Analysts' corner

Colgate Palmolive, Persistent Systems, Tata Motors & Thermax

COLGATE PALMOLIVE
Reco price/date: Rs 1,387/December 17
Current/target price: Rs 1,530/Rs 1,250
Dominance in a relatively inelastic category, benefits of premiumisation and focus on innovation make Colgate one of the more attractive plays in our coverage universe. Hindustan Unilever’s higher share of voice has not translated into share of market which is testament to Colgate’s strong brand equity. We believe concerns over valuations are overdone as Colgate’s multiples (at 30xFY14 EPS) are in line with those of other MNC consumer companies and, given strong business fundamentals vis-à-vis peers, are justified. Moreover, GlaxoSmithKline's recent open offer to buy back shares of its India consumer healthcare business at a 30 per cent premium to current market price indicates that all consumer MNC names will remain highly pegged. Upgrade to Outperformer.

IDFC INSTITUTIONAL SECURITIES

PERSISTENT SYSTEMS
Reco price/date: Rs 493/December 17
Current/target price: Rs 481.2/Rs 540
Persistent has made key hires and acquired IPs over the last one year. According to the management, the execution holds the key now. We see a distinct positioning of Persistent compared to peers, giving it an advantage to exploit the growth opportunity. However, the current valuation is demanding. The firm continues to spend five per cent of efforts in developing its own IP. Moreover, the company continues to look out for end of life cycle products to build its IP portfolio. According to the management, software companies are keen to sell some of these assets in order to free their assets for future growth. The IP acquisitions are profitable from the day of acquisition. Persistent builds solutions and services around the IP to deliver services to its enterprise customers. Besides, according to recent Gartner report, Social, Cloud, Mobility and Collaboration have taken centre stage of enterprise decision making. According to the management, the main stage deployment of these trends will start from the second half of CY13. Brokerage view Accumulate.

Prabhudas Lilladher

TATA MOTORS
Reco price/date: Rs 288/December 14
Current/target price: Rs 293.9/Rs 284
Global wholesales of Jaguar Land Rover (JLR) in November were at 34,649 vehicles; up 19 per cent yoy. Weaker-than-expected sales volumes over the last few months have raised concern over whether JLR would be able to meet market expectations of 360,000-370,000 units for FY13. We believe the stronger-than-expected sales volume numbers in Nov should reduce the risk now. We note the company needs to achieve a monthly volume run-rate of 35,400 units for the remaining months of the year to achieve our full-year FY13 sales volume target of around 365,000 units. There can be some positive stock reaction to the numbers. For now maintain Neutral.

Nomura Equity Research

THERMAX
Reco price/date: Rs 604/December 14
Current/target price: Rs 600.1/Rs 456
The analyst visited Thermax Ltd to understand the management thoughts on the captive power and utility boilers market and the way forward. While the overall scenario remains weak with sustained deferrals and delays in the larger utility and captive power segment, baby boilers and heaters market is growing at a healthy 10-15 per cent. The management expects the CPP market to drop 15-20 per cent to 1,200 Mw in FY13E led by weak scenario, particularly in the metals space, while it expects the packaged boilers and heaters market to continue growing at a healthy 10-15 per cent plus, given a sustained level of demand across industries. The company is targeting to sustain its double digit Ebitda margins in FY14E despite tough market conditions. Thermax is yet to see any super-critical inflows, while its new 3Gw plant in Maharashtra is already commissioned. This remains a key challenge. Brokerage view Reduce.

Edelweiss Securities