16 stocks to watch: PINC Research

ASHOK LEYLAND : Our earnings estimates for FY12 and FY13 are Rs2.5 and Rs3.1 respectively. Our FY13 earnings estimate is 11.2% higher than the consensus estimate of Rs2.7.We have a 'BUY' recommendation on the stock with a target price of Rs38, which discounts FY13E earnings by 12.5x.

ASHOKA BUILDCON : Our FY12 and FY13 earnings estimates are Rs19.4 and Rs25.9, 15.8% and 14.4% lower than consensus estimates respectively. We expect top-line growth of 29.3% and 30.1% to Rs16.8bn and Rs21.9bn in FY12E and FY13E vs. consensus forecasts of 28.2% and 32.5% to Rs16.7bn and Rs22.1bn, respectively. We value BOT (on a DCF basis) at FY12E and FY13E equity multiples of 1.6x and 1.1x, respectively. Our SOTP-based target price is Rs321, where BOT is valued at Rs198 and EPC at Rs122 (8x FY12E earnings). The stock offers an upside potential of 75.2% at our SOTP-based target price of Rs321 vs. consensus target of Rs293.

BAJAJ AUTO : Our FY12 and FY13 earnings estimates are Rs107.5 and Rs123.3, respectively. We have a 'BUY' recommendation on the stock with a target price of Rs1,850 discounting FY13E earnings at 15x. Our FY13 earnings estimate is 3.3% higher than the consensus estimate of Rs119.4.

CESC : Our FY12 & FY13 PAT estimates are in line with consensus. We value various projects - both existing and future - on FCFE basis to arrive at a target price of Rs346 (terminal growth rate 3% and cost of equity 15%).

HCL TECH : Our revenue estimates marginally differ from consensus by 1% and (0.7%) for FY12 and FY13 respectively. While EBITDA margin and EPS estimates for FY12 are higher than consensus by 58 bps and 7% respectively; for FY13 EBITDA margin and EPS estimates lag the consensus by 46bps and 3% respectively.

HSIL : Our earnings estimates (EPS) for FY12 and FY13 are Rs20.0 and Rs27.4, respectively. Our FY12 earnings estimate is 12% higher than the consensus estimate of Rs17.8. We have a 'BUY' recommendation on the stock with a target price of Rs270, which discounts FY12e earnings by 13.5x.

INFOSYS : Our revenue estimates are inline with consensus for FY12 and marginally lower than consensus for FY13 by 1.3%. EBITDA margin estimates are higher by 112bps for FY12 and 80 bps for FY13. While our EPS estimate is 1.8% higher than consensus EPS for FY12, it lags the consensus by 1.2% for FY13.

IRB INFRA : Our FY12 and FY13 earnings estimates are Rs14.5 and Rs12.5, 0.9% and 20.9% lower than consensus estimates respectively. We expect top-line growth of 28.2% and 22.3% to Rs31.3bn and Rs38.2bn in FY12E and FY13E vs. consensus forecasts of 29.6% and 24.3% to Rs31.6bn and Rs39.2bn, respectively.

JAGRAN PRAKASHAN (JPL): Our FY13 revenue estimate is 5% below consensus. However, our FY13 EPS estimate of Rs8 is in-line with consensus. We have a 'BUY' recommendation on the stock with a target price of Rs148 (18.6xFY13E EPS).

JYOTHY LABORATORIES : Our estimates for FY13 are among the highest on the street, led by expectation of better performance of the core business and sustainability of Henkel's profitable performance. We assign 16x to FY13E earnings and add Rs12/share NPV on tax saving of Rs1.2bn @12% discount rate to derive the TP of Rs212.

MAHINDRA & MAHINDRA : Our FY12 and FY13 earnings forecast are Rs45.7 and Rs52.9 respectively. Our FY13 earning estimate is in line with the consensus estimate. We value M&M at Rs882 using SOTP methodology, discounting the standalone business at 13x FY13E earnings.

NESTLE INDIA : Our estimates and target price are lower than the consensus, led by the expectation of pressure on EBITDA margin and argument of narrowing down of the Nestle's valuation premium. We assign P/E of 30x on the next 12-months earnings to derive a TP of Rs3,618.

NIIT TECH : Our top-line estimate for FY12 is marginally higher by 1.6% than consensus while lag the consensus for FY13 by 1.4%. Our EBITDA margin estimates for FY12 are marginally lower than consensus by 26bps and in line with consensus for FY13. Our EPS estimates for FY12 & FY13 lag the consensus by 0.5% and 4.2% respectively.

