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Brokerage Calls: ABB, Mahindra & Mahindra

SI Reporter/New Delhi 10 Aug 12 | 12:10 PM

Current price: Rs 789
Target price: RS 498

ABB India (ABB) reported better than expected numbers for 2QCY2012. It reported in-line top-line growth of 10.0% and better than expected bottom-line growth of 33.3%. The order intake during the quarter was up 14%, taking the total order book to Rs 9,175 up 9.0% yoy, implying a sales coverage 1.2x. We expect order flow to improve over the coming quarters which will lend to improved growth trajectory. In addition, margin recovery in the long term seems likely, given that the pricing in the transmission and distribution (T&D) segment has bottomed out. However, on the back of expensive valuations we maintain our Sell recommendation on the stock.- Angel Broking

Mahindra & Mahindra
Current price: Rs 723
Target price: Rs 973

M&M has outperformed Sensex by 6% in last 6 months, driven by strong volume momentum in utility vehicles (UVs), despite concerns on tractor volumes. Short term headwinds notwithstanding, we remain positive on M&M's prospects, driven by dominance in core business of UVs & tractors, coupled with cheap valuations. Higher than expected impact on tractor volumes due to weak monsoon and potential diesel tax are potential negatives in short term. We are upgrading our EPS estimates for FY13/FY14 for M&M/MVML by 9%/5% to Rs 55.3/61.2, and consolidated EPS by 8%/4% to INR62/INR81 respectively. We model in volume growth of 20%/12.5% for UVs and 0%/8% for tractors for M&M in FY13/FY14. The stock trades at 11.8x FY14 S/A EPS (incl MVML) and 8.8x FY14 consolidated EPS. We maintain Buy with target price of INR973 (FY14 SOTP).- Motilal Oswal

Aurobindo Pharma
Current price: Rs 109
Target price: Rs 156

The commencement of operations at the Hyderabad SEZ and incremental contribution from the Pfizer deal would boost APL’s earnings and provide better growth visibility going forward. We estimate net sales to log a 12.6% CAGR to Rs 5,767 crore over FY2012–14E on the back of supply agreements in the US and antiretroviral (ARV) formulation contracts. Even after factoring in lower profitability going forward, the stock trades at an attractive valuation. Hence, we maintain our Buy recommendation with a revised
price target of Rs 156.- Angel Broking

Tata Motors

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Current Price:Rs 239
Target Price:Rs 276

Tata Motors posted a 12.9% YoY de-growth in the Tata Vehicles segment revenues, while JLR reported a top-line growth of 59.0% YoY. This led to an overall 29.0% YoY growth in the company’s consolidated top-line at Rs433.2bn.The stock is currently trading at 6.4x FY13E EPS and 5.5x FY14E EPS. However, accounting for R&D expense of Rs33bn, the valuation stands at 7.7x FY13E and 7.2x FY14E. This seems fair compared to Global Peers’ average P/E of 7-8x FY13E earnings. We believe volumes could be lower than the monthly average of ~29K as the old ‘Range Rover’ is likely to be phased out and be replaced by new variant by December 2012. The momentum in the monthly volumes would be the key to the stock price performance. On account of ~15.4% upside from the current levels, we maintain our ‘Accumulate’ call on the stock.- Prabhudas Lilladher

Tech Mahindra

Current Price:Rs 762
Target Price:Rs 820

Tech Mahindra reported revenue in-line with our expectation; however,margin performance was ahead of Street expectations.We continue to see problem with the core business of Tech Mahindra. However, strong operational performance from Satyam is
expected to give a boost to the bottom-line. We retain our ‘Accumulate’ rating, with a revise TP of Rs820, 9x FY13e earnings estimate.- Prabhudas Lilladher

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Company Price Gain (%)
ICICI Bank297.201.35
Reliance Inds.1,032.101.19
H D F C1,852.000.30
Tata Motors306.400.26


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