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Summary
of Contents
PULSE TRACK
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Export growth back
on track
STOCK UPDATE
Mahindra and Mahindra
Cluster: Apple
Green
Recommendation: Buy
Price target: Rs1,050
Current
market price: Rs848
Price target revised to
Rs1,050
Key
points
-
We are revising our price target
for Mahindra and Mahindra (M&M) from Rs870 to Rs1,050
considering the continuing strong growth in its core businesses
(mainly tractor) and the recent run-up in the prices of its
subsidiaries, particularly Tech Mahindra.
-
The growth in M&M's core
business continues and shall be further fuelled by new launches
like Ingenio and Shaan. Further, the launch of its new passenger
car Logan next year, is not only a positive for its domestic
business, but also opens further export possibilities.
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M&M's subsidiaries have been
performing splendidly in the recent times. Tech Mahindra delivered
a strong performance in the last quarter. Its robust order book
should further drive up valuations. The plans for Systech are also
on track with the management planning to make it a US$1 billion
company by FY2009.
-
We maintain our Buy recommendation
on the stock with a revised price target of Rs1,050. At the
current market price of Rs848, the stock quotes at 12.7x its
FY2008E consolidated earnings.
Marico
Cluster: Apple
Green
Recommendation: Buy
Price target: Rs634
Current
market price: Rs547
De-coding Egyptian
market
Key
points
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Marico has entered into a
strategic alliance with Cairo-based Pyramids Group for the
latter's Rs40-crore hair care brand, Hair Code. The Hair Code
range includes hair creams, hair gels and gel creams. The brand
has a market share of about 23% in the Rs170-crore pre- and
post-wash hair care market in Egypt.
-
With the acquisition of Hair Code,
Marico will now have a dominant share (of about 50%) of the hair
care market. It already has a strong presence in this market,
thanks to its earlier acquisition of Fiancée.
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A back-of-the-envelope calculation
shows that this deal will be earnings accretive, as it will add
Rs0.1 or 0.6% to Marico's FY2007E earnings per share (EPS) and
Rs0.5 or 2.2% to its FY2008E EPS.
-
The stock is also trading at a
price/earnings ratio (PER) of 21.8x FY2008E and enterprise value
(EV)/earnings before interest, depreciation, tax and amortisation
(EBIDTA) of 12.3x FY2008E. We continue to remain bullish on Marico
and reiterate a Buy on the stock with a price target of
Rs634.
SECTOR
UPDATE
Information
Technology
A technical snag
It is a tough quarter for the domestic information
technology (IT) service companies. The performance in the third
quarter would be severely dented by the double impact of lower
number of working days and the appreciation of the
rupee .
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