PSU Shares - Gold Mine or Black Hole ?

Dear Investors,

The recent rally in BSE and NSE has given a big boost to the most neglected sector - Public Sector Undertakings.  

BSE PSU Index comprises of 59 scrips out of which 24  belong to Nationalized Banks.  Rest 35 shares belong to core business / manufacturing activities.  Many stocks in this sector are under owned by both FIIs and Domestic Institutions, HNIs for the simple reason that these are thoroughly mis-managed.

The Sector is out of investment radar of large investors due to uncertainty. There are several reasons for the downturn in PSU stocks include decline in net profit and the government's move to sell shares of some of these companies via offer for sale, at a discount to prevailing market price.  Any further equity dilution means - more supply depressing the market price.  FPOs by the government has become a nightmare for the Retail investors as they are now trading at deep discount to their issue price.  

For the smart investors this gives a golden opportunity to buy into high quality stocks at attractive valuations.  The top ten identified by our Research Team is given below :

1. BHEL
2. BPCL
3. BEML
4. Coal India
5. Engineers India
6. GAIL
7. Hindustan Copper
8. Indian Oil
9. NMDC
10. ONGC

Investors should carefully analyze the price movements of these shares besides the Q4 results for 2014 before taking any investment decisions.

Discover how Smart Investors are taking undue advantage of our Share Market Expertise by subscribing to our premium services !!

Smart Investor

Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli
BANGALORE 560048

For Stock Advise + Ideas
mail to intellinvestor@gmail.com
Talk / SMS 08105737966

Visit - www.ingeniousinvestor.in
Follow us - www.twitter.com/smartinvestor

Tata Global Beverages - Buy on Declines !

We recommend a Buy in the stock of Tata Global Beverages from a long-term horizon. It is apparent from the charts of the stock that after marking a new high at Rs 181 in mid-November 2012, the stock reversed direction. This reversal was triggered by negative divergence in weekly relative strength index and daily moving average convergence divergence indicator. Since then, the stock has been in a short-term downtrend.

Last week, the stock breached its 21- and 50-day moving averages decisively and has been hovering well below them. The stock fell by 3 per cent reinforcing bearish momentum in the previous week. On Wednesday, the stock appears to have breached its key support at around Rs 130 by declining more than one per cent. The daily RSI has entered the bearish zone from the neutral region and weekly RSI is declining in the neutral region. The daily MACD is sloping down, in line with the stock price and featuring in the negative territory implying downward momentum.

Our short-term outlook for the stock is bearish. We expect its decline to prolong and reach our price target of Rs 115 or Rs 124 in next 2 weeks .   After hitting a 52 week high of Rs.181 the stock has been declining which is now near to the 6 months low of 127.

Smart Investors  with long-term perspective can consider buying  the stock with stop-loss at Rs 100 levels.

Smart Investor
Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross, Kammanahallli
BANGALORE 560084

For Stock Advise + Ideas
sowmya@ravinaconsulting.com
Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com
Follow us - www.twitter.com/smartinvestor
http://www.google.com/profiles/intellinvestor

IRB Infra Add on dips

IRB Infrastructure Developers: Buy

The stage is set for road projects to take off after the new norms for bidding have been put in place. Well-entrenched players such as IRB Infrastructure Developers would emerge as the natural beneficiaries of road orders, after this move.

A strong balance sheet, lucrative portfolio of 15 road projects, increase in toll revenues and reasonable leverage all augur well for the company. Investors with a 2-3 year perspective can consider buying the stock.

As IRB is a relatively mature developer compared with its peers, the stock is a fit candidate for the core portfolio. At the current price of Rs 262, the stock trades at 14 times its consolidated per share earnings expected for FY-12 (the company operates mainly through special purpose vehicles).

IRB's order book as of March 31, 2010 was close to Rs 9,000 crore, 5.3 times its sales this year. Most of the ongoing projects are slotted for completion by FY-13. IRB's revenue growth in its currently operational 10 projects has been encouraging.

