STOCK RECOMMENDATION
SELL BAJAJ AUTO (532977)
CMP: 1428
Target: 1100
Bajaj Auto sales have dropped on M-o-M basis. In an interview on CNBC,
Rajiv Bajaj, MD, Bajaj Auto stating that it was expected post festive
season and other factors like rising interest rate and petrol rise is
the reason in slowdown in sales. But if you compare Bajaj auto with
its competitors like Honda, Hero MotoCorp, Yamaha and Suzuki whose
sales have increased tremendously on M-o-M basis in the same period.
With the introduction of new variant like CBR150 by Honda, Impulse by
Hero MotoCorp and R15 by Yamaha will have an adverse effect on the
Bajaj premium bikes. Honda has increased its production capacity due
to Alwar plant and its further increasing its capacity to 3.5 lacs due
to setting up a Karnataka plant by Oct 2012. With decrease in waiting
period of Honda's unicorn and Shine will give a stiff competition to
discover and pulsar. It is on the verge of launching a new cheapest
110cc bike ever worth Rs.27, 700 in Indian domestic market by Jan,
2012. Italian based Piaggio is also penetrating in the two-wheeler
segments with attractive variations of bikes by January 2012.This will
have a direct impact leading to a price war within the two-wheeler
bikes in this segment. On an export front, Bajaj auto is getting hit
by Hero MotoCorp, as it is setting up a 100% export plant in Sanand
Gujarat and Honda, through its China plant has introduced its new
variant Honda Ace125cc (pricing 31,000 INR) in Nigerian and South
African market. Hero MotoCorp on the other hand, has initiated its
distribution network in all the 11 countries where Bajaj is exporting.
In three-wheeler segment Hero MotoCorp is coming in a very big way and
Piaggio is increasing its capacity by 40%. According to the sources,
LIC and Citi group have also recommended a sell on Bajaj Auto. Within
a year 11 new models is going to launch in this segment having an
adverse effect on the old model of Bajaj and TVS.
In the current market the most preferred brand of two-wheelers is
Honda which will replace Bajaj's 2nd position by December 2011 & by
March -12, Bajaj will downgrade to 4th position giving its way to TVS
in Indian market.
Considering this entire factor, we recommended a STRONG SELL on Bajaj
auto with a target price of Rs 1100.
BUY FIRSTSOURCE SOLUTION (532809)
CMP: 8
Target: 25 in 9 months.
Formerly known as ICICI OneSource, incorporated in 2001, Firstsource
Solutions Limited provides a range of business process outsourcing
services.
It offers business process management services to the banking,
financial services and insurance (BFSI); telecommunications and media;
and healthcare industries. Firstsource has a "rightshore" delivery
model with operations in India, U.S., UK and Philippines.
INVESTMENT VIEW:-
Firstsource Recognized with Top Honors at the International Quality
and Productivity Council (IQPC) Conference.
Leadership position in the healthcare industry.
About 40% of the revenue comes from its healthcare vertical catering
mainly to US markets.
The Company works with more than 1000 clients. 7 of the top 10 clients
have grown during the quarter.
The current Employee Strength is 29,664 and further increasing its
strength by 3000.
Depreciation in Rupee from 44 to 52 will increase the profitability of
the company.
The company is expected to sell out one of its subsidiary company
worth Rs 1600cr.
The company has repurchased zero coupon convertible bonds worth `99.7
crore ($19.1 million). The buyback will bring down its outstanding
foreign currency convertible bonds from the current `993 crore ($191
million) to `894 crore ($172 million).Quarter by Quarter it will
repurchase the remaining FCCB bonds and its liability will be zero by
2012.
With P/E of 22 and considering the strong performance both on revenues
and profitability it will be a cash rich company within a year. Hence,
we recommend a strong BUY on FSL at CMP Rs.8 with a target price of Rs.
25 within 9 months.
BUY NATIONAL HYDRO POWER CORPORATION (533098)
CMP: 20
Target: 40 in 6 months
National Hydro Power Corporation, an entity of Government of India, is
country's largest hydro power producer.
NHPC is currently having an installed capacity of more than 5,300 MW
with 14 operational power stations and has a cash surplus of over Rs.
4,000 crore.
National Hydroelectric Power Corporation (NHPC) has reported a net
profit of Rs 966 crore in the second quarter of FY12, a growth of 40%
as compared to Rs 690 crore in the corresponding quarter of last
fiscal.
Net sales jumped 47.66% to Rs 1,831 crore in the July-September period
of 2011 versus Rs 1,240 crore in same quarter the previous year.
The second quarter is a seasonally favorable quarter which contributes
bulk of full-year earnings.
Total revenue shot up 54% to Rs 1,981.5 crore from Rs 1,282.6 crore Y-
o-Y.
Earnings before interest, tax, depreciation and amortization (EBITDA)
rose 35% to Rs 1,416 crore from Rs 1,049 crore during the same period.
The state-run major is engaged in the construction of 10 projects at
various locations in the country, going to have an additional capacity
of 4,502 MW. It is planning to develop two hydro projects in Myanmar.
It plans to increase the capacity to over 10,000 MW by end of 2012.
The coal price has risen, which will force to increase in power price
by 26%. This will further boost the profit margin of NHPC to a large
extent.
Spanning on Government's increasing emphasis on hydro power and NHPC's
strong hold, we recommend a BUY on NHPC at CMP of Rs 20, with a target
of Rs.40 in 6 months and Rs 90 in 2 years.
DISCLAIMER:- Smart Profit has taken due care and caution in
compilation of data for its reports. The market view and investment
tips expressed on Smart Profit are in no way a guarantee either
express or implied. However, Smart Profit does not guarantee the
accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained
from the use of such information. CEO, Directors and staff may have a
position in the recommended stock.
FOR FURTHER DETAILS CONTACT:-
SUMAN JAIN
(CEO)
+919820041126
Email: sumanjain@smartprofit.in
DIPAK MANGELA
(Research Analyst)
+919820260291
Email: dipak.mangela@smartprofit.in
SHAILESH GOWDA
(Sr. Executive)
+919967394114
Email: shailesh.gowda@smartprofit.in
MANSINGH RAI
(Sr. Executive)
+919320907684
Email: mansingh.rai@smartprofit.in
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