Union Budget 2013: Moody’s gives thumbs up to FM’s speech

Buy Stovec Industries Ltd For Target Rs.408.00 - Firstcall Research

Buy Stovec Industries Ltd For Target Rs.408.00

Stovec Industries Ltd is a technology and market leader for the supply of rotary – screen and printing machines and through continuous innovations and strong distribution network.
* During the quarter, the robust growth of Net Profit is increased by 100.00% to Rs. 26.18 millions.
* Stovec Industries has recommended the final dividend of Rs. 10.70 per share (107%) for the financial year ended December 31, 2012.
* Stovec Industries is planning to expand its high end textile machinery capacity from 30 per cent market share to 40 per cent in next one year with an investment of Rs. 2 crore.
* Stovec Industries has recently forayed into electro-form products which include manufacturing textile screens for sugar industries.
* Revenue for the quarter rose 15.31% to Rs.236.20 millions from Rs.204.84 millions, when compared with the prior year period.
* Net Sales & PAT of the company are expected to grow at a CAGR of 15% and 29% 2011 to 2014E respectively.
Investment Highlights
Results updates- Q4 CY12
SIL is a technology and market leader for the supply of rotary – screen and printing machines & through continuous innovations & strong distribution network, reported its financial results for the quarter ended 31st Dec, 2012. The fourth quarter witnesses a healthy increase in overall sales as well as profitability on account of exciting innovative products, an enhanced Distribution network.
The company’s net profit jumps to Rs.26.18 millions against Rs.13.09 millions in the corresponding quarter ending of previous year, an increase of 100.00%. Revenue for the quarter rose 15.31% to Rs.236.20 millions from Rs.204.84 millions, when compared with the prior year period. Reported earnings per share of the company stood at Rs.12.54 a share during the quarter, registering 100.00% increase over previous year period. Profit before interest, depreciation and tax is Rs.42.13 millions as against Rs.23.09 millions in the corresponding period
of the previous year.
Outlook and Conclusion
* At the current market price of Rs.361.00, the stock P/E ratio is at 8.33 x CY13E and 7.35 x CY14E respectively.
* Earning per share (EPS) of the company for the earnings for CY13E and CY14E is seen at Rs.43.33 and Rs.49.14 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 29% 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 3.21 x for CY13E and 2.41 x for CY14E.
* Price to Book Value of the stock is expected to be at 1.43 x and 1.20 x respectively for CY13E and CY14E.
* We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.408.00 for Medium to Long term investment.

Buy Maruti Suzuki For Target Rs.1,715 - Prabhudas Lilladher

Buy Maruti Suzuki For Target Rs.1,715

Maruti Suzuki’s (MSIL’s) stock has corrected ~17% in last 1 month mainly on account of technical reasons (stock being removed from the MSCI index) and demand moderating in the diesel segment. The correction, in our view, provides a buying opportunity to long-term investors. In our view, MSIL is the best play on recovery in the macroeconomic situation. Given the strong product portfolio of ‘Swift’, ‘Dzire’ and the success of ‘Ertiga’, we maintain our long-term positive view on the stock and expect a strong recovery in FY15E (volume growth of 13.8%). We maintain MSIL as our top-pick in the Auto space with a TP of Rs1,715 based on 14.0x FY15 EPS (MSIL +SPIL) of Rs122. Due to a 26.7% potential upside from the current levels, we upgrade the stock to ‘BUY’ from ‘Accumulate’ earlier.
* Increased Tax on Royalty payment not applicable to MSIL: Tax on Royalty payment was increased to 25% from 10% in the budget. However, in case of MSIL this is not applicable as it comes under the purview of DTAA with Japan where the applicable tax rate stands at 10% on Royalty payment. Hence, there is no impact on MSIL.
* Favourable currency impact on imports yet to come: MSIL’s JPY denominated imported content (direct + indirect) stands at ~19% of net sales. With JPY depreciating against USD by almost 10% and INR being relatively stable against USD in last 3 months, MSIL is likely to benefit on the imported content of raw material. For FY14, we have assumed a cross‐currency rate of INR/JPY at 0.61 v/s 0.66 in FY13. As a result, we estimate 60bps improvement in material cost/sales ratio in FY14E.

Buy Tecpro Systems Ltd For Target Rs.129.00 - Firstcall Research

Buy Tecpro Systems Ltd For Target Rs.129.00

Tecpro started as a material handling company in 2001 and has become a prominent player in Engineering, Procurement and Construction (EPC) of handling systems.
* Tecpro Systems received an order worth Rs. 139.8 crore from The West Bengal Power Development Corporation Ltd.
* Tecpro Systems received an order worth Rs. 146.6 crore from Damodar Valley Corporation for the supply of Coal Handling Plant Package for BTPS ‘A’
* Tecpro Systems received an International order worth US $17.4 million from SK Engineering & Construction, South Korea for Paco Power Plant (2X160 MW) in Panama.
* Tecpro Systems has considered and decided to acquire 100% paid up share capital of Tecpro Ispat Private Ltd.
* Tecpro Systems Ltd has received order worth Rs. 267.3 crore from Kanti Bijlee Utpadan Nigam Ltd a subsidiary of NTPC Ltd.
* Tecpro Systems order book position as on 31st Dec, 2012 stood at about Rs. 47.2 billion.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 10% and 9% over 2011 to 2014E respectively.

