Stock views on State Bank of India, Tata Tea

IIFL on State Bank of India - Target Rs 1777
"SBI’s focus on rapid network expansion and gaining market share has yielded results over the past two years. With 100% of its expansive branch network now linked to a common technology platform, a major constraint vis-à-vis new generation private banks is removed. The declining trend in ROE was arrested last year but the bank still lags other major government banks in this respect. Asset quality deteriorated last year and provisioning may remain high in the coming years."

"The six associate banks are in good shape and a consolidation would add value to the SBI Group. Despite the recent run-up in the stock price, valuations remain inexpensive at 1.2x core book. 'ADD' with a 12-month target of Rs 1777," says IIFL's research report.

Sharekhan on Tata Tea - Target Rs 939

"We believe with a net cash of Rs 755 crore (and a gross cash of Rs 2,963 crore as on March 31, 2009), the company is in good position to build organic as well as inorganic growth in the coming years. We broadly maintain our estimates for FY2010 and introduce FY2011 estimates through this note. At the current market price, the stock is trading at attractive valuations of 11.8x its FY2010E earnings of Rs 64.5 and 10.2x its FY2011E earnings of Rs 75.0 compared to some of the large-cap FMCG stocks. We maintain our Buy recommendation on the stock with the revised price target of Rs 939 (as we roll over our price target at 12.5x its FY2011E earnings),"

Stock Views on Sadbhav Engineering, Tata Tea, ITC

Angel Broking on Sadbhav Engineering - Target Rs 774

Angel Broking has recommended a buy rating on Sadbhav Engineering, with price target of Rs 774, in its report.

"We value Sadbhav Engineering on a SOTP basis to capture the long-term value creation from its BOT Segment. Considering a CAGR of 22.1% in the top-line over FY2009-11E (on the back of a strong Order Book), cooling commodity prices (leading to an improvement in the Margins), rolling over to FY2011 numbers and re-rating of the assigned P/E (10x in place of the 8x assigned earlier, on the back of an overall re-rating of the Sector), we are upgrading the stock to a 'Buy' from 'Neutral', with a SOTP target price of Rs 774, implying a potential upside of 19% from its current levels. Our SOTP target price is achieved by assigning a P/E multiple of 10x on its FY2011E Earnings of Rs 62.1 and by valuing its BOT Project of Rs 200 crore at Rs 153/share (at an implied P/BV of 1x)," says Angel Broking's report.

Sharekhan on Tata Tea - Target Rs 853

Sharekhan has recommended a buy rating on Tata Tea with a target price of Rs 853 in its research report.

"Tata Tea’s Q4FY2009 numbers (derived from FY2009 and M9FY2009 numbers) are below our expectations. The top line grew by 9.4% year on year (yoy) to Rs 1,226.1 crore in Q4FY2009, which is below our expectation of Rs 1,319.7 crore for the quarter. At the current market price the stock trades at 8.7x FY2010E earnings per share of Rs 64.0. We shall revisit our estimates for FY2010 and introduce FY2011 estimates after our interaction with the management. We maintain our 'Buy' recommendation on the stock, target of Rs 853," says Sharekhan's research report.

Nirmal Bang on ITC - Target Rs 250

Nirmal Bang has recommended a buy rating on ITC with a target price of Rs 250 in its research report.

"At the CMP , the stock is currently trading at a PE of 17.1x FY10E & 14.6x FY11E, which looks quite attractive when compared to the peers in the industry. The FMCG segment as a whole trades at an Average PE of around 24x earnings. ITC historically has traded in the PE range of 21x to 27x with an average PE of around 24x.We recommend a 'BUY' rating on the stock with a Price target of 250 per share (PE of 22x FY10E) an upside of 29% over a period of one year," says Nirmal Bang's research report.

Stock views on Ratnamani Metals, Tata Tea, Cummins India Limited

Bonanza on Cummins - Target Rs 300

Bonanza has recommended long term investors to stay invested in Cummins. Fresh entries can be made only on dips, near Rs 230 level for a target of Rs 300.