At a time when quite a few developers have been witnessing lower than anticipated toll volume, IRB has seen increase in toll revenues in most of its key projects.

As there has not been any significant increase in toll rates, traffic volume growth is likely to have contributed to this trend. Revenue by way of tolls alone more than doubled over the last two years to Rs 842 crore in FY-10. This translates into a judicious mix of 50 per cent toll revenues and the rest from construction and maintenance.

In recent times, some of the new projects in operation by other developers have witnessed lower than anticipated traffic. IRB's portfolio of roads is unlikely to suffer from such a limitation as the routes are well-established.

While new projects may witness this trend, continuous bidding for fresh projects and revenue from construction is likely to shield the company from any slowdown in growth.

To ensure that it remains in the race for new projects, IRB has kept itself well-qualified (financially) to bid, by achieving financial closure on all four major projects bagged over the last one year. It is now financially eligible for projects up to Rs 4,000 crore.

Besides, given that IRB holds a large portfolio, it may have the luxury to bid only for lucrative projects. While this might require higher financial qualification, it recently tied-up with Reliance Infrastructure for a project with estimated cost of over Rs 5,000 crore.

IRB ended FY-10 with a 72 per cent revenue growth at Rs 1,705 crore while net profits at Rs 385 crore jumped 119 per cent, partly aided by tax credits. Despite taking on large projects, debt-equity ratio remains less than 1.5.

Vidya Bala

BL Research Bureau

For more investment ideas / Portfolio Management advise get in touch with us

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi, Whitefield
Mahadevapura Post
BANGALORE 560048

For Free Stock Advise + Ideas
sowmya@ravinaconsulting.com
Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com
Follow us - www.twitter.com/smartinvestor

Gail Buy on declines for a target of 525

GAIL reported impressive year-on-year topline growth of 9.09 per cent to Rs 27,035.30 in FY10, largely driven by transmission revenues. Natural gas transmission revenues aided by KG basin grew a healthy 27.63 per cent, while LPG transmission revenues grew 17.58 per cent during the fiscal.

The year saw 28 per cent y-o-y growth in gas transmission to 106.74 MMSCMD. Fourth quarter alone saw a gas transmission increase by 115 mmscmd. Net sales in Q4 FY10 grew in line with estimates to Rs 6,522.12 crore, marking 6.42 per cent y-o-y growth.

Operating profit for the year grew 23.97 per cent and operating margins surged 242 basis points. The growth at PBIT level for transmission of natural gas was 40.12 per cent and for LPG at 25.79 per cent. Fourth quarter marked operating profit growth of 37.52 per cent (Increase of Rs 359.26 crore). Further upside was restricted in the backdrop of transmission tariff being less at Rs .72/scm compared to last year’s Rs 0.88 /scm.

Net profit growth (y-o-y basis) for the full year ended March 2010 was robust at 18 per cent with consolidated profit at Rs 3,292.29 crore compared to Rs 2,790.05 in FY09. Profit margin also showed improvement of 89 bps. Consolidated fourth quarter net at Rs 9,10.82 crore grew a healthy 44.57 per cent from Rs 630.02 crore in Q4FY09.

Petrochem business has shown good growth and is about 11.5 per cent contributor to overall revenues. Other revenue contributors for Gail like LPG and liquid hydrocarbons segments (contributing 10.48 per cent to total revenues) have shown de-growth of 4.5 per cent over FY09.

While the city gas distribution grew good 23.72 per cent and holds promise, it is still a small business segment (2.64 per cent contribution in overall revenues). Thus, going ahead, transmission services still hold the key to overall revenues and the growth registered is encouraging. However, transmission tariffs have to be watched carefully for margin expansions.

The crude prices have again started spiraling and likely to go up from present $72 per barrels. “Given our crude price assumption of $80/bbl for FY11E-12E, we model for GAIL’s subsidy payout to be higher by 15 per cent – 30 per cent over FY10,&" states an Ambit Capital report.

The stock moved up 1.7 per cent to Rs 440 levels today and trades at 16 times FY10 earnings.

