Analysts' corner

Tata Motors, Ultratech Cement, Rallis India & Godrej Consumer

TATA MOTORS
Reco Price: Rs 1,137,
Target Price: Rs 1,500
Jaguar Land Rover’s (JLR) February scorecard of 21,653 units (up26 per cent YoY and 6 per cent MoM) was ahead of analysts estimates. With YTD volumes of 217000 units, the company is firmly on track to achieve its full-year guidance of 240000 units. While analytsts expected lower sales in February (a lean month for the UK market), the management has seen no significant change in geographic mix, implying a build up of inventory at the dealers’ end in anticipation of higher offtake in March. JLR’s good run was led by Land Rover which recorded its highest volumes in FY11. Jaguar volumes came in at 3,213 units (down 2 per cent YoY but up 5 per cent MoM), while Land Rover notched up 18,440 units (up 33 per cent YoY and 6.5 per cent MoM). Other luxury car majors—Audi and BMW—continued to perform well across geographies. Maintain buy.

— Religare Institutional Research

ULTRATECH CEMENT
Reco Price: Rs 1,028,
Target Price: Rs 1,177
The cement industry is suffering from over-supply and substantial rise in costs. Cement demand is expected to pick up in the current quarter and continue until the onset of monsoons, giving price flexibility to manufacturers. Ultratech Cement (UTCEM) has the most balanced geographical spread of cement capacities with major demand centers, North, West and South, each accounting for 25 per cent of total capacity. Analysts expect UTCEM to achieve volume of 42 million mt in FY12. Developmental projects in AP, which were stalled, should receive a boost considering easing political tensions in the state, which has been the trouble spot for the cement industry. Maintain buy.

— Pinc Research

RALLIS INDIA
Reco Price: Rs 1,247,
Target Price: Rs 1,472
Rallis India (RALI) is an attractive play on the growing agriculture inputs market. Analysts expect a 17 per cent revenue CAGR over FY10-13E versus an expected industry growth of 7-8 per cent during the same period, driven by a market share expansion from the current share of 13 per cent in a Rs 6500 crore domestic agrochemicals market and a presence of strong macro drivers in the domestic agrochemicals industry. A strong product portfolio and launch pipeline, CRAMS initiatives planned by the company and incremental exports from the Dahej SEZ facility would also make a significant contribution to revenue growth. Margin is at a historical peak, but sustainable at 19-20 per cent. Analysts expect revenue contribution from high margin exports to increase to 35-40 per cent by FY12 from 21 per cent in FY10. Maintain buy.

— Reliance Securities

GODREJ CONSUMER
Reco price: Rs 356,
Target price: Rs 465
After a rally of over 50 per cent in the past six months, Palm oil prices have corrected 10 per cent from their peak, due to expectations of a strong soybean harvest in Latin America. Godrej Consumer (GCPL)’s own purchasing costs for palm oil have come off 3-5 per cent from peak prices. If the price correction continues, IIFL's FY12 margin estimates for GCPL could witness an upside. Revenue growth is on a strong footing in both the domestic and international business. GCPL is witnessing an improvement in volume growth in soaps and hair colours, while price hikes add to revenue growth. Home insecticides is likely to see a moderation in growth rates going ahead at 18-20 per cent, as GCPL continues to gain share in a category with a revenue growth of over 15 per cent. International business growth will be led by Indonesia and Latin America, while Africa and UK would also likely see a gradual recovery in growth rates.GCPL has almost completed the process of merging the two domestic businesses, and cost synergies could also provide margin gains in FY12. Valuations at 18.4x FY12 EPS are attractive.

— Crisil Equities