rating on IDBI Bank, with price target of Rs 115, in its report.

"IDBI Bank has adopted a strategy of developing a larger client base in the mid-corporate, SME and retail sectors while nurturing the deep relationships that already exist in the large corporate sector. IDBI Bank has high quality assets, comfortable capital adequacy, robust other income and strong growth in advances in the current challenging scenario. At the CMP of Rs 87, the share is trading at a P/BV of 0.74 (FY10), P/E of 8.2x on FY09E and 6.1x on FY10E. We recommend 'BUY' with a target of Rs 115 in the medium term," says Sunidhi Securities & Finance's research report.

Sharekhan on Marico - Target Rs 85

Sharekhan has recommended a hold rating on Marico with a target price of Rs 85 in its report.

"We remain bullish about Marico’s prospects. We maintain our earnings estimates but increase our price target for the stock to Rs 85, as we roll the target over based on our 19x FY2011E estimates. However considering marginal upside from current market price we put a 'Hold' recommendation on the stock," says Sharekhan's research report.

Motilal Oswal on JP Associates - Target Rs 227

Motilal Oswal has maintained its buy rating on Jaiprakash Associates with a price target of Rs 227 in its report.

"We expect Jaiprakash Associates to report net profit of Rs 11.8 billion in FY10E (up 38% YoY) and Rs 11.5 billion in FY11E (down 2% YoY). Based on SOTP methodology, we arrive at price target of Rs 227 per share. Stock trades at PER of 24.6x FY10E and 25.1x FY11E. Maintain Buy," says Motilal Oswal report.

Stock views on Bajaj Auto, JSW Steel, Marico

IIFL on Bajaj Auto - Target of Rs 670

IIFL has recommended a buy rating on Bajaj Auto with a target price of Rs 670 in its research report.

"After two years of declining volumes, Bajaj Auto is poised for profitable growth, on the back of a series of model launches in the high-margin 125cc+ segment. We believe strong margin expansion aided by volume growth in this class of bikes will drive a re-rating in the stock. The stock is trading at a PE of 9x on FY10ii—a 30% discount to Hero Honda, which is trading at 12.8x. We value the stock at 11x FY10ii and rate it a BUY with a target price of Rs 670," says IIFL's research report.

Karvy on JSW Steel - Target of Rs 834

Karvy Stock Broking has maintained its buy rating on JSW Steel with target price of Rs 834 in its research report.

"JSW Steel, India's third-biggest producer, is on target to achieve robust sales volume growth during Q4FY2009. It is likely to sell 1.2 million tonnes of steel as against 0.7 million tonnes during Q3FY2009. However, it is to be noted that the YoY sales volume is likely to be flat."
"We believe that the sales volume growth could help the company in posting EBIDTA growth on QoQ in absolute terms, but the EBIDTA margin of 15% is expected to be under pressure due to the lower price realization. In our opinion, the current rally in JSW Steel and other steel stocks is driven by the strong sales volume growth during Q4FY2009. We maintain our BUY rating on the stock with target price of Rs 834," says Karvy Stock Broking's research report.

IIFL on Marico - Target of Rs 80

IIFL has recommended a buy rating on Marico with a target price of Rs 80 in its research report.

"The recent hike in minimum support price (MSP) for copra by the government has given rise to concerns on Marico’s margin outlook for FY10. Historical evidence leads us to believe that the MSP hike will not alter copra price dynamics. NAFED (National Agriculture Marketing Federation), the nodal procurement agency for copra, has in the past not been as effective in supporting copra prices."

"Perishable nature of copra as well as the dearth of funds has compounded the problem of NAFED being not an end-user itself (unlike FCI), necessitating liquidation of copra inventory in the market within four months of procurement. Importantly, copra demand, over 50% of which comes from edible coconut oil, has fallen this year as consumers switch to cheaper options such as palm oil, creating downward pressure on copra prices. Copra prices are likely to rule 7-8% lower in FY10 (YoY) benefiting Marico, supporting a 110 bps gross margin expansion in FY10, in our estimate. BUY with a target price of Rs 80," says IIFL's research report.

