Cipla
Cluster: Cannonball
Recommendation: Buy
Price target: R600
Current market price: Rs560
Price target revised to Rs600
Proscar provides a key upside to our estimates. The sales of Sertraline in the regulated markets and that of ARVs in Africa along with the supply agreements with partners like Watson are also expected to substantially increase the revenues. For Cipla we estimate a net profit of Rs667 crore for FY2007. At the current market price of Rs560, the stock is trading at 22.3x its FY2007 earnings estimate. Considering the company's strong growth prospects and the de-risked business model, we are basing our price target on our FY2008 estimates. We believe that due to the partnership model that Cipla uses, it can benefit from the future generic approvals of its partners and this is the hidden potential for the company. Hence we believe that Cipla should command a FY2008 multiple of 21x. Keeping in mind the huge growth potential of the company we reiterate our Buy recommendation on Cipla with the revised price target of Rs600.
Hindustan Lever
Cluster: Apple Green
Recommendation: Buy
Price target: Rs227
Current market price: Rs208
Precursor to HLL's results
Unilever has declared its results today. Mentioned below are the major highlights of its CY2005 results. Further, we shall discuss the impact of the results on Hindustan Lever (HLL), which is scheduled to announce its results on February 14, 2005.
Tata Motors
Cluster: Apple Green
Recommendation: Buy
Price target: Rs844
Current market price: Rs754
Price target revised to Rs844
Result highlights
- Tata Motors' net sales for Q3FY2006 were better than expectations at Rs5,074.55 crore, marking an increase of 16.3%.
- The sales volumes for the quarter at 111,228 units, grew by 12.74%. The domestic sales volumes registered a growth of 11%. The export volumes registered a growth of 35% to 11,782 vehicles.
- Excluding the foreign exchange loss, the operating profit is up by 27% and consequently the earnings before interest, depreciation, tax and amortisation (EBIDTA) margins have improved from 11.8% in Q3FY2005 to 13% in Q3FY2006. The profit before tax (PBT) includes a gain of Rs164.30 crore from the sale of 20% equity in its subsidiary Telco Construction Equipment Company Limited (Telcon), to Hitachi.
- The reported net profit has increased by 45.6% to Rs460.2 crore as compared to Rs316.2 crore for the corresponding quarter of the previous year, while the adjusted net profit was down by 2% to Rs312.8 crore.
- We are upgrading the earnings for FY2006 from Rs37.6 to Rs38, to account for the one-time income from the sale of the stake in Telcon. We are maintaining our unconsolidated EPS of Rs42 for FY2007. We are introducing our consolidated earnings for FY2006 at Rs43 and for FY2007 at Rs53.6.
- Doing the sum-of-parts valuation of Tata Motors and taking into account the value of its investments, we have arrived at a target price of Rs844 and maintain our Buy recommendation.