Stocks you can buy this week; Bharti Airtel, Titan, Jet Airways

Titan Industries
Research: Morgan Stanley
Rating: Overweight
CMP: Rs 1,469

Morgan Stanley has assigned an ‘overweight’ rating to Titan. The stock is not fully discounting its long-term growth potential which depends on the following factors: 1) Product mix-led revenue growth and margin expansion in the watch business; 2) Improvement in product mix and same-store growth for Titan’s Tanishq jewellery retailing business; 3) Successful roll-out of its new businesses, i.e. eyewear and mass market jewellery retailing; and 4) Turnaround in its international and precision engineering division businesses. Morgan Stanley assumes Titan can deliver 22.4% CAGR in earnings during FY07-20. However, in FY07-10, it is likely to deliver 34.7% CAGR in earnings. The stock is trading near its all-time high and is attractively valued on a price-earnings growth versus return on equity basis.

Jet Airways
Research: Merrill Lynch
Rating: Neutral
CMP: Rs 907

Merrill Lynch has downgraded Jet Airways’ rating to ‘neutral’ from ‘buy’ as the stock has breached its target after its strong performance this fiscal. The stock currently trades at a slight premium to global growth airlines, up from a 25% discount earlier this year. Jet’s earnings are highly sensitive to variations in Jet Kero prices, but they are even more sensitive to the rupee’s volatility. A $1 variation in fuel price will impact Jet’s FY09E EBITDAR by 1.8%, assuming load factors are not impacted. Conversely, a Re 1 variation in exchange rate will positively impact FY09E EBITDA by 5.1%.

Jet has registered stronger-than-expected load factors on existing as well as new routes. The company’s recent introduction to the US has expectedly done well, and it is on track to add five more routes this year, including the busy Middle Eastern routes. Jet’s key routes to London and Singapore continue to grow rapidly.

The company is likely to sustain this performance on new routes, given its superior product and expanding franchise. Jet’s Q1 yields, up 13.4% YoY and 2.4% QoQ, also illustrate improved pricing power. The stock has risen 53% this fiscal, compared to 30% growth witnessed in the broader stock market. Merrill Lynch believes that this has largely captured the turnaround in Jet’s operations.