Research recommendations

IVRCL
Market price (September 23): Rs 37.65
Target price: Rs 62
Upside: 64.67%
Brokerage: Angel Broking

IVRCL Group has bagged orders aggregating to Rs 22.29 billion across various segments during 2QFY2012. IVRCL Assets and Holdings (IVRCLAH) have been awarded a road project in Arunachal Pradesh worth Rs 14.86 billion by MORTH. At the CMP of Rs 38, the stock is trading at P/E of 6.2x FY2013E EPS and 0.5x FY2013E P/BV on standalone basis and adjusting for its subsidiaries at P/E of 3.0x FY2013E EPS and 0.2x FY2013E P/BV, which it believe is attractive. Therefore, on the back of the company`s robust order book to sales ratio and attractive valuations, it maintain its Buy rating on the stock with a target price of Rs 62.

Bajaj Electricals
Market price (September 22): Rs 186
Target price: Rs 238
Upside: 27.96%
Brokerage: Nirmal Bang Securities

BEL reported a poor performance in Q1FY12 due to the consumer business facing poor market conditions for fan and room cooler (reported a moderate growth of 15.5%) and E&P (Engineering & Projects) business showcased just a meager 2.5% growth coupled with loss on account of increased cost incurred to close down the lingering projects. BEL prices corrected by 14% since Q1FY12 result. It expect BEL performance to improve in Q2FY12E and bounce back to normal level in second half of FY12E on the account of better performance by E&P business and normal growth in consumer durable business. At CMP of Rs 186, the stock is trading at a PE of 11.3 in FY12E and 9.4 in FY13E whereas on EV/EBITDA it is trading at 5.8 and 4.8 in FY12E and FY13E respectively. It recommend to ``BUY`` the stock with a target price of Rs 238 a share (12 on FY13E EPS), an upside of 28% for a long term view.

GVK Power & Infrastructure
Market price (September 21): Rs 17
Target price: Rs 32
Upside: 88.24%
Brokerage: ICICI Securities

GVK Coal Developers, a JV between GVK and GVK Natural Resources (a GVK group company), has entered into an agreement to acquire major coal resource aggregating 3.3 billion resources and infrastructure development projects [Abbot Point port with capacity of 60 million tons (MT) and 495 km rail line] from the Hancock Group. GVK will have 10% stake in the JV with an option to increase to 49% subsequently. The total acquisition cost is USD 1.26 billion for which it has tied up debt of USD 1billion. For this debt, GVK will provide corporate guarantee to 49% and is likely to pledge the shares of GVK Energy Ltd and GVK Transportation Ltd, which remain a cause for concern especially considering its leveraged balance sheet. To analyze the situation, it has built up bear case and bull case valuation for GVK from this project. It get bear case value of Rs 13/share and bull case valuation of Rs 48/share with high sensitivity to key variables (discussed in valuation section). It maintains its BUY recommendation with an SOTP price target of Rs 32. However, lack of clarity on project funding and GVK`s corporate guarantee remain key risks to its call.

Linc Pen & Plastics
Market price (September 20): Rs 61.65
Target price: Rs 81
Upside: 31.39%
Brokerage: SKP Securities

LPPL has successfully leveraged its strong brand image to reach to a wide consumer base in India. The company has invested Rs 227 million in branding and advertising in the last three years. The wide scale branding exercise undertaken by the company will further enhance the top line of the company going forward. LPPL is currently trading at a PE of 7.07 FY12E and 5.33 FY13E EPS. It recommend Buy rating on the stock with a 15 months target price of Rs 81, at 7 FY13E earnings, implying an upside of 31% from the current levels.

ITC
Market price (September 20): Rs 195
Target price: Rs 241
Upside: 23.59%
Brokerage: Shah Investor`s Home (SIHL)

ITC has levered on its large distribution network and has increasingly diversified its presence into other growth area like hotels, paper, stationery, agri-business, packaged foods, confectionery and branded apparels. In a short span of time ITC has built a portfolio of strong brands and is gaining market share in most of the categories. Improving operating efficiencies, strong balance sheet, high free cash flow and higher payout ratio makes ITC a lucrative investment opportunity in growing Indian consumer space. It has valued the stock on weighted average of stock price arrived based on two different valuation parameters. On EV/EBITDA it arrived at a value of Rs 243/share at 50% weight. On a PE basis we arrived at a value of Rs 238/share at 50% weight; based on the weighted average, target price for ITC stock comes at Rs 241/share. It recommend BUY on ITC with an investment horizon of 12 to 15 months, and an upside potential of 23%.

