Tuesday, October 25, 2011

9 Diwali Stocks from Kotak


The last Samvad year has been challenging for the markets with both, global and domestic concerns weighing on the indices. The new Samvad year brings hope of some solution to the global economic crises and speedy action from the Government in India.
In this background, broking firm Kotak Securities has selected some stocks which look attractive from an investment perspective. It opines these stocks may have a relatively lower downside in case of a sharp fall in markets. The same are as follows:
TCS:
CMP - Rs.1,049
Current TP - Rs.1,240
> We opine that, recent management commentary reflects greater optimism, likely on the back of strong pipeline and better deal flow.
> Management has seen continued revival in discretionary spends as well as in cost efficiency initiatives, which is encouraging.
> Stock is available at about 16.9x FY13 estimates.
ICICI Bank:
CMP - Rs 871
Current TP- Rs 1,364
> ICICI bank is better placed vis-à-vis its peers with robust liability franchise (CASA mix at ~42% at the end of Q1FY12), improving asset quality, healthy margin (NIM at 2.6% in Q1FY12).
> After achieving substantial success on 5Cs (Credit growth, CASA, Cost optimiza-tion, Credit quality and Customers), ICICI Bank is likely to continue its focus on profitable growth.
> After stripping the value of subsidiaries (Rs.236), stock is trading reasonable at 1.25x its FY12 ABV.
JP Associates:
CMP-  Rs 70
Current TP-  Rs 90
> Cement volumes are likely to jump going forward due to incremental capex while construction division revenues would start picking up by FY13.
> Along with this, post completion of cement capex, company is expected to utilize free cash flows for debt reduction.
> Thus, debt reduction and decline in interest rates would be positive for the company.
> Stock is available at about 9.2x EV / EBIDTA on FY12 estimates.
BEL:
CMP- Rs 1,522
Current TP - Rs.1,913
> The company enjoys a dominant status in the defence sector and has a steady growth profile, a key positive in the current economic environment.
> Order backlog is strong at Rs 230 billion, providing revenue visibility of 43 months, one of the highest in capital goods sector. We thus see revenue growth rates to move up in the future.
> The business is high-end with rich profitability and strong cash generator.
 BEL would remain a preferred vendor to the Indian defence sector.
> Stock is available at about 11.2x FY13 estimates.
Cummins India:
CMP - Rs 393
Current TP - Rs 507
>Company is well poised to benefit from recovery in the infrastructure spending in India.
> Commencement of mega production site at Phaltan is likely to ease out capacity constraints and would add to cash flow generation from Q3FY12E.
> Company has committed a Capex of USD 300 million funded mainly through internal accruals.
> Stock is available at 10.3x FY13 estimates. 
IRB infra:
CMP - Rs 160
Current TP - Rs.246
>Company has a strong order book for its EPC division and is also ideally positioned to benefit from toll rate hikes in line with inflation in most of its toll projects.
>It also has sufficient funds to meet equity requirements of existing and new projects and is best positioned to capture upcoming opportunities in the road segment.
>Stock is available at 8.6x FY13 estimates.
Indraprastha Gas: 
CMP - Rs 400
Current TP - Rs 450
>Looking at the growth potential in the City Gas Distribution, rich experience, huge demand of natural gas and strong promoter background, we are bullish on IGL.
>We believe that the strong trends in CNG and PNG segment will continue and IGL is best placed to benefit from rising gas consumption in India.
>Based on our estimates, the stock at current market price of Rs.400 is trading at 8.3x EV/EBIDTA and 14.5x P/E on FY13E earnings.
HT Media:
CMP - Rs.138
Current TP - Rs.200
Investments in three large markets (HT-Mumbai, Hindustan-UP, and Mint-business newspapers) over the past five years shall provide industry-beating growth in the coming years as readership reaches threshold levels in market share in key markets.
> Two of the company`s properties (HT-Mumbai, Mint) are set to achieve breakeven towards FY12-end.
> Valuations are reasonable at 11.8x PER FY13E.
NIIT Tech:
CMP - Rs.230
Current TP - Rs.300
>The company reported eight successive quarters of high volume growth.
>Non-linear revenues continue to grow at the company average and form about 27% of revenues.
> The order bookings in 2QFY12 were high at USD 200 (USD 86 million), indicating a conducive macro scene.
> The company may have net cash of about Rs.65 a share by FY13 end, as per our estimates.
> Stock is available at 6.3x FY13 estimates.
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