Investment Highlights
Results updates- Q3 FY13,
Tecpro Systems Ltd is a leading Engineering Procurement and Construction Company providing comprehensive range of services in Coal handling and Ash handling, BoP packages for Power Sector & Material Handling to Steel, Cement, Ports, Mining & other industries in Infrastructure sector, reported its financial results for the quarter ended 31st Dec, 2012.
The company’s net profit declines to Rs.50.65 million against Rs.146.82 million in the corresponding quarter ending of previous year, a decrease of 65.50%. Revenue for the quarter decreased 4.19% to Rs.6003.80 million from Rs.6266.54 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.00 a share during the quarter, registering 65.50% decrease over previous year period. Profit before interest, depreciation and tax is Rs.873.02 millions as against Rs.628.48 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.115.00, the stock P/E ratio is at 15.44 x FY13E and 14.78 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.7.45 and Rs.7.78 respectively.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 10% and 9% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.63 x for FY13E and 4.40 x for FY14E.
* Price to Book Value of the stock is expected to be at 0.73 x and 0.70 x respectively for FY13E and FY14E.
* We recommend ‘HOLD’ in this particular scrip with a target price of Rs.129.00 for Medium to Long term investment.

Buy Tata Chemicals Ltd. For Target Rs.421 - GEPL Capital Ltd

Buy Tata Chemicals Ltd. For Target Rs.421

Steady Free Cash Flow Generation going ahead:
Tata Chemicals Limited (TTCH) enjoys optimum capacity utilization in its Urea and domestic Soda Ash business and has seen increase in capacity utilization in its North American and Kenyan (Magadi) operations. Also, Rallis India Limited (Rallis) which is a subsidiary of TTCH has
seen consistent cash generation over the past few years. Based on these factors, we expect TTCH to generate Free Cash Flow of more than `17 bn between FY13E-FY15E.
More than 60% of revenues are from relatively “safe” businesses
TTCH derives more than 60% of its revenues (61% in FY12) from businesses which can be designated as “relatively safe”. These include businesses of Tata Chemicals North America (TCNA), Soda Ash business in India, Fertilizers, Salt, Cement and Rallis. These businesses either have low cost of production or are immune to cyclicality or have stable demand or strong pricing or a combination of these factors. We expect contribution from “safe” businesses to go up to 65% in FY15E against 61% currently.
Customized Fertilizers and Salt business to garner impressive revenue growth
During FY12, TTCH commissioned India’s 1st customized fertilizer plant at Babrala, U.P. Customised fertilizers are crop- and region-specific. After its success in U.P., company is planning to make a foray into West Bengal, Punjab and Haryana in the near future. We expect customized fertilizers to log revenue growth of 93% CAGR over FY12-FY15E. Tata Salt, owned by TTCH is the market leader in packaged salts in India with market share of more than 66% and is a household name in India. On the back of its increasing market share, constant market growth (expected to be 1.3%) and higher realization for customized salt offerings, we expect Revenues from Salt business to grow at 6% CAGR over FY12 – FY15E.
Fertilizers and Rallis lend stability to the overall portfolio
TTCH has two plants dedicated to manufacturing of fertilizers; Babrala, U.P. which manufactures Urea and Haldia (West Bengal) which manufactures DAP, NPK and SSP. TTCH has urea capacity of more than 1 mn MT at its plant in Babrala, U.P. with production of 1.16MT in
FY12. We expect sales from urea to grow at 3% CAGR over FY12-FY15E. The Government hiked selling price of urea by `50 in October, 2012 to make it `5,390 per MT. As per the New Urea Investment Policy, Government will cover cost of natural gas and assure 12-20 % post-tax return on fresh capital infused by the manufacturers for setting up of new plants as well as for expansion and revamp of the existing ones. This would improve profitability of urea manufacturers going ahead. Rallis, which is 50.06% subsidiary of TTCH has an installed capacity of 15,225 MT for solid pesticides and 13,500 KL for liquid pesticides. Rallis holds 75.64% in Metahelix which is an agricultural biotechnology company focusing on developing traits and technologies for crop protection & improved productivity. We expect Rallis to log revenue growth of 15% CAGR and EBITDA growth of 17% CAGR over FY12-FY15E. It is Free Cash Flow Positive with Debt-Equity Ratio of 0.3.
Valuation
A well diversified portfolio with respect to products as well as geographies makes us like TTCH as a stable business with robust growth prospects. Besides, the company also has considerable pricing power in salt and faces an improving outlook for soda ash. Commencement of operations at Magadi would boost revenues further.
We initiate coverage on TTCH with a BUY rating and target price of `421, implying an upside potential of 27%. We value TTCH using a Sum of the Parts (SOTP) approach since its businesses are varied in nature and geographies.
At the CMP of `332, TTCH is trading at an EV/EBITDA multiple of 4.79x its FY14E EBITDA and 4.49x its FY15E EBITDA respectively. At the CMP of `332, PE works out to be 6.70x TTCH’sFY14E EPS of `49.53 and 5.87x its FY15E EPS of `56.58.

President Barack Obama on Friday signed an order that starts putting into effect across-the-board budget cuts known as the "sequester" after he and congressional leaders failed to find an alternative budget plan.

The White House released a copy of Obama's directive entitled "Sequestration Order for Fiscal Year 2013." Government agencies will now begin to hack a total of $85 billion from their budgets between Saturday and Oct. 1.