1 / 6Havells India: Buy | Target: Rs 713 | Return: 14.5 percentAnand Rathi said driven by lower sales across divisions, Havells Q3 FY20 results were weak; however, cost optimisation helped margins expand, and should continue. Management said traction has improved in most of the core division in the last 2-3 weeks and performance at Lloyd would rebound in the coming season.The brokerage broadly maintained its FY20-22 PAT estimates and expects a 12 percent CAGR over FY19-22. At a target price of Rs 713 (40x FY22 expected P/E, the mean of the past five years), earlier Rs 724, the research firm upgraded the stock to a buy, after the recent fall in its price. A stronger-than-expected recovery in Lloyd poses upside risks to its estimates, it said.
2 / 6Alembic Pharma: Buy | Target: Rs 740 | Return: 25.4 percent"Belying our estimates, Alembic's Q3 FY20 sales grew 19 percent YoY to Rs 1,200 crore supported by strong traction in the US (up 65 percent to $71 million), primarily due to Sartan exclusivity. EBITDA grew 34 percent YoY to Rs 330 crore, with the EBITDA margin expanding 309bps to 27 percent. PAT came at Rs 230 crore, up 38 percent YoY," Anand Rathi said.The long exclusivity in the US helped Alembic retain its growth momentum and launches (15-17 per annum) in the US.A turnaround in domestic formulations is likely to help Alembic sustain growth even on the higher base, said the brokerage expects earnings to bottom out in FY21 and a rise in the pace of oncology filings to lead recovery from FY22.The stock is available at an attractive 14x FY22e PE, said Anand Rathi which upgraded the stock to a Buy, with a higher target of Rs 740 (earlier Rs 624), based on 18x FY22e EPS.
![Zee Entertainment: Buy | Target: Rs 350 | Return: 24.64 percentPulled down by the sharp drop in advertising revenue, Zee's revenue slid 5.5 percent YoY to Rs 2,049 crore. Domestic ad revenue declined 15.7 percent YoY. On the new tariff implemented last year, domestic subscription revenue grew 21.7 percent YoY. The EBITDA margin slipped 720bps YoY to 27.6 percent."After the stake sale, management is now focusing on improving cash-flows and the balance sheet, through recovering receivables from related party, a huge positive. On the less than expected results, we cut our FY20 / FY21 EBITDA estimates respectively 4 percent and 6 percent, and our target multiple to 12x FY22 expected EBITDA (earlier valuing it at 13x FY21 EBITDA). Thus, we arrive at a target of Rs 350 (earlier Rs 364)," said Anand Rathi.The brokerage now valued Zee at 12x FY22 expected EV/EBITDA and upgraded recommendation to a buy. "Risk is any slippage in content ratings."](https://images.cnbctv18.com/wp-content/uploads/2020/01/Untitled-3.png?impolicy=website&width=550&height=300 "Zee Entertainment: Buy | Target: Rs 350 | Return: 24.64 percentPulled down by the sharp drop in advertising revenue, Zee's revenue slid 5.5 percent YoY to Rs 2,049 crore. Domestic ad revenue declined 15.7 percent YoY. On the new tariff implemented last year, domestic subscription revenue grew 21.7 percent YoY. The EBITDA margin slipped 720bps YoY to 27.6 percent."After the stake sale, management is now focusing on improving cash-flows and the balance sheet, through recovering receivables from related party, a huge positive. On the less than expected results, we cut our FY20 / FY21 EBITDA estimates respectively 4 percent and 6 percent, and our target multiple to 12x FY22 expected EBITDA (earlier valuing it at 13x FY21 EBITDA). Thus, we arrive at a target of Rs 350 (earlier Rs 364)," said Anand Rathi.The brokerage now valued Zee at 12x FY22 expected EV/EBITDA and upgraded recommendation to a buy. "Risk is any slippage in content ratings."")
3 / 6Zee Entertainment: Buy | Target: Rs 350 | Return: 24.64 percentPulled down by the sharp drop in advertising revenue, Zee's revenue slid 5.5 percent YoY to Rs 2,049 crore. Domestic ad revenue declined 15.7 percent YoY. On the new tariff implemented last year, domestic subscription revenue grew 21.7 percent YoY. The EBITDA margin slipped 720bps YoY to 27.6 percent."After the stake sale, management is now focusing on improving cash-flows and the balance sheet, through recovering receivables from related party, a huge positive. On the less than expected results, we cut our FY20 / FY21 EBITDA estimates respectively 4 percent and 6 percent, and our target multiple to 12x FY22 expected EBITDA (earlier valuing it at 13x FY21 EBITDA). Thus, we arrive at a target of Rs 350 (earlier Rs 364)," said Anand Rathi.The brokerage now valued Zee at 12x FY22 expected EV/EBITDA and upgraded recommendation to a buy. "Risk is any slippage in content ratings."
4 / 6Larsen & Toubro: Buy | Target: Rs 1,612 | Return: 18.55 percentCentrum Broking said Larsen & Toubro has maintained its ex-services revenue growth guidance of 12-15 percent (9MFY20 growth of 4.7 percent), implying a robust growth recovery in Q4FY20. "This recovery is likely to be driven by improved execution in its Maharashtra & NCR based projects, resumption of works in its Andhra Pradesh projects as well as improved payments in government contracts."The brokerage introduced its FY22 earnings and expects 12.1 percent revenue CAGR and 16.6 percent earnings CAGR for L&T's core E&C business (ex-E&A) over FY19-22."We value L&T on SOTP basis at Rs 1,612 with core business valued at 20x FY22E earnings. Stock currently trades at 14.5x FY22E consolidated earnings and with a favourable risk reward we upgrade our rating from add to buy," Centrum said.
