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Rallis India (Buy)
CMP: Rs 163
Target: Rs 198
Rallis India Ltd underperformed the street expectations in Q2 FY12. Topline for the quarter stood at Rs 436.8 crore, up 18.3 per cent on YoY basis. Lower contribution from seeds business, slower ramp up of Dahej facility and lower occurrence of pest in the monsoon season impacted the quarter results. Net profit increased by 5.4 per cent YoY to Rs 61.9 crore while net profit margin dropped 174bps to 14.2 per cent this quarter. Rallis is poised for strong growth on account of strong product mix, launch of new products, commencement of Dahej facility, strong distribution channel and contract manufacturing alliance with several multinational agrochemical companies. Pickup in seeds business would further enhance the growth prospects. Currently, stock is trading at 15.5x its FY13E earnings.
Rolta (Buy)
CMP: Rs 80
Target: Rs 105
Rolta India Ltd (Rolta) has delivered numbers that were below our estimates for Q1FY12. Top-line and EBITDA both were below our estimates. Foreign currency losses and wage hikes during the quarter contributed to a decline in EBITDA and PAT numbers. Results this quarter were affected due to the global economic environment which saw significant currency fluctuation. We expect better growth in the quarters moving ahead. With large deals in the pipeline, the company is in a good position and could significantly benefit from these deal wins in the quarters ahead. We expect the rupee to appreciate in the quarters moving ahead which will benefit Rolta, as this quarter saw a notional mark to market loss on FCCBs and other foreign currency of Rs 25.92 crore which could be reversed.
MSFL Research
Corporation Bank (Buy)
CMP: Rs 430
Target: Rs 524
Corporation Bank's Q2FY12 results came slightly above our expectations both on Net Interest Income (NII) and Net profit front with 3.9 per cent and 14 per cent y-o-y growth respectively, largely on account of lower than expected contraction in margins, higher other income on account of trading gains and lower tax provisions. We largely maintain our earnings estimates for FY12 & FY13 respectively though lower our target multiple to factor in pressure on margins and asset quality.
Dalmia Securities
Divi's Lab (Neutral)
CMP: Rs 769
Target: Rs 775
At the CMP of Rs 764.50, the stock is trading at 20.74x its FY12E EPS of Rs 36.86 and 17.44x its FY13E EPS of Rs 43.83. For valuing the company, we have used Relative Valuation based on EV/EBIDTA, Price/Earnings (P/E) multiple and DCF methodologies. Considering 16x multiple on our FY12E EBIDTA estimates of Rs 659 crore, we arrive at a target price of Rs 796 a share. Using 22x multiple on our FY12E EPS estimates of Rs 36.86, we arrive at a target price of Rs 810 a share. Our DCF-based valuation for Divi's stand at Rs 747. By taking the 25 per cent weighted through EV/EBIDTA, 25 per cent weighted through P/E methodologies and 50 per cent weighted through DCF valuation, we have arrive at a target price of Rs 775 representing an upside of 1.37 per cent.
Business Line does not assume responsibility for the recommendations sourced from third party brokerages. Reports may be sent to marketwatch@thehindu.co.in
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