"Cummins India Limited (CIL) is a 51 percent subsidiary of Cummins Inc. USA, the world’s largest independent diesel engine designer and manufacturer above 200 HP. CIL is India’s leading manufacturer of diesel engines with a range from 15 hp to 2365 hp, serving the Power Generation, Industrial and Automotive Markets. In Engine segment exports that were about Rs 1300 Crore in FY 09 can fall to Rs.900-1000Crore in FY10. About 30%-35% to growth is expected in domestic business, as there is robust demand for power, railways (largely from new Metro stations coming up at metro cities), reality and construction, increased oil exploration, defense, marine, ports etc. Turnaround in Commercial Vehicles, to also boost sales of Cummins."


Sharekhan on Tata Tea - Target Rs 939

Sharekhan has maintained its buy rating on Tata Tea with a target price of Rs 939 in its research report.

"We believe with a net cash of Rs 755 crore (and a gross cash of Rs 2,963 crore as on March 31, 2009), the company is in good position to build organic as well as inorganic growth in the coming years. We broadly maintain our estimates for FY2010 and introduce FY2011 estimates through this note. At the current market price, the stock is trading at attractive valuations of 11.8x its FY2010E earnings of Rs 64.5 and 10.2x its FY2011E earnings of Rs 75.0 compared to some of the large-cap FMCG stocks. We maintain our Buy recommendation on the stock with the revised price target of Rs 939 (as we roll over our price target at 12.5x its FY2011E earnings)," says Sharekhan's research report.


Sharekhan on Ratnamani Metals - Target Rs 118

Sharekhan has maintained its buy rating on Ratnamani Metals and Tubes with a target price of Rs 118 in its research report.

" We have revised downwards our EPS estimates for FY2010 and FY2011to Rs 19.8 and Rs 23.7 mainly on account of
(1) Lowering volume growth;
(2) Lower realisations; and
(3) A lower OPM.

The business environment for RMTL is challenging given the slowing capital expenditure in oil & gas sector, the key user industry for the company’s products. However, the company also has specialty products in its portfolio of offering, which are consumed in high-growth sectors like power. We feel, RMTL should be able to report a CAGR of 14.3% and 10.5% in its revenues and profit respectively over FY2009-11E. The key risk to our call would be a significantly lower order inflow going forward. However, at the current market price the stock is trading at an attractive valuation of 3.3x its FY2011 earnings. We maintain Buy rating on the stock with a price target of Rs 118 (5x FY2011E)," says Sharekhan's research report.

Stock views on Divis Labs, South Indian Bank, Tata Tea

Hem Securities on Divis Labs - Target Rs 1370

Hem Securities has initiated a buy rating on Divi's Laboratories with a target price of Rs 1370 in its research report.


"Being a pioneer in the API and CRAMS segment, Divi’s Laboratories has posted tremendous growth over the past few years. With the leadership in dextromethorphan, phenyleffrine, nabumetone and lopamidol, the com-pany is expected to witness surge in its business. Further, with almost completion of massive capex, the company is expected to continue to post excellent financial performance on the back of its successful entry into the high margin nutraceuticals segment. In wake of the growth of the phar-maceutical sector, Divi’s Laboratories Ltd seems to be extremely attrac-tive investment opportunity."


"Presently, the stock is trading at Rs 1088.60 which is at 16.92 times to its earnings and 5.68 times to its book value of Rs 191.72. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with a target price of Rs 1370 in medium to long term investment horizon ex-pecting an appreciation of about 26% from the current level of Rs 1088.60", says Hem Securities' report

FinQuest Securities on South Indian Bank - Target Rs 120

FinQuest Securities has recommended a buy rating on South Indian Bank, with price target of Rs 120, in its report.

"South Indian Bank is trading at an attractive valuation of 0.7x FY10E ABV. Peer banks like KTK Bank, KVB etc continue to trade at 1x FY10 ABV, although operational parameters are comparable with SIB. We therefore believe that SIB’s valuations will catch up with peer banks. Our target price of Rs 120 for the stock (based on DDM model) discounts 1x FY10E ABV. We recommend Buy on the stock," says FinQuest Securities' report.

