Maruti Udyog
CMP: Rs 767.95
Target price: Rs 980
CLSA has maintained its ‘buy’ rating on Maruti Udyog with a price target of Rs 980, citing reasonable visibility of volume growth as a key trigger.
“The key concerns in investors’ mindset regarding Maruti from an FY09 perspective are domestic volume growth after a slew of competitive car launches and sustainability of margins post increase in exports as a percentage of sales.
Our scenario analysis throws up a worst-case value of Rs 750 and a best-case value of Rs 1,050 for Maruti on FY09 basis,” the CLSA note to clients said. “Our estimates assume 10% domestic volume growth, 1 lakh units of export volumes and a 100 bps year-on-year margin decline in FY09, resulting in an EPS of Rs 74.4.
In our view, Maruti is the only auto stock that offers reasonable visibility of volume growth till FY10 on the back of rising exports,” the note added.
Gokaldas Exports
CMP: Rs 252.10
Target price: Rs 285
Citigroup Global Markets has retained its ‘buy’ rating on Gokaldas Exports with a price target of Rs 285 after the Blackstone Group’s decision to buy a 50.1% stake in the company.
“Prima facie, we believe that the open offer at a 20% premium from current levels provides a good upside. While the company is unlikely to witness any major operational impact, the fact that promoters have sold a significant stake does raise some concerns,” the Citigroup note to clients said.
“With Gokaldas’ large capacity, good relationships with global brands and healthy order-book position, we believe the company is well positioned for growth. Its strategy to focus on outerwear, enrich its wide product range and expand customer base should lead to a lower-risk business model,” the note added.
Action Construction
CMP: Rs 306.20
Target price: Rs 388
Prabhudas Lilladher has retained its ‘outperformer’ rating on crane manufacturer Action Construction Equipment with a price target of Rs 388.
“The infrastructure spending in the country is projected to grow from current 4.5% of GDP to 8% by FY12,” the Prabhudas note to clients said.
“ACE supplies to more than 5,000 customers, and last year 70% of its sales were to infrastructure sector and the remaining to engineering companies. ACE would be one of the major beneficiaries of this industrial capex and infrastructure spending,” the note added.
Cairn India
CMP: Rs 138.90
target price: Rs 163
Motilal Oswal Securities has initiated coverage on Cairn India with a ‘buy’ rating and a price target of Rs 163 based on sum-of-the-parts valuation.
“Resolution of the pipeline issue will enable monetisation of Cairn’s largest and most promising asset — Rajasthan block — by 2HCY09 (second half of 2009),” the Motilal Oswal note to clients said.
“Though, there still remains several uncertainties on cess, pricing and crude offtake, we believe these will not hamper the initial oil delivery schedules. Successful development of Rajasthan block, which will catapult Cairn into bigger league, will be the key driver to its performance in our view,” the note added.
Mindtree Consulting
CMP: Rs 533.05
Target price: Rs 575
Morgan Stanley has upgraded its rating on Mindtree Consulting to ‘equal-weight’ from underweight, but lowered the price target for the stock to Rs 575 from Rs 625.
“In our view, MindTree is among the more promising mid-sized offshore IT services companies and offers some compelling business positives including a high-quality management team and good employee brand equity,” the Morgan Stanley note to clients said.
“We have always thought that growth expectations by the street were high for this stock and consequently valuations were rich. The stock is down nearly 30% in the past three months, and while we still do not view valuations as attractive, we do not see them as overly excessive either,” the note added.
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