For more investment ideas / Portfolio Management advise get in touch with us

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Buy JSW Energy on dips

With the commissioning of the first unit (300 mw) out of the total 1200mw Ratnagiri project (Maharashtra) in July 2010, JSW Energy’s installed capacity will jump 30 per cent to almost 1300mw.

The Sajjan Jindal group-owned company is well on course to achieve 3410 mw capacity by FY14, with full commissioning of Ratnagiri (1200mw) and Barmer (1080mw) by FY12 itself. Besides, 8250mw worth of projects are under various stages of development, which will help JEL achieve a project size of about 11500mw by FY16.

Analysts are positive and confident about the company’s capability of achieving the said project targets due to its strong execution track record, financial strength and huge base of operational capacity (1000mw) unlike many other new private entrants. They estimate strong sales and profit CAGR of 54 per cent and 48 per cent respectively between FY10-13E. In FY11, average sales and profits are likely to almost double on a y-o-y basis to Rs 5,530 crore and Rs 1,291 crore, respectively due to phased commissioning of Ratnagiri and Barmer projects. This is over and above 28 per cent and 169 per cent jump in sales and profit at Rs 2,355 crore and Rs 745.5 crore, respectively in FY10 mainly due to a lower base.

The most interesting argument in favour of JEL is the fact that it is also one of the best plays on India’s currently buoyant merchant power story. In FY10, around 70 per cent of the power generated by JEL was sold on merchant basis at Rs 4.5 per unit. Going ahead, though this high share is expected to come down to less than around 50 per cent by FY14, the company is well placed to reap benefits of high merchant power rates in India, thanks to robust power demand on account of strong economic growth and supply lagging behind. The front loaded merchant capacities are likely to benefit the company due to high merchant tariff over the next 2-3years, say analysts.

However, there are risks to being bullish about the company.

Beyond FY14, merchant power rates are going to soften as robust expansion of power plans start getting commissioned. Around 1, 00,000mw is expected to come up by FY14, adding to the current India’s installed capacity of 1, 55,000 mw and thus putting pressure on short-term rates. JEL witnessed about halving of merchant power rate at Rs 4.5 in FY10. Analysts estimate that spot tariff would converge with regulated tariff of Rs 2.5-3.5 per unit.

Secondly, the company is exposed to fuel availability and its cost. It is dependent on 10 million tonnes per annum (MTPA) imported coal for 3410mw. While more than 60 per cent of the coal will be bought on spot basis, the rest has been tied up on a long-term basis. Also, till the time its lignite mines start operations, which will take 2-3 years, it will need additional 8.5MTPA of coal. By using more of imported coal, JEL is exposed to pricing and exchange risk that could have serious impact on its financial performance, as there is no benefit of pass-through in merchant based projects.

Thus, investors need to watch out for this critical trigger as to how the company reduces its excessive dependence on imported coal. JEL is trying to resolve the issue though slowly. In April, it acquired about 50 per cent stake in South African Coal Mining Holding Ltd (SACMH) having total reserves of 50 million tones. Further, Indian Ocean Mining Ltd, South Africa (IOM) and Osho Venture FZCO, Dubai is now working together with JSW Energy to give JSW access to get 70 per cent of Osho and IOM, which is subject to due diligence. Lastly, the company has been using Chinese equipments for projects under construction (3410mw). There are questions raised about the quality and efficiency of Chinese equipments.

At Rs 125, the stock has given a return of 25 per cent in the last six months over its issue price of Rs 100 since its listing in January 2010. It trades at 10 times and 3.5 times FY12 estimated earnings and book value, respectively. With various positive triggers such as timely commissioning of capacities and announcement of acquisition of coal mines, analysts are nevertheless positive on the company. They have estimated an average one year target price at Rs 163, implying an upside of over 30 per cent.

