Analysts' corner

GMR Infrastructure & Cipla

GMR INFRASTRUCTURE
Reco price: Rs 26
Target price: Rs 29
Although the stock has underperformed the market by 19 per cent this year, it has an upside potential of 10 per cent. Analysts have revised the target price to Rs 29 (from Rs 42). This is due to continual losses expected in FY12/marginal profit in FY13 estimated; led by lower profitability from airport and power vertical, deferment of real estate monetisation (leasing) at Delhi airport, and higher execution risks like capex new projects. In power, lower PLF and a change in coal mix by blending linkage coal with e-auction/imported coal (at 1.5-2.5 times the linkage price) led to lower earnings. The realty monetisation is expected to be delayed by a year (from FY14), as primary concern remains on obtaining capital cost, ADF approval and raising rates. Reduce to underperform.

—Bank of America Merrill Lynch

CIPLA
Reco price: Rs 280
Target price: Rs 363
In spite of the last six quarters of lukewarm growth in earnings, the Cipla management has exhibited several positives. One, the next generation of the promoter family is to be actively involved in the management. Two, Cipla will have a combination inhaler in Europe in the next two years. Also, Cipla's Indore SEZ has contributed 18 per cent of exports in Q1FY12. This is expected to rise (in keeping with the increased sales to regulated markets). Technology-licensing income in the past will pave way for manufacturing income. Cipla has no issue with the Indian market, despite recent concerns. Over the longer term, it plans to enter the Chinese formulations market with its partner Dusano group (currently manufacturing API for Cipla). Maintain buy.

—ICICI Securities