5 / 6HCL Technologies: Buy | Target: Rs 700 | Return: 15.2 percentHCL Tech reported a healthy set of Q3FY20 numbers. Further, HCL Tech has revised the lower end of the revenues guidance from 15-17 percent YoY to 16.5-17 percent and margin guidance from 18.5-19.5 percent to 19-19.5 percent. "In the quarter, Mode 1 and Mode 2 business was impacted by furloughs and cutting of long tail clients. This is expected to improve in coming quarters, ICICI Direct said."HCL Tech reported a healthy quarter from the perspective of margin expansion and organic growth guidance. We expect the company to continue to report healthy growth in organic revenues in coming quarters," it added.Further, the brokerage expects Mode-2 to improve in subsequent quarters. "Additionally, easing of seasonality pressure in the products & platforms business within IBM driven by renewals would ensure growth.""Further, we expect margins to improve gradually in FY19-22E. This coupled with reasonable valuation of 12x, prompt us to upgrade the stock to buy recommendation with a target price of Rs 700 per share," ICICI Direct said.
![CEAT: Buy | Target: Rs 1,260 | Return: 25.5 percent"CEAT Q3FY20 operating margin beat estimates. EBITDA jumped 28 percent YoY to Rs 190 croren (versus estimate Rs 160 crore) with margin of 10.4 percent (versus estimate 9.1 percent) due to better mix and lower raw material prices along with efficient cost management measures. Consolidated revenue grew by 1.8 percent YoY to Rs 1,760 crore," Dolat Capital said.The brokerage expects ramp up in PCR and TBR capacity, coupled with winning new business in 2W segment (despite market weakness), to support medium term revenue growth. Margin is also expected to remain stable led by soft commodity costs and improving mix (higher share of replacement/PC/ exports), according the research house."Although, the key concern remains the debt funded capacity expansion (around Rs 3,000 crore) for TBR/OTH/PCR at a time of weak demand from both OEMs and Replacement segments, we expect free cash flow to turn positive from FY22 as majority of the new capacities will be commissioned by FY21," Dolat Capital said.The brokerage expects 18 percent earnings CAGR over FY20-22 led by 10 percent revenue growth, 80bps margin expansion and benefit of lower tax rate."At CMP, stock is trading at 14/13x for FY21/22 EPS estimates versus historical mean of 16x which looks compelling (considering the revival in earnings). We roll forward our estimates to FY22 and upgrade our rating from reduce to buy with a target price of Rs 1,260 (based on 16x FY22 consolidated expected EPS)," it said.](https://images.cnbctv18.com/wp-content/uploads/2020/01/CEAT.jpg?impolicy=website&width=550&height=300 "CEAT: Buy | Target: Rs 1,260 | Return: 25.5 percent"CEAT Q3FY20 operating margin beat estimates. EBITDA jumped 28 percent YoY to Rs 190 croren (versus estimate Rs 160 crore) with margin of 10.4 percent (versus estimate 9.1 percent) due to better mix and lower raw material prices along with efficient cost management measures. Consolidated revenue grew by 1.8 percent YoY to Rs 1,760 crore," Dolat Capital said.The brokerage expects ramp up in PCR and TBR capacity, coupled with winning new business in 2W segment (despite market weakness), to support medium term revenue growth. Margin is also expected to remain stable led by soft commodity costs and improving mix (higher share of replacement/PC/ exports), according the research house."Although, the key concern remains the debt funded capacity expansion (around Rs 3,000 crore) for TBR/OTH/PCR at a time of weak demand from both OEMs and Replacement segments, we expect free cash flow to turn positive from FY22 as majority of the new capacities will be commissioned by FY21," Dolat Capital said.The brokerage expects 18 percent earnings CAGR over FY20-22 led by 10 percent revenue growth, 80bps margin expansion and benefit of lower tax rate."At CMP, stock is trading at 14/13x for FY21/22 EPS estimates versus historical mean of 16x which looks compelling (considering the revival in earnings). We roll forward our estimates to FY22 and upgrade our rating from reduce to buy with a target price of Rs 1,260 (based on 16x FY22 consolidated expected EPS)," it said.")
6 / 6CEAT: Buy | Target: Rs 1,260 | Return: 25.5 percent"CEAT Q3FY20 operating margin beat estimates. EBITDA jumped 28 percent YoY to Rs 190 croren (versus estimate Rs 160 crore) with margin of 10.4 percent (versus estimate 9.1 percent) due to better mix and lower raw material prices along with efficient cost management measures. Consolidated revenue grew by 1.8 percent YoY to Rs 1,760 crore," Dolat Capital said.The brokerage expects ramp up in PCR and TBR capacity, coupled with winning new business in 2W segment (despite market weakness), to support medium term revenue growth. Margin is also expected to remain stable led by soft commodity costs and improving mix (higher share of replacement/PC/ exports), according the research house."Although, the key concern remains the debt funded capacity expansion (around Rs 3,000 crore) for TBR/OTH/PCR at a time of weak demand from both OEMs and Replacement segments, we expect free cash flow to turn positive from FY22 as majority of the new capacities will be commissioned by FY21," Dolat Capital said.The brokerage expects 18 percent earnings CAGR over FY20-22 led by 10 percent revenue growth, 80bps margin expansion and benefit of lower tax rate."At CMP, stock is trading at 14/13x for FY21/22 EPS estimates versus historical mean of 16x which looks compelling (considering the revival in earnings). We roll forward our estimates to FY22 and upgrade our rating from reduce to buy with a target price of Rs 1,260 (based on 16x FY22 consolidated expected EPS)," it said.