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi, Whitefield

Mahadevapura Post

BANGALORE 560048

For Free Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Apollo Tyres - Buy

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Amtek Auto - Buy

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

Alok Industries - Buy

Source ET

Bought to you by

Ingenious Investor

Equity Research Division

Ravina Consulting

No.429 Mahavir Tuscan

Near Hoodi Circle, Whitefield

Mahadevapura Post

BANGALORE 560048

For Stock Advise + Ideas

sowmya@ravinaconsulting.com

Talk / SMS 08105737966

Read - www.ingeniousinvestor.blogspot.com

Follow us - www.twitter.com/smartinvestor

buy BHEL

BHEL is a public sector undertaking (PSU) managed like private companies. “It is highly profitable due to monopoly in various sectors. Research & developments are leading to greater highs in product quality and performances. BHEL also has strong presence in overseas markets and is a good stock for investment,” says Surana.

Our recommendation :

IT has been consolidating at current levels investors should add on dips for a decent 10-15% returns in the next 3 months time frame.

Source : ET.com

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

www.twitter.com/smartinvestor

Buy ITC

Although tobacco remains the major revenue earner of the company, yet over the years the company has made remarkable progress in the non-tobacco businesses by leveraging the ITC brand. Its strong presence in agro commodities, FMCG products, rural marketing, luxury hotels, organised retail, paper and packaging make it a company with very stable and secure fundamentals. Over the years, it has built a very strong foundation in trading and export of agro commodities. Moreover, its rural marketing initiative -- e-choupal -- will give them exceptional access to agricultural produce.

“On the back of its diversified nature and leadership position in various business segments, it validates premium valuation. Hence ITC is one of the safest players to bet for medium-to-long term,” informs Kapur.

Source : ET.com

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

www.twitter.com/smartinvestor

Buy PNB

PNB’s 1HFY10 performance has been by far the best among PSU banks with strong business growth coupled with improved margins.

“While an extensive branch network should continue to aid PNB to deliver robust business growth, the relatively high CASA ratio should ensure better NIMs, compared to its peers. The technology initiatives (100% CBS implementation) along with prudent lending practices would also help towards keeping costs under check and maintain asset quality,” says Kapur.

OUR RECOMMENDATION :

Investors should buy on dips for a target of 1200 in a 12 months time frame.

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

www.twitter.com/smartinvestor

Buy TCS on dips

TCS is one of the world’s leading information technology companies and is well poised to take advantage of the amazing business opportunity in outsourcing which is set to emerge as the leading companies of the world reorganize themselves after the financial crisis of 2008. It has around 90 clients the world over and has been showing good performance over the years.

“TCS will also benefit from the diversity of its business operations. It has reported better than expected volume and profit growth in the recent quarters. We recommend buying TCS as the stock trades around 20 times FY10E, which is a 15 – 20% discount to the valuation of Infosys,” says Kapur.

OUR RECOMMENDATION :

TCS has had a dream run in the last 2 months from a low of 450 it has scaled 680 a 52 week high recently. Avoid in the short term and buy below 600 for a target price of 900 in a years time frame.

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

www.twitter.com/smartinvestor

Buy L & T

L&T is in diversified business activities with a great future potential. It is also cost effective & profitable. “The management is highly professional and it is not a family business. The company is expected to do very well due to its presence and dominance in most of the infrastructure-related areas,” informs Atul Surana, Certified Financial Planner & MD of Mangalore-based Catalyst Financial Planning.

OUR RECOMMENDATION :

L&T has always been an investors delight. Buy on dips and hold for a target price of 2500 in a years time. The stock is consolidating around 1600 levels and is poised to jump to next level after the Q3 results.

In a weak market it does not all much unlike other stocks which gives a support to move up once the market trend moves up

Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

www.twitter.com/smartinvestor

Buy SBI on dips and add to your Portfolio

With its surplus liquidity and balance sheet size, SBI is expected to be a major beneficiary of pickup in credit demand going forward. Its non banking subsidiaries -- SBI Capital Markets, SBI Mutual Fund and SBI Life Insurance -- will benefit from uptick in capital markets. Its mammoth branch network (most of it already under Core Banking Solutions), increasing contributions from fee-based activities, comfortable capitalisation, a well-diversified loan book and high proportion of low-cost deposits remain investment positives for the bank.

