What to Buy: Analyst Picks

GLAXOSMITHKLINE CONSUMER
CMP: Rs 717 TARGET PRICE: Rs 865
ICICI Securities has reiterated its ‘buy’ rating on GlaxoSmithKline Consumer Healthcare, while raising its 12-month fair value estimate for the stock to Rs 865 from Rs 746 earlier. “Given the cheap valuations, new product launches in various categories and with expected earnings CAGR of 20% through CY09-10E (estimated), we continue to favour GSKCH (along with Marico) as one of our preferred picks in the mid-cap FMCG space,” the brokerage said in a report. ICICI Securities expects the company’s operating profit margin, a measure of the company’s operating efficiency, in 2009 to expand 258 basis points or 2.58% from last year on falling input costs and price hikes.
JAIN IRRIGATION
CMP: Rs 435.40 TARGET PRICE: Rs 500
Bank of America Merrill Lynch has initiated coverage on Jain Irrigation with a ‘buy’rating and price target of Rs 500. “We forecast 30% FY09-11 EPS (earnings per share) CAGR led by strong revenue growth in domestic micro irrigation and changing business mix in favour of high margin businesses like agro processing,” the foreign brokerage said in a report. Bank of America Merrill expects the company’s changed business focus in favour of micro irrigation and agro processing to boost profit margins by 270 basis points. “We expect revenue contributions from these businesses to rise to 71% by FY11 and improve margins further by 60 bps despite declining profitability in plastic pipes and plastic sheets,” the brokerage said.
GUJARAT GAS
CMP: Rs 274.50 TARGET PRICE: Rs 325
LKP Shares has reiterates its ‘buy’ recommendation on Gujarat Gas Co with a price target of Rs 325. “Although gas supply and tariff structure regulations remain a concern for GGCL, we believe that newer sources of gas supply will add to the topline of GGCL,” the brokerage said in a report. “We believe the deficit gas can be sourced through spot purchases of LNG, the pricing of this gas shall be crucial due to differential between spot prices of gas and long term contracts fixed by GGCL,” it added.
UTV SOFTWARE
CMP: Rs 266.15 TARGET PRICE: Rs 190
CITIGROUP has reiterated its ‘sell’ rating on UTV, with a price target of Rs 190 citing concerns over ‘muted’ return ratios in the nearterm. “Various businesses are inherently volatile or are at nascent stages, increasing execution risk,” the investment bank said in a report. “We do not ascribe any value to the broadcasting and new media business despite good growth prospects as the business is in its early stages and there is limited clarity on earnings,” it said. “Over the last few months, company already seemed to be in consolidation mode for the broadcasting vertical. They had shut their Delhi office operations in 2QFY09. Expansion plans were gradually being scaled down as future investments were restricted; which we view as positive,” Citi added.

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