KRChoksey on Tata Tea - Target Rs 859

KRChoksey has maintained its buy rating on Tata Tea, with price target of Rs 859, in its report.

"More than 70% revenues and 80% of EBIT come from tea business, which is likely to face margin pressure in FY10 as tea prices are likely to remain firm on account of decline in production by 5%. However, with company planning to leverage its tea & coffee brands in other beverage products would help it to diversify and become a complete beverage company. The company plans to focus on six key geographies - Great Britain and Africa, Europe and Middle East, the U.S., Canada and South America, South Asia and Asia Pacific, innovation and distribution going ahead to integrate the business, take advantage of economies of scale. Its recent launch T!ON - an active drink made from fruit juice, tea extracts and ginseng in Chennai has been performing well. At CMP of Rs 728, we maintain our ‘BUY’ recommendation on Tata Tea with a target price of Rs 859, which gives it an upside potential of 18%. At the CMP, the stock is trading at 5.1x FY10E earnings of Rs 143.8," says KRChoksey's report.

Sharekhan views on Tata Tea, Sun Pharmaceutical, Crompton Greaves

Sharekhan on Tata Tea - Target of Rs 853

Sharekhan has maintained its buy rating on Tata Tea with a price target of Rs 853 in its research report.

"In line with the strategy, Tata Tea, together with European Bank of Reconstruction and Development (EBRD), has decided to acquire a 51% stake in Grand, a leading player in the Russian economic beverage segment. Tata Tea (through one of its overseas subsidiaries) and EBRD will hold a 33.2% and a 17.8% stake respectively in the company. The balance 49% stake will remain with the founding promoter of the company (Dr Alexander E Borisov)."
"With tea volumes growing moderately in the domestic and international markets, we expect Tata Tea’s new initiatives, such as the launch of green and herbal tea, the foray into non-carbonated beverage segment and the entry into new geographies, to drive growth at the consolidated level going forward. However, in the near term, the company’s profitability would remain under pressure, as the prices of its key raw materials (especially raw tea) shall remain firm. At the current market price, the stock trades at 8.7x its FY2010 earnings estimate and EV/EBIDTA of 3.2x. We maintain our Buy recommendation on the stock with a price target of Rs 853," says Sharekhan's research report.

Sharekhan on Sun Pharmaceutical - Target of Rs 1295

Sharekhan has maintained its buy rating on Sun Pharmaceutical Industries with a price target of Rs 1,295 in its research report.

"Sun’s domestic business has clearly outpaced the industry by registering a +17% growth in M9FY2009 vs a 12-14% industry growth in the same period. With a strong field force, a robust pipeline of new launches, strong product portfolio and a firm foothold in the domestic market, Sun expects its domestic formulation business to continue to outpace the industry growth of 10-12%. At the current market price, Sun Pharmaceutical Industries is valued at 12.6x FY2009E and 14.1x FY2010E fully diluted earnings. Uncertainty on the Taro acquisition and Caraco’s warning letter would remain as an overhang on the stock and cap the near-term upside. We maintain our Buy recommendation on the stock with a price target of Rs 1,295," says Sharekhan's research report.

Sharekhan on Crompton Greaves - Target of Rs 157

Sharekhan has maintained its buy rating on Crompton Greaves with a price target of Rs 157 in its research report.

"Crompton Greaves Ltd (CGL) has emerged as a strong power T&D product and service provider in the past few years, thanks to the acquisitions made globally. The stake purchase in APIL will squeeze the company’s plan to make any further acquisitions in the near term. Further, the diversification into the power business may be remunerative only in the longer term as any meaningful returns may flow in only after three to four years. This will suppress the company’s RoE in the near term, thereby exerting pressure on the stock’s valuations.
We remain positive about CGL’s business and operational efficiencies as CGL has performed consistently on these parameters. We have revised our price target for the stock to Rs 157 (9xFY2010E earnings) mainly to capture the lower returns expected after the investment in APIL. We are maintaining our Buy recommendation on the stock as its current valuation of 6.1x FY2010E earnings per share (EPS) is attractive. However, the stock may underperform in the near term as the proposed investment in a group company is sentimentally negative for the stock," says Sharekhan's research report.