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VIKAS PARSHURAM SAMWATSARE

Buy Sesa Sterlite For Target Rs.205

Sesa-Sterlite has witnessed considerable de-rating due to its burgeoning CWIP. Financial stress on the merged entity's balance sheet due to leveraged buyout of Cairn India and Vedanta Aluminum acquisition, and temporary suspension of iron ore mining in Goa has resulted in further de-rating.
* Sesa-Sterlite's CWIP/MCap ratio has ballooned to 67%. The implied valuation of its CWIP is at 82% discount. With capex intensity peaking and LME prices at the bottom from the margins perspective, we do not anticipate further increase in the discount.
* The highly probable buyout of remaining stake in Hindustan Zinc and its subsequent merger with Sesa-Sterlite will relieve balance sheet stress and re-rate the stock.

Buy Time Technoplast Limited

Horizon - 12 months ,
Return - 25%-30%

This Company is market leader in polymer packaging solutions for various industries. The product portfolio includes Industrial packaging, infrastructure products, automobile components., healthcare products, and material handling solutions. The Company is innovative with strong balance sheet. The outlook for medium to long term for this company is promising.

Buy Zydus Wellness Ltd. For Target Rs. 520

Buy Zydus Wellness Ltd. For Target Rs. 520 By Nirmal Bang

Earnings growth maintain traction
Zydus posted a good quarter in terms of Gross Sales/EBITDA/APAT growing 9.8%/33.3%/38.1% respectively. The EBITDA margin improved by 490bps YoY to 26.9% and by 1050bps QoQ. The margin improved on account of decline in advertisement expenses as a % of sales and other expenses. The rise in EBITDA margin was arrested by the significant jump in employee expenses by 78.3% YoY and 15.6% QoQ. The APAT registered a growth of 38.1% YoY to Rs. 23.62 crores and by 75.1% QoQ.
* Net Sales for Q2FY13 increased by 9% YoY to Rs. 91.41 crs and down by 3.1% QoQ. The slower growth in the Net Sales was attributed to the single digit growth in Nutralite; though Sugarfree and EverYuth registered double digit growth. The Gross revenue was up by 9.8% YoY and down by 6.6% QoQ to Rs. 96.5 crores.
* The EBITDA was up by 33.3% YoY to Rs. 24.6 crores and by 59.4% QoQ. The EBITDA margin was up by 490bps YoY to 26.9% in Q2FY13 and by 1050 bps QoQ. The margin was up on YoY basis due to the decline in advertisement expenses as a % of sales and other expenses. The advertisement expenditure was 16.5% as a % of sales in Q2FY13 and 18.7% in Q2FY12 as compared to 33.3% in Q1FY13. Excluding Advertisement Expenditure, the EBITDA margin grew by 280bps YoY to 43.5% in Q2FY13 though it was down by 610bps QoQ.
* Gross margin stood at 69.8% in Q2FY13 as against 68.1% in Q2FY12 and 71.1% in Q1FY13.
* The Adj PAT was up by 38.1% YoY to Rs. 23.62 crores and by 75.1% QoQ. The PAT margin was up by 540bps YoY to 25.8% in Q2FY13 and up by 1150 bps QoQ. The tax rate was at 12.3% in Q2FY13 as against 9.2% in Q2FY12 and 23.1% in Q1FY13. The tax rate fell down as compared to Yoy due to decreased sales in Nutralite.

Valuation & Recommendation
The management has been able to report good result in Q2FY13 and we believe that the company will be able to churn the momentum and will register good growth in the coming quarters. The company is focusing on improving the sales of its existing product portfolio and we believe that the double-digit revenue growth will take place from FY13E onwards. We have recommended Zydus at a price of Rs. 371 per share on 30th May 2012 with a target price of Rs. 477 per share, which got achieved on 7th November 2012.
At CMP of Rs. 467, the stock is trading at a PE of 24.2x in FY13E and 19.7x in FY14E. We rollover our target multiple from FY13E to FY14E to a target of Rs. 520 (PE 22x FY14E). We recommend investors to partially book profit and remaining stock can be hold for further gain for medium term.