Eicher Motors – Weak quarter, long-term outlook good; Buy. RE continues to be robust on increased capacity and sustained demand. However, the M&H CV slump is expected to result in a lower growth rate for VECV. We expect the sequential improvement in operating performance, a recovery in the CV cycle in CY14, and revenue accretion from the engine plant to be growth drivers. We lower our estimates to factor in lower M&H CV volumes, and lower EBITDA margins; hence, we lower our CY14e EPS 12%. We maintain a Buy with a price target of Rs 3,130. At the ruling price, the stock trades at a PE of 14.9x CY14e.
Britannia Industries – Lacklustre performance; Sell. Our valuation puts the stock at '493, at a target PE of 20x FY14e earnings. We believe the potential to hike prices and expand margins has been capped due to the keener competition in the industry. The company will find it tougher to pass on wheat and sugar prices, which were each up 25% yoy. It will also be required to invest aggressively in ad-spend as well as on variants. Also, it would have to increase staff costs in line with other consumer-product companies. With lower margins and return ratios, we expect valuation multiples to be lower than past averages.
Lovable Lingerie – Strong volume growth; Buy. Due to expansion of distribution network as well as softer base of FY13, we expect the company will be able to report healthy volume growth in FY14. EBITDA margin is also expected to move upwards due to price hike and stable raw material prices. We expect a healthy, 20%, earnings CAGR over FY13-15 and value the stock at a target price of Rs 490, at a target PE of 26x FY14e earnings.
Pratibha Industries – Operating performance improves; Buy. For 9M FY13, revenue grew 29% yoy and net profit rose 35% yoy. The 9M EBITDA margin stood at 15.5% vs 14.3% a year ago. We expect the company to post 30% revenue growth, and a 14.5-15% EBITDA margin over FY13-15. We retain a Buy, with a target price of Rs 81. Our target is based on 6x FY14e earnings, a 25% discount to other midcap construction companies’ target multiples.
Natco Pharma – Growth momentum on track; Buy. We believe the strong performance came chiefly from higher revenue from the APIs business, that too from supplies of niche APIs, which command better margins. This resulted in a strong, 450bps yoy, expansion in the EBITDA margin. We expect formulations to ramp up from 4QFY13 as the company has launched Lansoprazole in the US market through one of its partners. Further, approval for Lansoprazole OTC product is expected soon; this would help accelerate the growth momentum. We are positive on the growth outlook of Natco and its Para IV pipeline for the US market. We increase the value of the Para IV pipeline to Rs 141 a share (from Rs 117) on the launch of the Lansoprazole prescription and reducing one year for calculating the NPV.
Heidelberg Cement – Subdued quarter; recovery pinned on new capacity; Hold. On lower-than-expected volumes and higher costs, Heidelberg’s reported EBITDA registered a loss of Rs 90 per ton (we expected a profit of Rs 250). Costs continued to rise, with the major push from an increase in the power tariff and in freight. Consequent on the disappointing 4QCY12 results, we lower our CY13/14 earnings estimates 36%/23%. We maintain our Hold rating due to the limited upside, and lower our target to Rs 51 from Rs 58 earlier.
Source: Anand Rathi Institutional Equities