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Brokerage Recommendations

Monday, May 06, 2013

Dolat Capital calls a ‘Buy’ on Kajaria Ceramics
CMP: Rs. 218            Target Rs. 272
Q4FY13 Net revenues up 20.5% for the quarter under review: Kajaria Ceramics has reported net revenues at Rs 4.49bn (Dolat Est. Rs 4.55bn), growth of 20.5% YoY as compared to Rs 3.73bn registered in the corresponding quarter of the previous year. We believe that the revenue growth is largely attributed to volume growth while increase in realization due to change in product mix would also have aided the company. For the full year, KCL reported 22.8% rise in net turnover at Rs 16.1bn.

Profitability rises 29% to Rs 1.05bn PAT for the quarter under review grew by robust 31% to Rs 308mn as compared to Rs 235mn YoY on consolidated basis led by lower interest costs which fell 23% YoY to Rs 102mn. Net margins thus gained 60 bps YoY to 6.9%. For the full year, PAT grew by 29% to Rs 1.05bn.
Our View: We expect the company to report revenues & PAT CAGR of 18% & 26% over the next two years (FY13-15) with ROE expected to remain strong at 30%. However we expect the margins to soften from 15.2% in FY13 to 14.9% in FY15E. At CMP of Rs 208, the stock trades at 11.3x & 9.2x its FY14E & FY15E earnings of Rs 18.4 & Rs 22.7 respectively. We maintain our BUY rating and TP of Rs 272 (12x FY15E earnings), an upside potential of 31% from the current levels.

First Call Research calls a ‘Buy’ on Maruti Suzuki
CMP: Rs. 1666            Target Rs. 1849
Maruti Suzuki is India’s largest passenger vehicle company with a market share close to 40% which offers 14 models with over 200 variants across the Industry segments like: Passenger cars, Utility vehicles and Vans. The Company has posted a net profit of Rs. 12396.20 million for the quarter ended Mar. 31, 2013 as compared to Rs. 6398.40 million for the quarter ended Mar. 31, 2012. Total Income has increased from Rs. 364139.50 million for the quarter ended March 31, 2013 to Rs. 444003.00 million for the quarter ended March 31, 2012. Maruti Suzuki India Ltd sold a total of 119,937 units in March 2013.This includes 12,047 units of exports. Maruti Suzuki Ltd recommended a dividend of 160 per cent for 2012-13. Maruti Suzuki India Limited unveiled the SX4 in an all new form. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 30% over 2012 to 2015E respectively. Maruti Suzuki’s bestseller Swift Dzire and Ertiga have been awarded the prestigious India Design Mark: Good Design Award.

Outlook and Conclusion: At the current market price of Rs.1688.80, the stock P/E ratio is at 16.78 x FY14E and 14.35 x FY15E respectively. Earning per share of the company for the earnings for FY14E and FY15E is seen at Rs.100.66 and Rs.117.73 respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 30% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 8.01 x for FY14E and 6.84 x for FY15E. Price to Book Value of the stock is expected to be at 2.35 x and 2.03 x respectively for FY14E and FY15E. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 1849.00 for Medium to Long term investment.

Nirmal Bang calls a ‘Buy’ on Federal Bank
CMP: Rs. 447            Target Rs. 562
At CMP, the stock is trading at 1.13x and 0.99x FY14E and FY15E Adj BVPS and 7.93x and 6.25x FY14E and FY15E EPS respectively. We believe that the downside risk from current levels stands limited and the valuations turns the risk reward ratio favorable for FB. We recommend to BUY the stock (earlier recommended to book profit and now recommend to BUY again) with a target price of Rs 562 (1.4x FY14E Adj BV) indicating potential upside of 24.1% from current levels.

Net Interest Income saw a decline of 2.3% on YoY basis and 3.5% on QoQ basis to Rs 479.8 cr in Q4FY13. Advances grew 16.8% YoY and 11.7% QoQ to Rs 57,615 cr driven by growth across all segments. Although corporate book grew 16.2% QoQ; the de bulking in H1FY13 led to an overall YoY growth of 7.5% in corporate book. Deposits grew 17.7% YoY and 11.6% on sequential basis. Growth was witnessed in retail term deposits which led to a decline in the CASA deposits. CASA ratio dipped to 26.9% in Q4FY13 vs 29.2% in Q3FY13. Slippages stood at Rs 357 cr which was largely contributed by the corporate
segment (Rs 202 cr).

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