Analysts' corner

BAJAJ AUTO, BANK OF BARODA, SIEMENS & TATA CHEMICALS

BAJAJ AUTO
Reco price: Rs 2,483,
Target price: Rs 2,598

For June 2010, Bajaj Auto reported a sturdy volume growth of 63.3 per cent year-on-year (y-o-y) to 315,422 units, led by robust motorcycle and three-wheeler volumes. Motorcycle sales were up 67.8 per cent y-o-y, with the recently-launched Discover-150 sold 20,000 units. The company stated that production constraints restricted sales in June, but would ease soon as motorcycle capacity inches up to 300,000 units a month, which is expected to go onstream from July.

In June 2010, export growth was 68.4 per cent y-o-y, and 18.8 per cent month-on-month (m-o-m) to 114,024 units — a monthly export all-time-high so far for Bajaj Auto. The brokerage is upbeat over Bajaj’s volume-growth outlook and anticipates market-share gains to be sustained. Residual growth estimate is 17.7 per cent. Maintain buy

— Anand Rathi Research

BANK OF BARODA
Reco Price: Rs 720,
Target Price: Rs 830

Brokerage estimates BoB’s business to achieve a 21 per cent y-o-y growth in the deposit base and around 24 per cent y-o-y growth in the loan book. BoB’s margins have been trending up sequentially since the June 2009 quarter. Expect the credit demand to pick up towards the end of FY11E (2010-11, estimated) in line with the rest of the system.

This will result in pressure on margins in the near term, and estimate blended net interest margins of 2.7 per cent for the full year. Restructured assets are to the tune of Rs 5,100 crore, a predominant portion of which is on the wholesale book. The stock trades at 1.4x estimated FY11 adjusted book. Maintain buy.

— Angel Securities

SIEMENS
Reco price: Rs 719,
Target price: NA

Siemens, along with Siemens AG, Germany, signed a Turnkey EPC (engineering, procurement and construction) contract for two gas-based combined cycle power plants. One of them is a brownfield project of Torrent Power, and the other is a greenfield project of Torrent Energy at Dahej SEZ and the value of the contract is around Rs 4,800 crore, to be executable over the next 30 months. At consolidated earnings per share (EPS) estimates of Rs 23.9 and Rs 24.3, the stock is trading at 30x and 29x, for FY10E and FY11E, respectively. Siemens, in the first half of FY10, has seen a strong order flow traction, which is expected to further improve for estimated Q3FY10 on a y-o-y basis, imparting further improvement on revenue visibility for FY11E and FY12E. Maintain hold. Maintain hold.

— Edelweiss Research

TATA CHEMICALS
Reco price: Rs 330,
Target price: Rs 353

The government has reimposed safeguard duty on Chinese soda ash imports till April 2011, albeit at a lower rate of 16 per cent (from 20 per cent). Tata Chemicals has in the past sold soda ash in the domestic market at a premium to the landed cost of imports and the re-imposition of the duty puts to rest concerns relating to the domestic soda ash demand and pricing for Tata Chemicals.

Tata Chemicals’ scrip has moved significantly up in the recent past on the back of positive developments. Additionally, the expectations of a normal monsoon and a strong growth outlook for the company’s subsidiary Rallis India lead to an improved outlook for Tata Chemicals. The stock trades at 9.3x its FY2012E EPS and 1.2x its FY2012E book value. Maintain hold.

— Sharekhan