Reco price/Date: Rs 1,024/July 18
CMP/Target Price: Rs 1,036.55/Rs 1,280
Axis Bank reported a rise of 22 per cent in net profit in the quarter ended June. This was supported by robust net interest income growth of 26.4 per cent, helped by the good loan growth and an annual rise of nine basis points in net interest margin. However, asset quality failed to match the high earnings, with gross and net non-performing assets increasing to 1.06 per cent and 0.31 per cent, respectively. Though the deterioration was higher than estimated and the asset quality is likely to deteriorate further, we don't believe it is a cause of concern, as it is only a lag indicator of the economic downturn. On the positive side, the retail asset story continues to play out, with its share rising by 150 basis points sequentially to 24 per cent. Valuations remain inexpensive at 1.6 times the one-year forward book value. Retain Buy.
Reco price/Date: Rs 144/July 18
CMP/Target Price: Rs 147.35/Rs 166
Zee Entertainment (ZEE)'s flagship general entertainment channel, Zee TV, has crossed the 250 gross rating point (GRP) mark after more than a year and a half, reaching the second slot, behind STAR Plus. We are enthused by this development, as the growth in GRPs is primarily due to the good performance of fiction shows. In the current environment of poor ads, a sustained improvement in GRPs would provide a much-needed boost to ZEE's revenue (Zee TV's ad revenue amount to Rs 20-25 per cent of its total revenue). Irrespective of the winner between direct-to-home and cable operators, ZEE would be one of the safest and most attractive stocks to play the digitisation theme. Sturdy free cash flow generation, Rs 1,000 crore in net cash, minimal debt, a secular growth story and a stable dividend policy earn ZEE an unequivocal place among the best stocks to own in the defensive space. We have a target price of Rs 166 from a one-year perspective (two-year target of Rs 244). The stock is trading at P/E of 22.0x and 18.6x the FY13E and FY14E earnings, respectively. Maintain Buy.
Reco price/Date: Rs 132/July 17
CMP/Target Price: Rs 130.8/Rs 149
Exide reported better-than-expected results in the quarter ended June. With 24.5 per cent growth, its revenue surprised positively, led by strong growth in two-wheelers and industrial battery volumes. However, the operating profit remained suppressed, slipping 285 basis points, owing to higher input costs and other expenditure. While the lead prices declined 22 per cent year on year (y-o-y) and six per cent sequentially, the rupee's depreciation against the dollar (21 per cent y-o-y and eight per cent sequentially) negated most resulting advantages. We expect Exide to report improvement in its performance in 2012-13, led by a possible revival in demand from four-wheeler OEMs (original equipment manufacturers), as well as replacement batteries, and a decline in lead prices. Maintain Accumulate.