STEEL AUTHORITY OF INDIA
Reco price/date: Rs 61.55/April 22;
Current/target price: Rs 62.55/Rs 61
We have cut FY13-14 EPS by 11.6-11 per cent and hence the price objective from Rs 75 earlier, as we cut volume, Ebitda/tonne estimates and also raise our net debt estimates. Domestic steel price rises have been muted, despite seasonally strong March quarter. While a Rourkela unit is likely to be commissioned in June quarter, IISCO expansion & other downstream projects have been delayed. We believe meaningful gains from new projects in FY14 are unlikely. Wage hike provisions are inadequate and should rise in FY14. SAIL has corrected 31 per cent year-to-date but valuation at 6.9 xs FY14E Ebitda is still at a premium to peers and further EPS disappointment is possible. Hence, maintain Underperform.
Reco price/date: Rs 1,870/April 23;
Current/target price: Rs 1,864.35/Rs 2,175
UltraTech's operating profit was in line with our expectations but net profit was marginally (eight per cent) lower on lower-than-expected other income and higher tax rate. At CMP of Rs 1,870, the stock is trading at EV per tonne of $137 a tonne on FY15 capacity. We believe the company will grow faster than its peers due to timely capacity additions. However, we believe that earnings for the company will rise by the end of FY14 on account of time required for the capacity to ramp up. We are maintaining our Accumulate rating on the stock.
Reco price/date: Rs 680/April 22;
Current/target price: Rs 676/Rs 735
Torrent's concentrated basket of few therapies in the domestic formulations space, coupled with its premium pricing of products, might lead the company to face headwinds in the near term owing to the pricing policy. Slowing growth in Brazil could remain an overhang in the near term. At current levels, we believe the positives with regard to high growth in the domestic business and momentum in the US business are adequately priced in. Torrent's three-year average P/E multiple of 14.7x is higher than its five-year average of 14x. Strong growth in US business is the primary reason for the same. The company is expected to report revenue CAGR of 15.1 per cent during FY12-FY14, compared to 18.3 per cent during FY10-12. We believe current valuations are fair and value the company at 14x on FY14E EPS of Rs 52.6, translating to a target price of Rs 735. Recommend hold.