Reco price/date: Rs 92/March 25;
Current/target price: Rs 91.65/Rs 128
Crompton Greaves has seen a tough seven-eight quarters due to issues relating to restructuring and global turmoil, which impacted its international operations. With restructuring behind it, efficiency-led gains (Merlin project and improved manufacturing footprint at low-cost location) are expected to drive margin improvement and help improve focus on execution. We believe that a record backlog, better/leaner cost structure, good and increasing product basket and improved reach in terms of geography will drive earnings over the next few years. Given the inexpensive valuation and favourable risk reward, we upgrade the stock to Accumulate from Reduce with a revised price target of Rs 128. ACCUMULATE.
Reco price/date: Rs 276/March 25;
Current/target price: Rs 264.75/Rs 302
CESC's core business provides stability despite concerns plaguing the power sector but the decision to diversify into BPO business with acquisition of Firstsource Solutions will dampen sentiment towards the stock in near term. Expansion at Chandrapur and Haldia remain largely on track with likely commissioning by Q2FY14 and Q3FY15, respectively, but securing power purchase agreements for Chandrapur could pose a challenge while Haldia will cater to Kolkata license area. We have raised earnings estimate by nine per cent each in FY13 and FY14 but reduce target price by three per cent on higher risk assumed for Chandrapur. Maintain ADD.
Reco price/date: Rs 134/March 25;
Current/target price: Rs 130.75/Rs 139
We believe the company could witness a rerating and revival in its performance if it is able to pull off consolidation of its expansion in rural distribution, re-enforcing its strong herbal positioning and scaling up of Namaste's operations in the African markets. However, in our view the recovery in performance may not be witnessed during the next 12 months and the ongoing initiatives would fructify over a 12-18 month period. We, therefore, believe the stock lacks triggers in the short term. We value the stock at 23 times FY15e, while it is trading at 22 times. Maintain HOLD.
Reco price/date: Rs 1,025/March 25;
Current/target price: Rs 1,023/Rs 850
We are downgrading Container Corporation of India (Concor) to SELL with a 12-month target price of Rs 850 per share. We believe the company would continue to see muted revenue and EPS growth over the next couple of years. This would be driven by weakness in the domestic economy and in export-import volumes. Concor is continuing to lose market share to private players in the rail container business and the roads segment is becoming more competitive due to recent rail tariff increases. We have cut our estimates by three per cent and now forecast four per cent / nine per cent EPS growth in FY14E/FY15E. We expect P/E multiples to keep contracting as growth remains sluggish and expect the stock to underperform. Sell.