KEC International
Market price (September 19): Rs 71
Target price: Rs 58
Upside: 22.41%
Brokerage: Way2Wealth

KEC strategically acquired 100% stake in US based subsidiary SAE Towers, in Sept. 2010 to tap the growing markets of North and South America. In Q1FY12, SAE Towers ended the quarter with a strong order book of Rs 9.82 billion comprising 12% of its total order book position. It has also acquired Jay Railway Signaling. Company to make further inroads in the Railways business. At the CMP of Rs 58, the stock quotes a PE of 5 and 4.2 its FY13E and FY14EEPS of Rs 11.8 and Rs 13.9 a share respectively. It initiate coverage with a BUY Rating on the stock, with a price target of Rs 71 a share based on its PE of 6 FY13E EPS of Rs 11.8 a share.

Bajaj Auto - Overweight
Price (Rs) Sep. 16: 1,625
Mcap (USD bn): 10
Avg 3MT/O (USD Mn): 3
Relative to MSCI India
YTD Perf: 29%
12 months Perf: 31%

Cox & Kings - Overweight
Price (Rs) Sep. 16: 213
Mcap (USD bn): 1
Avg 3MT/O (USD Mn): 4
Relative to MSCI India
YTD Perf: 0%
12 months Perf: -19%

M&M - Overweight
Price (Rs) Sep. 16: 798
Mcap (USD bn): 10
Avg 3MT/O (USD Mn): 30
Relative to MSCI India
YTD Perf: 26%
12 months Perf: 39%

ICICI Bank - Overweight
Price (Rs) Sep. 16: 881
Mcap (USD bn): 21
Avg 3MT/O (USD Mn): 30
Relative to MSCI India
YTD Perf: 79%
12 months Perf: -6%

Oberoi Realty - Overweight
Price (Rs) Sep. 16: 223
Mcap (USD bn): 2
Avg 3MT/O (USD Mn): 0
Relative to MSCI India
YTD Perf: 7%
12 months Perf: 7%

Dr Reddy`s - Overweight
Price (Rs) Sep. 16: 1,522
Mcap (USD bn): 5
Avg 3MT/O (USD Mn): 15
Relative to MSCI India
YTD Perf: 12%
12 months Perf: 22%

Adani Ent - Overweight
Price (Rs) Sep. 16: 598
Mcap (USD bn): 14
Avg 3MT/O (USD Mn): 11
Relative to MSCI India
YTD Perf: 13%
12 months Perf: 3%

IRB Infra - Overweight
Price (Rs) Sep. 16: 173
Mcap (USD bn): 1
Avg 3MT/O (USD Mn): 6
Relative to MSCI India
YTD Perf: -6%
12 months Perf: -26%

Jain Irrigation - Overweight
Price (Rs) Sep. 16: 171
Mcap (USD bn): 1
Avg 3MT/O (USD Mn): 7
Relative to MSCI India
YTD Perf: -1%
12 months Perf: -19%

Tata Steel - Overweight
Price (Rs) Sep. 16: 460
Mcap (USD bn): 9
Avg 3MT/O (USD Mn): 49
Relative to MSCI India
YTD Perf: -17%
12 months Perf: -9%

Infosys - Overweight
Price (Rs) Sep. 16: 2,393
Mcap (USD bn): 29
Avg 3MT/O (USD Mn): 75
Relative to MSCI India
YTD Perf: -15%
12 months Perf: -5%

Bharti - Overweight
Price (Rs) Sep. 16: 386
Mcap (USD bn): 31
Avg 3MT/O (USD Mn): 49
Relative to MSCI India
YTD Perf: 32%
12 months Perf: 30%

GAIL - Overweight
Price (Rs) Sep. 16: 425
Mcap (USD bn): 12
Avg 3MT/O (USD Mn): 9
Relative to MSCI India
YTD Perf: 2%
12 months Perf: 6%

Stocks to Avoid

Ashok Leyland - Underweight
Share price Sep. 19, 2011: 27
Market Cap (USD Mn): 1,499
Average Daily Volumes (3 months USDMN): 4.4
F2011PB: 1.8
F2011PE: 11.3
12 months Perf: -26%
5 year CACGR in Share Price: 6%

Bank of Baroda - Underweight
Share price Sep. 19, 2011: 760
Market Cap (USD Mn): 6,377
Average Daily Volumes (3 months USDMN): 7.1
F2011PB: 1.4
F2011PE: 7.1
12 months Perf: -12%
5 year CACGR in Share Price: 26%

Bank of India - Underweight
Share price Sep. 19, 2011: 313
Market Cap (USD Mn): 3,761
Average Daily Volumes (3 months USDMN): 6.5
F2011PB: 1
F2011PE: 7.2
12 months Perf: -37%
5 year CACGR in Share Price: 17%

Canara Bank - Underweight
Share price Sep. 19, 2011: 427
Market Cap (USD Mn): 4,066
Average Daily Volumes (3 months USDMN): 8
F2011PB: 1
F2011PE: 4.8
12 months Perf: -25%
5 year CACGR in Share Price: 14%

