BAJAJ AUTO
Reco Price: Rs 1,320,
Target Price: Rs 1,855
Bajaj Auto's (BJAUT) Q3FY11 results with a reported profit of Rs 670 crore were ahead of Pinc Research's profit estimates of Rs 610 crore. The price rise taken during the quarter and a richer product mix helped the company maintain its per vehicle Ebidta at Rs 9,000/unit. Due to high cash accruals, other income almost tripled to Rs 100 crore. Adjusted profit increased by 40.4 per cent y-o-y to Rs 670 crore. Motorcycle segment growth has been driven by high margin products Pulsar and Discover. This coupled with the price rise undertaken to pass on the input cost pressure led to a 8.3 per cent growth in realisations to Rs 44,000/unit. Raw material cost pressure was evident as cost per vehicle increased 13 per cent to Rs 31,500/unit. Margins declined 160 basis points y-o-y to 20.3 per cent. Maintain buy.
— PINC Research
HINDUSTAN ZINC
Reco Price: Rs 1,339,
Target Price: NA
Hindustan Zinc (HZL) reported Q3FY11 net revenue of Rs 2,600 crore, 10 per cent above expectations due to zinc and lead concentrate sales of 24 kt. In the past two quarters, concentrate sales were virtually nil considering the ramp up in zinc and lead volumes. Net Profit, at Rs 1,290 crore, was accordingly higher than Edelweiss estimate of Rs 1,070 crore. Currently, cash on books is Rs 13,000 crore. Edelweiss cut its lead volumes for 2010-11 leading to marginal downward revision of its 2010-11 Ebitda and EPS by 4 per cent each. It has retained its 2011-12 profit estimates. Edelweiss is positive on the stock due to the impending volume growth in 2011-12 (22 per cent y-o-y), competitive cash costs, and strong balance sheet. Maintain buy.
— Edelweiss Securities Limited
HCL TECHNOLOGIES
Reco Price: Rs 508,
Target Price: Rs 570
HCL reported another stellar quarter and is well positioned to participate in incremental demand, improve its operational performance with low utilisation coupled with superior lateral gross hires. Consequently, ICICI Securities have raised their target multiple to 18 times versus 15 times earlier to account for better revenue visibility in the core business and raised the price target to Rs 570 from Rs 477 earlier. Brokerages believe a 24 per cent and 28 per cent P/E multiple discount relative to Infosys and TCS assuming consensus FY12 EPS estimates is unwarranted pending a likely improvement in operational metrics. Maintain buy.
— ICICI Securities Limited
OMAXE
Fair Value: Rs 176,
Current Price: Rs 144
Crisil Equities has assigned fundamental grade of 2/5 to Omaxe Ltd (Omaxe), indicating moderate fundamentals. Omaxe's project pipeline of 164 mn sq.ft., with pre-sales booking of 47 mn sq.ft. by FY10 and construction activity in progress provide revenue visibility for the next seven to eight years. The grade is constrained by the high level of borrowed funds raised for executing projects, which has stretched the company's balance sheet. Besides, it needs a large amount of funds to meet its debt obligations, finance the ongoing projects and to acquire land for the proposed hi-tech townships. Omaxe is evaluating options to raise equity either at the corporate or the project level. If these do not materialise, the balance sheet will be stretched further. CRISIL Equities expects Omaxe's revenues to grow at a three-year CAGR of 33 per cent to Rs 2350 crore in FY13, while EPS is expected to increase from Rs 5.2 in FY10 to Rs 23.9 in FY13.
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