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Money Nov 13, 2012

Large-cap stock recommendations for Mahurat trading

Brokerage Angel Broking is of the view that Indian equity markets are witnessing renewed confidence on positive global and government initiated policy reform measures domestically.

Here are the six large-cap companies that investors can buy this muhurat trading session.

According to the brokerage, private banks have much better capital adequacy than PSU banks and continue to expand their branch networks at a healthy rate, so it expect them to continue gaining market share in loans and low-cost deposits.

Axis Bank: The bank has increased its CASA market share multi-fold over the past nine years (4.6% as of FY2012) on the back of robust branch and ATM network expansion. The bank opened more than 400 branches in FY2011 and added another 230 branches in FY2012. Going forward as well, an annual addition of 250+branches is expected to lead to a 30-50bp increment in CASA market share every year.

Reuters

"Axis Bank is trading at 1.6x FY2014E ABV (~55% discount to HDFC Bank). We remain positive on the bank, owing to its attractive CASA franchise, multiple sources of sustainable fee income and reasonable growth outlook. We maintain our Buy recommendation on the stock with a target price of Rs 1,476," the report said.

Crompton Greaves: Angel Broking is bullish on Crompton Greaves even though it has been facing several headwinds on the international and domestic business fronts mainly due to a general slowdown faced by economies and increasing competitive pressures. However, the brokerage thinks hat CG's margins will bottom out in FY2013 and expects operating margin to improve going forward as the company restructures its Belgium unit.

"Given the attractive valuations (stock trading at 0.6x FY2014E EV/Sales compared to its trading range of 0.7x to 1.6x and median of 1.2x) , we maintain our positive stance on the company. We have assigned an EV/Sales multiple of 0.7x to arrive at a target price of Rs 145," the report said.

ICICI Bank: ICICI Bank's substantial branch expansion and strong capital adequacy at 18.3 per cent have positioned it to gain CASA and credit market share, respectively. Over FY2010-12, the bank improved its market share of savings deposits by 11bp, capturing a substantial 5.5 per cent incremental market share.

"The stock is trading at an attractive valuation of 1.7x FY2014E P/ABV. Hence, we maintain our Buy view on the stock with a target price of `1,270, valuing the core bank at 2.2x FY2014E P/ABV and assigning a value of Rs 153 to its subsidiary," the report said.

Lupin: Lupin is one of the highest filers of ANDAs in the Indian pharmaceuticals industry. As of FY2012, the company's cumulative filings stood at 173, of which 64 have been approved. Lupin plans to launch 20 products in the US in FY2013 and another 80 products over the next three years, including nine exclusives. In the oral contraceptive segment, Lupin plans to launch around 10 ANDA's in FY2013.

"Management has given a revenue guidance of $3 billion by FY2013-14. We expect Lupin's net sales to post a 19.3 per cent CAGR to Rs 10,082 crore and earnings to report a 26.5 per cent CAGR to Rs 31.1/share over FY2012-14E. We maintain our Buy rating on the stock with a revised target price of Rs 652," the report said.

Tata Steel: Tata Steel has completed its 2.9mn-tonne expansion programme at the Jamshedpur plant. The product mix constitutes 2.5mn tonne of hot rolled coil (HRC) and 0.3mn tonne of slabs. Angel Broking expects this expansion to contribute Rs 2,500 cr per annum to the company's consolidated EBITDA, once the new plant reaches optimum capacity utilization, as it will be backed by captive iron ore.

"The stock is currently trading at an inexpensive valuation of 5.1x FY2013E and 4.5x FY2014E EV/EBITDA. On a P/B basis, the stock trades at 0.8x FY2013E and 0.7x FY2014E earnings. We maintain a Buy on the stock," the report said.

Wipro: "We believe that the step taken by Wipro to hive off its non-IT business is positive for its shareholders. The de-merger would result in an increase in ROCE and ROE of the listed entity, as non-IT business had lower return ratios. We expect a 12.8 per cent and 11.1 per cent CAGR in EBITDA and PAT over FY2012-14E. We value the stock at 15x FY2014E EPS of Rs 28.1, which gives us a target price of Rs 421 and recommend it as one of our top picks with a Buy rating," the report said.

(Disclaimer: These stock recommendations are the views of Angel Broking and not Firstpost. Firstpost shall not be heldresponsiblefor any investment decisions based on these recommendations.)

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