PHOENIX MILLS : Our EPS estimates for FY12 and FY13 are Rs10.8 and Rs11.9 respectively. Our FY12 earnings estimate is 21% higher than consensus estimate of Rs8.9. We have a 'BUY' recommendation on the stock with a target price of Rs265 after assigning 15% discount to FY12E gross NAV.

POWER GRID : Our FY12 & FY13 PAT estimates are in line with consensus. We value PGCIL on FCFE basis to arrive at a target price of Rs120 (terminal growth rate 3% and 13% Ke).

TECPRO SYSTEMS : We expect EPS of Rs31.0 and Rs37.4 in FY12 and FY13, respectively, almost in line with consensus forecasts. We expect 9% growth in order inflow in FY12, whereas some analysts forecast de-growth of ~30-35%. However, the management has guided for ~30% growth in order inflow in FY12. We maintain a BUY recommendation on the stock with a target price of Rs375 (10x FY13E).

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PN Vijay`s multibaggers AVT Natural, IRB Infra

Portfolio Manager PN Vijay picks AVT Natural and IRB Infra as multibaggers stocks for the day. He sees both stocks earning better returns ahead.

Below is the edited transcript of Vijay's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

On AVT Natural

AVT Natural is a south based 100% export oriented company.They export marigold products, marigold flowers and marigold oleoresin. They are one of the world's largest exporters of vanilla. The vanilla pod is grown by them. It is an additive in ice-creams and desserts. They also have a package tea exports division.

It is one of the very few examples of contract farming in India where corporate sector owns the farms, makes them and exports them or for domestic. It is a bit like Karuturi except that Karuturi did all these global expansions and got into trouble. AVT has got a long history. It is not a new company, it has been in the business for a long time. Their profit growth has been very impressive. It is a small company.

They closed the last financial year at about Rs 140 crore topline and about Rs 11 crore bottomline. But in this half year, profits have gone up five times though the sales have gone up only twice. They have global collaborations. The world's biggest producer of marigold oleoresin and marigold seeds is their partner. So, on the ground they are very firm. They have very specialized products and have one of the most de-risked agro based contract forming businesses.

The de-risking they have done to their businesses against the vagaries of monsoon and all are very impressive. The stock like many other smallcaps stocks has corrected viciously on selling by retailers. It is now standing and dicing near at about Rs 300. We are predicting in earnings per share of about Rs 50 this year. So, we are talking about current PE of six which is even for a smallcap very attractive.

I should say as a risk factor, this is a bit of an agro-based business and also that hits the smallcap stocks, so the risk level is more. One has to take the risk as it comes. But given these factors and the present optimism about small and midcaps in the environment, I recommend a buy on this with a target of Rs 500 in the next 15 months.

On IRB Infra

After about 18 months I have got an infrastructure stock on my buy list. Like the rest of the world community, I am slowly increasing the beta in my portfolio. If one were to pick good infrastructure stock to ride a possible turnaround in the Indian economy in the next two years, IRB would be a candidate. IRB is in the build, operate and transfer activity, confining itself to highways and roads.

It is in that portion of infrastructure. It doesn't do anything else like urban development and so on. It has been one of the biggest players in the golden quadrilateral concept. It has more than 10% market share on the kilometers of the golden quadrilateral. Last quarter it did fairly well. The topline went up impressively, the EBITDA went up only about 35%. The net profit went up only about 22% because there was about Rs 4,200 crore of debt on their books which was beginning to hurt a bit.

So, the topline growth didn't translate itself into the bottomline growth. But going forward, they have two cash-cow. One is the Mumbai-Pune Expressway on which they have got a very strong toll increase of 18% recently. Also the Bharuch-Surat-Dahisar Expressway, on which also they have got a very handsome toll increase from the Gujarat government. Their toll incomes are pretty steady and growing. They are starting work on very mega Ahmedabad-Vadodara link which is one of the most profitable links in the country.

Once that gets going, it will be very good. I am just betting that with interest rates starting to slacken, the topline growth which is there, they have got an order book of about Rs 96,000 crore would translate into a better bottomline. I would warn investors that buying infra stocks at this time even though the valuations have corrected viciously, 40% in the last one year is fraught with various risks of buying infrastructure stocks. At about Rs 135-140 or so I would say IRB on a two year timeframe should go up to about Rs 250 in about two years time.

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