“At current market price it trades at 2x of its FY10E adjusted book value. In the banking sector it remains our preferred pick and should be bought on any significant fall,” says Kapur.


Bought to you by

Ingenious Investor
Equity Research Division

Ravina Consulting
No.429 Mahavir Tuscan
Near Hoodi Circle, Whitefield
Mahadevapura Post
BANGALORE 560048
+91.9880080321

www.twitter.com/smartinvestor

Diwali Cracker Scrips from India Infoline

India Infoline has identified 14 stocks, including BoB and 3i Infotech, for buying during muhurat trading tomorrow.

A report said: "It's been a cracker of a year with the stock market illuminating the lives of the investing community. The market has also seen some amazing display of firepower in terms of liquidity. The celebrations ought to continue though the action, in our opinion, will move to stocks beyond the main indices, which explains our theme – Sense over Sensex.

"Last Diwali, when the street was plagued with pessimism, we had recommended a portfolio of 15 large cap stocks. Needless to say, the performance of the portfolio has been stupendous. This year, one needs to dig deep as discount sales may be missing in the main index stocks. There are bargains to be hunted in the broader market with several noteworthy stocks to be picked up even at current levels. We bring you 14 such stocks to buy during muhurat trading."

The list includes

Stock Target Price
Ahluwalia Contracts India 214
Anant Raj Industries 178
Bank of Baroda 592
Canara Bank 446
Ceat 225
Consolidated Construction 397
Dhampur Sugar Mills 141
Gayatri Projects 445
Infotech Enterprises 306
KPIT Cummins Infosystems 107
Lakshmi Energy & Foods 152
Sanghvi Movers 228
Suzlon Energy 107
3i Infotech 115

Buy - Bharti Airtel

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Bharti Airtel Ltd is India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBUs) -- Mobile Services, Airtel Telemedia Services & Enterprise Services. For 1Q FY10, the company’s total revenue grew to Rs 99.4 bn, EBITDA grew 18% YoY and 3.8% QoQ to Rs 41.5bn, while earnings grew 24% YoY and 12.4% QoQ to Rs 25.2 bn. ARPU declined 20.6% YoY and 8.9% QoQ to Rs 278/sub/month. MOU was 478 minutes, down 1.4% QoQ. However, overall mobile minutes grew 33.7% YoY and 7.7% QoQ to 140.7b. Rural market remains attractive: Bharti remains sanguine about the rural markets and believes that economic growth in rural India would continue unabated. ARPU in rural markets remains attractive at ~2/3rd of the overall Indian market ARPU. Low tariffs (high affordability) is the safety net against competition: Bharti believes that very low tariffs prevailing in the Indian market are the biggest safety net for incumbents against increasing competition. Bharti's significant coverage advantage would ensure that incremental margins are in line with the current margin profile. Bharti MTN Deal: Bharti and the MTN group are in talks to discuss exclusively a potential transaction. The MTN group is present in 21 countries of Africa and the Middle East. High tariffs and relatively low penetration in Africa makes it an attractive market for Bharti. The scope for cost and tariff reductions could trigger significant volume growth opportunity in the African markets. Bharti, thus, remains best-placed, given low capex intensity, un-leveraged balance sheet, and scale advantage. Bharti trades at an EV of 8x FY11E EBITDA and 14.1 x FY11E EPS. Bharti is well positioned with strong incumbency advantage and healthy balance sheet.