IDBI - Underweight
Share price Sep. 19, 2011: 107
Market Cap (USD Mn): 2,255
Average Daily Volumes (3 months USDMN): 5.2
F2011PB: 0.8
F2011PE: 6.5
12 months Perf: -29%
5 year CACGR in Share Price: 11%

Punjab National Bank - Underweight
Share price Sep. 19, 2011: 976
Market Cap (USD Mn): 6,462
Average Daily Volumes (3 months USDMN): 6.5
F2011PB: 1.4
F2011PE: 6.9
12 months Perf: -25%
5 year CACGR in Share Price: 16%

State Bank of India - Underweight
Share price Sep. 19, 2011: 1,917
Market Cap (USD Mn): 25,346
Average Daily Volumes (3 months USDMN): 105.8
F2011PB: 1.5
F2011PE: 11.3
12 months Perf: -41%
5 year CACGR in Share Price: 17%

Educomp Solutions - Underweight
Share price Sep. 19, 2011: 232
Market Cap (USD Mn): 479
Average Daily Volumes (3 months USDMN): 2.3
F2011PB: 1
F2011PE: 6.8
12 months Perf: -62%
5 year CACGR in Share Price: 17%

Colgate-Palmolive India - Underweight
Share price Sep. 19, 2011: 988
Market Cap (USD Mn): 2,856
Average Daily Volumes (3 months USDMN): 2.2
F2011PB: 33.7
F2011PE: 33.7
12 months Perf: 14%
5 year CACGR in Share Price: 22%

Hindustan Unilever - Underweight
Share price Sep. 19, 2011: 338
Market Cap (USD Mn): 15,862
Average Daily Volumes (3 months USDMN): 17.3
F2011PB: 28.6
F2011PE: 35.1
12 months Perf: 13%
5 year CACGR in Share Price: 8%

Marico - Underweight
Share price Sep. 19, 2011: 141
Market Cap (USD Mn): 1,848
Average Daily Volumes (3 months USDMN): 1.3
F2011PB: 9.6
F2011PE: 32.7
12 months Perf: 13%
5 year CACGR in Share Price: 22%

GMR Infrastructure - Underweight
Share price Sep. 19, 2011: 29
Market Cap (USD Mn): 2,345
Average Daily Volumes (3 months USDMN): 2.4
F2011PB: 1.4
12 months Perf: -49%
5 year CACGR in Share Price: 5%

Hindalco - Underweight
Share price Sep. 19, 2011: 144
Market Cap (USD Mn): 5,819
Average Daily Volumes (3 months USDMN): 28.1
F2011PB: 1
F2011PE: 11.3
12 months Perf: -27%
5 year CACGR in Share Price: -2%

Mphasis - Underweight
Share price Sep. 19, 2011: 339
Market Cap (USD Mn): 1,512
Average Daily Volumes (3 months USDMN): 3.7
F2011PB: 2.2
F2011PE: 6.6
12 months Perf: -45%
5 year CACGR in Share Price: 13%

Tec Mahindra - Underweight
Share price Sep. 19, 2011: 636
Market Cap (USD Mn): 1,675
Average Daily Volumes (3 months USDMN): 3.6
F2011PB: 2.4
F2011PE: 9.2
12 months Perf: -16%
5 year CACGR in Share Price: 3%

Mahanagar Telephone - Underweight
Share price Sep. 19, 2011: 35
Market Cap (USD Mn): 466
Average Daily Volumes (3 months USDMN): 0.8
12 months Perf: -43%
5 year CACGR in Share Price: -26%

Tata Communications - Underweight
Share price Sep. 19, 2011: 203
Market Cap (USD Mn): 1,230
Average Daily Volumes (3 months USDMN): 1.5
12 months Perf: -33%
5 year CACGR in Share Price: 13%

Tata Power - Underweight
Share price Sep. 19, 2011: 986
Market Cap (USD Mn): 4,784
Average Daily Volumes (3 months USDMN): 7.5
F2011PB: 2
F2011PE: 22.5
12 months Perf: -29%
5 year CACGR in Share Price: 13%

Adani Power - Underweight
Share price Sep. 19, 2011: 86
Market Cap (USD Mn): 3,920
Average Daily Volumes (3 months USDMN): 3.7
F2011PB: 3
F2011PE: 36.3
12 months Perf: -36%

Indiabulls Power - Underweight
Share price Sep. 19, 2011: 15
Market Cap (USD Mn): 626
Average Daily Volumes (3 months USDMN): 0.2
F2011PB: 0.7
F2011PE: 544.6
12 months Perf: -49%

JSW Energy - Underweight
Share price Sep. 19, 2011: 62
Market Cap (USD Mn): 2,055
Average Daily Volumes (3 months USDMN): 1.7
F2011PB: 1.8
F2011PE: 12.1
12 months Perf: -50%