2012 - Views from top brokerage houses
Srujani Panda / 16 Dec 2011
DINESH THAKKARCMD, Angel
Where do you see the Sensex at the end of CY12?
We value the Sensex at a conservative 14x target P/E multiple to arrive at a Sensex target of 19,100.
Which are the three stocks that you are betting upon for CY12 and why?
• Axis Bank is expected to achieve higher profits through incremental CASA market share gains and higher fee income.
• ICICI Bank’s execution of a credible strategy of consolidation is expected to drive a materially improved balance-sheet and earnings quality over the next two years.
• Lupin is our preferred bet in the high margin branded generics business in the US which is the key differentiator for Lupin. It has also entered the niche oral contraceptive segment. We expect Lupin to clock an EPS CAGR of 24 per cent over FY11-13 and an ROE of 28.2 per cent and 30.8 per cent in FY12 and FY13 respectively.[PAGE BREAK]
PRAKASH DIWANHead – Institutional Client Group, Asit C Mehta
Where do you see the Sensex at the end of CY12?
I expect the Sensex to go through very sharp swings in the first half of 2012 and eventually find stability in the 19,500 – 20,500 zone towards the end of 2012
Which are the three stocks that you are betting upon for CY12 and why?
• L&T: Since the stock has taken enough of beating within the NIFTY stocks, thanks to the huge exodus by FIIs from some of the erstwhile popular counters. However, with the likelihood of interest rates moving on to a descendant cycle in 2012, capital expenditure is likely to find favour and this is one company that is poised to benefit majorly from any turnaround in spending within the capital goods sector.
• Coal India: This company has a universal product line, huge market share, assured long term and short term demand and a favourable cash position which together make a unique play on energy within any portfolio. The recent news flow has brought the price down to levels which are very reasonable to buy into with a medium to long term orientation.
• J P Associates: This is another stock which is likely to be a beneficiary of the change in interest rate movements owing to the currently high leverage on its balance-sheet. It is a stock that could come into its own once the potential value is unlocked. The strong trend of asset creation followed by the company and the group as a whole should start paying dividends to patient investors in 2012 too.[PAGE BREAK]
MADHUMITA GHOSHSenior Vice President - PMS & Research, Unicon
Where do you see the Sensex at the end of CY12?
It will hover around the levels of 18,000 to 19,000.
Which are the three stocks that you are betting upon for CY12 and why?
• Divi’s Laboratories: It is an established player in the pharmaceuticals outsourcing space. The company has 93 per cent of its revenue coming from exports. During FY11 the company added 21 new products, of which 13 were custom synthesis APIs. It has a robust product pipeline which is expected to help the company maintain a strong revenue growth trend going forward in H2FY12. Divi’s is expected to increase revenue going forward from the carotenoids business and from the optimum utilisation of its Vizag manufacturing unit, the commissioning of which occurred in H1FY12. It is also a low-debt company with its current DER at 0.01. Currently the stock is trading at 20x its FY12E and 16x its FY13E earnings. Considering the robust performance and stability in margins we recommend buying into this counter.
• ICICI Bank: It is expected to continue to deliver a steady performance while maintaining a balance-sheet growth (15 per cent CAGR over FY11-13) with loan growth (CAGR of 19 per cent), profitability and stable asset quality. The revenue increase will be driven by growth in the NII and the fee income (pick up more retail assets). We expect NIMs to improve from here on from 2.6 per cent to about 3 per cent by FY13. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, sufficient capital adequacy and multiple sources of sustainable fee income along with a strong growth outlook. At its CMP the stock trades at 1.2x of FY13’s book value.
• Tata Motors: The management guidance on volume growth going forward on the JLR front with Chinese demand outstripping the supply has been very strong. The company plans to increase its dealership in China to 100 by the end of FY12 from 60 in FY11. The demand in the US is stabilising while there would be little concern on the European front due to an overall slowdown. We expect the margins to be under pressure due to the high raw material costs. On the domestic front we expect the performance of the PV segment to remain under pressure while the overall consumption growth can drive demand for the LCV segment. The capex guidance remained at GBP 1.5 billion for FY12. We believe that the company’s overall performance will improve going forward with a better product mix and higher volumes. At its CMP the stock is trading at PE multiple of 6x of its FY13E earnings which seems to be attractive. Considering the robust performance improvement in JLR along with the company’s domestic business line, we would recommend a ‘buy’ on the counter.[PAGE BREAK]
AMBAREESH BALIGA
COO, Way2Wealth
Where do you see the Sensex at the end of CY12?
My year-end target for the Sensex will be about 21,000 based on 15x one-year forward earnings.
Which are the three stocks that you are betting upon for CY12 and why?
• Dish TV: It is India’s largest DTH operator with a 29 per cent share of gross subscribers as of March 2011 and a leading operator in terms of market share addition of 25 per cent in FY11.
• Petronet LNG: It is the largest domestic player in India in importing, storing, and re-gasifying LNG. It has a unique risk-free business model (wherein supply and demand side risks are hedged through a mix of long-term sourcing and off-take contracts), generating revenues by charging re-gasification margins on the imported LNG.
• Hindustan Oil Exploration Co: This company’s asset portfolio presents a stable mix, protected from commodity price risks. HOEC’s portfolio of five producing and three exploration assets and two appraisal/development projects presents a stable mix which will facilitate regular monetization of resources. As 85 per cent of HOEC’s production is attained from gas which is sold at domestic prices, HOEC is protected from any commodity price risk.[PAGE BREAK]
GIRISH JAINExecutive Director, KJMC Capital Market Services
Where do you see the Sensex at the end of CY12?
I expect the Sensex to be in the range of 14,200 – 18,522 by end of CY12.
Which are the three stocks that you are betting upon for CY12 and why?
• ESAB: The company has grown by 12 per cent in the nine months ended September 2011 as compared to the corresponding period last year. ESAB’s parent company, Charter International Plc, is being acquired by Colfax of UK which may trigger an open offer in ESAB India.
• SML ISUZU: This company grew by 23 per cent for the half yearly ended September 2011 as compared to the corresponding period last year. Sumitomo Corporation holds a majority stake in SML ISUZU. Isuzu Motors Ltd has recently expressed its interest of reinforcing production and sales of commercial vehicles in the fast-growing Indian market by significantly raising its equity stake in SML ISUZU. This may trigger an open offer in SML ISUZU.
• Astral Polytechnik: It is the largest manufacturer of CPVC pipes in India with a market share of 60 per cent. CPVC pipes have relatively high entry barriers on account of Lubrizol, a single supplier of finished CPVC resins. It is a Warren Buffet-led company. Lubrizol Corporation is planning to set up a CPVC pipes’ manufacturing unit in Gujarat in a JV with Astral. Further, Astral is ramping up its capacity to meet the rising demand of CPVC pipes from 48,432 tonnes to 70,000 tonnes.
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