Buy Axis Bank

We believe Axis Bank’s planned equity dilution of about 17% is a precursor to marketshare gains at a faster growth rate of 8-10 percentage points above the industry over the next few years, strongly positioning the bank for the imminent revival in GDP growth from early FY2011E onwards. This dilution will result in book value accretion of about Rs 94 per share (25% increase over pre-dilution estimates), with a reasonable post-dilution leverage of 12x, average RoEs of about 16% over FY2010-11E and EPS dilution of about 7.5% in FY2011E. Amongst factors that drive competitive advantage, steady branch expansion, comprehensive product range and channel presence are driving consistent CASA marketshare gains (increased fourfold since FY2003). Moreover, diverse fee income streams, including cash management, syndication, bond underwriting, wealth management and cards, apart from the traditional CEB and Fx income, contribute a meaningful 2% of average assets. At the CMP, the stock is trading at attractive valuations of 2.0x FY2011E ABV (post-dilution). Post-dilution valuations imply an almost 30% discount to HDFC Bank, despite similar return ratios over FY2010-11E. We maintain a Buy on the stock with a 12-month Target Price of Rs 1,106.

Buy - Bayer CropScience

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Bayer CropScience (BCS), a subsidiary of Bayer AG Group, which is a world leader in agrichemicals, enjoys 23% market share in the Indian market. We believe that there exists substantial opportunity for company to grow its domestic business considering that India consumes an average 0.48kg of pesticides per hectare (ha) compared to 4.5kg/ha in the US and 10.7kg/ha in Japan. For FY2010E, we estimate BCS to register muted sales owing to the prevailing drought-like conditions though exports would be stable. On exports front, around 80% of BCS's export revenues come from Bayer AG’s group companies. If Bayer AG outsources 10% of its requirements from its global subsidiaries, BCS stands to benefit immensely. Pertinently, BCS registered strong 20.5% CAGR in export revenues during CY2005-FY2008. On financials, we estimate BCS to improve its EBITDA margins in FY2011E to 13.1% from 11.1% in FY2009 while registering robust RoE of 24% on the back of its ongoing restructuring exercise. BCS has shut its Thane plant (around 108 acres), which could come up for sale. At Rs 349, the stock is quoting at 9.5x FY2011E EPS. Our SOTP Target Price is Rs 501 with a Target P/E of 10x for its core business and 50% discounted value of the Thane land (Rs101/share post tax). We recommend a Buy on the stock.

Buy Ipca Laboratories

Latest Quotes | Charts | News/Announcements | Quarterly Results | P&L | Price History Ipca Laboratories (Ipca), a market leader in anti-malarials and rheumatoid arthritis segment, has grown at steady pace in the past, posting a CAGR of 15.7% in net sales and a CAGR of 24.1% in net profit over FY2005-08 primarily driven by its domestic formulations segment. Going forward, we expect the next leg of growth for the company to come from the export segment as it leverages its API capabilities to create a sturdy business in the regulated and emerging formulations market. We estimate Ipca’s net sales to post a CAGR of 17.7% and adjusted net profit to register CAGR of 40.1% over FY2009-11E. At Rs740, the stock is trading at 10.8x FY2010E and 8.7x FY2011E Earnings. We believe the stock is at attractive valuation compared to its historical trading band of 5-15x. We recommend Buy on the stock with a Target price of Rs 855.

Buy Apollo Typres

Apollo Tyres (ATL), India’s premier tyre company which is currently ramping up its capacities to 1,000TPD from 744TPD in India (through both green and brown-field additions, entailing an investment of Rs 1, 000cr) is well-positioned to take advantage of the revival in the domestic and global auto industries. Further, the substantial decline in the prices of natural rubber and other crude related raw materials from their peak levels in 1HFY2009 is expected to boost ATL’s profitability going ahead. Also, we expect ATL stands to benefit on account of a demand-supply mismatch in the cross-ply segment on account of the existing players concentrating on building new radial facilities which would lead to better realisations in cross-ply segment thereby improving its margins and profitability in the long term. Further, in May 2009, Apollo acquired 100% shareholding of Vredestein Banden (VBBV), a Dutch tyre manufacturing company, with a production capacity of 5.5mn tyres and enjoying a market share of 1.67% in the European market. This acquisition is expected to add further impetus to the company’s growth in overseas markets. At Rs 42, the stock is currently trading at 6.4xFY2011E Earnings. We recommend a Buy on the stock with a Target Price of Rs 53.