Stock Views on Marico, Union Bank, Akruti City

KRChoksey on Marico - Target Rs 64

KRChoksey has recommended a buy rating on Marico with target of Rs 64 in its report on October 22, 2008. "Marico’s net sales increased 30.1% Y-o-Y to Rs 603.5 crore in Q2FY09 as against Rs 463.8 crore during Q2Y08. EBITDA of the company registered a growth of 14.1% Y-o-Y to 73.9 crore & PAT rose by 11.6% Y-o-Y to Rs 47.1 crore. The second half of FY09 is expected to present significant challenges in the domestic consumer products business, though the long term fundamentals of the company remains strong. At CMP of Rs 53.3, the stock is trading at 18.5x on FY09E EPS of Rs 2.8. We recommend a BUY on this stock with target price of Rs 64.0, which represents an upside potential of 20.0%," says KRChoksey's research report.

Emkay Global on Union Bank - Target of Rs 200

Emkay Global Financial Services has maintained its buy rating on Union Bank of India with a target of Rs 200 in its November 3, 2008 research report. "Union Bank of India’s (UBI) reported net profit of Rs 3.6 billion for Q2FY09. The operating performance for Q2FY09 was much stronger than we expected with 48.6% growth in NII and 47% growth in fee income. The improving asset quality and strong cost/asset ratios remain positives for the bank."

"We have upgraded our earnings estimates for the bank by 10% each for FY09 and FY10. We continue to maintain it as one of our top picks. The stock is currently trading at 0.9x FY10E ABV and 3.9x FY10E FDPER. We maintain our BUY recommendation on the stock with price target of Rs 200," says Emkay Global Financial Services' research report.

HDFC Securities on Akruti City

HDFC Securities has recommended a buy rating on Akruti City in its report dated November 12, 2008. "Akruti’s revenues and EBITDA grew by 5%and 9% respectively on account of an increase in other income (including income from JVs). Akruti had EBITDA margins of 98% and PAT margins of 78% in Q2 FY09 due to its high mix of commercial projects (49% of land bank) and very little presence in the residential segment (10% of land bank) as compared to other players. Akruti City, with its land bank in these areas, is in a position to tap this market. Given the visibility in project execution, its diverse land bank and strong presence in SRA schemes, we recommend a BUY on the stock," says HDFC Securities' research report.

Motilal Oswal views on TCS, Marico, United Spirits

TCS - Target Rs 760

Motilal Oswal has maintained its buy rating on Tata Consultancy Services (TCS) with a target of Rs 760 in its October 22, 2008 research report. "TCS reported USD revenue growth of 3.2% QoQ and 11.2% YoY at USD 1574 m (v/s our est. of USD 1,600 million). PAT at Rs 12.6 billion grew 1.4% QoQ (1.2% YoY), significantly below our estimates (Rs 14.1 billion) due to forex losses of Rs 2.6 billion. We are revising our FY10 USD revenue growth estimates downward by 470bp from 19% to 14.3%, on account of client specific issues with respect to TCS and overall demand uncertainty."

"Our FY09 EPS stands revised to Rs 58.1 from Rs 60.4 while we have lowered our FY10 EPS to Rs 63.3 from Rs 69.1. We are assuming an average rate of Rs 45.2/USD for FY09 and Rs44/USD for FY10 against our earlier estimate of Rs 43/USD for FY09 and Rs 42/USD for FY10. We expect FY08-FY10 revenue CAGR of 19% and EPS CAGR of 11%. The stock is trading at 8.6x FY10E earnings. We revise our target price to Rs 760 (12x FY10 EPS), implying 39% upside. Maintain Buy," says Motilal Oswal's research report.

