Analysts' corner

UltraTech Cement & Hero MotoCorp

ULTRATECH CEMENT
Reco price/date: Rs 1,912/February 26;
Current/target price: Rs 1,906/Rs 2,201
Despite a slowdown in the economy, demand for cement has grown about six per cent during the first ten months of FY13, owing to sustained rural and housing growth. UltraTech Cement, India's largest cement producer, with presence in favourable regions, would benefit the most from this recovery in demand. Earlier, analysts were sceptical on the sector, as well as UltraTech Cement, due to the regulatory penalty of Rs 1,180 crore (45 per cent of one-year earnings). However, the case is still in court. In the worst-case scenario, the downside would be limited to 10 per cent of the company's net worth and 2.5 per cent of its marketcap. Despite allegations of price cartelisation, cement prices and demand have remained stable. Upgrade from 'Sell' to 'Buy'.

-"Kim Eng Securities

HERO MOTOCORP
Reco price/date: Rs 1,703/February 26;
Current/target price: Rs 1,690/Rs 1,860
The Hero MotoCorp stock has underperformed and now, valuations are pretty reasonable (11.8 times FY14 estimated earnings, adjusted for royalty). However, there could be more loss in market share, given the launches from Bajaj and Honda (which are also expanding capacity). Both Honda and Bajaj are increasing focus in the executive segment, which accounts for 75 per cent of Hero's sales. According to dealers, Hero's current inventory is about a month, against the usual 20-25 days, as the company wants to keep excess inventory. This is because it doesn't want to miss any sales opportunities in the coming marriage season. The recent upturn in dispatches has failed to comfort analysts, given the company has been increasing inventory. Maintain 'Neutral'.

-"Credit suisse