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Sushil Finance
HSIL (Accumulate)
CMP: Rs 204
Target: Rs 240
HSIL Ltd is the largest sanitary ware manufacturer in India and has diversified interest in container glass manufacturing. The demand for housing in India continues to remain high despite high interest rates. Moreover, the expected correction in housing prices may further catalyse the demand for building products. Growing disposable income will lead to demand for food, beverage and pharmaceutical sectors, thereby ensuring increases in utilisation of its container glass capacities. Given its strong performance in Q1 of FY12, we have upgraded our estimates for FY12 and introduced FY13 numbers. We now expect its revenues to grow by 30.6 & 17.5 per cent and APAT to grow at 46.3 and 15.3 per cent during FY12 and FY13 respectively.
Sharekhan
HCL Tech (Buy)
CMP: Rs 384
Target: Rs 622
HCL Technologies Ltd (HCL Tech) is a global information technology (IT) services company providing software-led IT solutions, remote infrastructure management services and BPO services. The company has a leading position in remote infrastructure management services that has helped it win large IT outsourcing contracts. The growth has been broad based across industry verticals, geographies and service lines. The management remains focused on gaining market share and at the same time maintaining its margins, thereby investing any upside in margins back into the business. We value HCL Tech at a 25 per cent discount to Infosys at 15x FY13E earnings. At the current market price, the stock trades at 12.5x and 9.8x its FY12E and FY13E earnings respectively.
Divi's Labs (Buy)
CMP: Rs 735
Target: Rs 1,047
Coupled with an IPR-respecting and “non-compete with customer” policy, Divi's focuses on the contract manufacturing (CM) space, thereby edging over its Indian peers. With the order inflow picking up from H2 of FY11 and its new plant getting operational, Divi's has a strong revenue growth visibility and the operating leverage in the business will boost its margins. Consequently, we estimate the company's revenue and earnings to grow at a CAGR of 23 and 21 per cent respectively over FY11-13. At the current market price the stock trades at PE of 19.1x and 15.3x discounting its FY12E and FY13E earnings respectively. We maintain our Buy recommendation.
Bonanza
Asian Paints (Accumulate)
CMP: Rs 3,269
Target: Rs 3,600
APL is one of the leading paints company in India. It does well in the industry on the back of strong sales volumes and innovative products. We expect APL's volume growth to remain strong and margins to improve on the back of increased demand due to festival season and increased sale price of its products. Full benefit of innovative product launches and price increases are likely to be seen in coming quarters. We are positive on strong fundamentals of the company. The stock is currently available at an attractive price of Rs 3,260 at a P/E of 29.8.The stock has the potential to touch Rs 3,600. Long term investors can accumulate the stock over a period of time.
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