Marico - Target Rs 65

Motilal Oswal has maintained its buy rating on Marico with a target of Rs 65 in its October 22, 2008 research report. "Marico posted in-line net sales of Rs 6 billion, a growth of 30% YoY. Adjusted net profit grew 11.6% YoY to Rs 471 million against our estimate of Rs 495 million."
"The management has given a cautious outlook on volume growth for 3QFY09. Prices of copra are likely to retreat in line with other edible oils in the coming weeks, which would be margin accretive for Marico. We expect adjusted PAT growth to remain under pressure in FY09 (16.5%); margin expansion of 90bp would result in 20% PAT growth in FY10. The stock is trading at 17.7x FY09E EPS of Rs 3 and 14.9x FY10E EPS of Rs 3 .6. We maintain Buy, target of Rs 65," says Motilal Oswal's research report.

United Spirits - Target Rs 1351

Motilal Oswal has maintained its buy rating on United Spirits with a target of Rs 1351 in its October 22, 2008 research report. "Revenues at Rs 9 billion (est. of Rs 9.2 billion) were up 20%. PAT at Rs 939 million (est. of Rs 1.05 billion) was up 17%. Gross margin declined 610bp due to sharp increase in raw material and packaging cost. EBIDTA margin improved 20bp due to sharp decline in advertising spend (down 340bp) and staff cost (down 240bp). EBIDTA is Rs 1.8 billion v/s est. of Rs 1.9 billion, up 21% YoY."

"We believe the growth story in United Spirits is intact. Volumes are expected to grow at 12% CAGR in the long term and the outlook from the regulatory changes continues to be positive. We are downgrading FY09 and FY10 EPS (excluding treasury stock) estimates from Rs 56.6 and Rs 77.6 to Rs 47.6 and Rs 67.6. The stock is trading at 16.3x FY09 EPS of Rs 47.6 and 11.5x FY10 EPS of Rs 67.6. Maintain Buy,target of Rs 1351" says Motilal Oswal's research report.

Stock Views on Idea Cellular, Marico, Bharti Airtel

IIFL on Idea Cellular - Target of Rs 112

IIFL has recommended a buy rating on Idea Cellular with a 12 month target of Rs 112 in its September 18, 2008 research report. "Idea Cellular is yet to receive the USD 640 million investment from the private-equity deal done in May this year, and the rupee’s depreciation against the USD will result in a gain exceeding Rs 2 billion for Idea. In FY08, Idea managed its FX exposure better than peers. Idea also sported the best asset turnover, highest depreciation rates and the highest ROE among the big carriers. It raised its market share in FY08 from 8.4% to 9.2% in terms of share of wireless subscribers."

"While minutes of usage increased by 5%, the rate per minute fell by 15%, resulting in a 12% drop in ARPU to Rs 299. At 54%, Idea’s YoY revenue growth rate was equal to that of Bharti. We build in higher cost of imports over the next 2 years and raise WACC to 14% and reduce our DCF target price from Rs 141 to Rs 112. BUY," says IIFL's research report.

Parag Parikh on Marico - Target of Rs 82

Parag Parikh Financial Advisory Services has recommended a buy rating on Marico Industries with a target of Rs 82 in its September 11, 2008 research report. "At the current market price of Rs 58.25 , the stock trades as 16x of FY09 earnings and 14x of FY10 earnings. This seems grossly under priced and a value pick. PPFAS research expects the stock to reach a level of Rs 82 within 18 months to trade at 20x on projected earnings of FY10E. Thereby we rate the stock as a BUY giving an upside of 40%, target of Rs 82," says Parag Parikh Financial Advisory Services' research report.

India Infoline on Bharti Airtel - target Rs 908

India Infoline has recommended buy rating on Bharti Airtel, with a price target of Rs 908, in its report dated September 15, 2008.

"Over the past 12 months DoT has granted spectrum to several new players, which are likely to start operations, aided, partly, by faster network roll out due to infrastructure sharing. However, we believe Bharti is well placed to maintain its leadership position with a strong pan India presence and a 75 million subscriber base and forecast a 36.1% CAGR in earnings over FY08-10E. Valuations appear attractive at EV/EBIDTA of 8.4x and P/E of 12.8x on our FY10E earnings; recommend BUY with a target price of Rs 908", says India Infoline report.